Hello everybody, it's Sam from Financial Samurai and in this episode we want to talk about why more public schools will eventually rank higher than private schools. So if you have kids or if you went to college, I think this is a really interesting conversation that we're about to have.

And I have here with me Sydney, my wife. Say hello. Hi everybody. So you may not know, but Sydney and I, we met at the College of William & Mary when I was a senior and she was a freshman. We met in Japanese 101 class and we hit it off.

So William & Mary is a public school and when I went, the freshman and sophomore year was about $2,800 a year in tuition, which I thought was a great deal. And the main reason why I didn't want to go to a private school, I got into Babson College, which is a small private college, but at the time it was like $25,000 a year.

So I thought back then going to William & Mary was good value. What did you think about going to William & Mary? I also wanted to go to a state school, not that far from home, not that big, that offered liberal arts and it just was a great fit.

Oh, speaking of liberal arts, it is a liberal arts school and so many people kind of bash liberal arts. You know, they think you should go into STEM, you know, the sciences and so forth. But I'm not sure that's correct because I know a lot of really awkward people who are very one-dimensional after graduating from college and when you apply to jobs like at Goldman Sachs, McKinsey, any of these firms that pay pretty well, I think they're looking for more well-rounded people who can learn, adapt, work in teams, socialize, and communicate.

So as a hiring manager for over 10 years or about 10 years, what are your thoughts about the argument that it's better to go to a liberal arts school rather than a school and focus on a technical degree? I definitely agree with what you're saying about finding well-rounded people.

I wouldn't necessarily exclude a candidate based on going to a technical school, but having someone who is open-minded and able to communicate well with a lot of people and has a bunch of skills that can be applied to many different types of roles is really important. So yeah, and I guess technical is not the right word, you know, science, STEM stuff.

It just seems like when you graduate college and you join any kind of job, you learn on the job. So I think the most important ability is to be able to learn, try hard, and figure things out and adapt rather than think, "Hey, you know these things from textbooks and these things from projects, and you're going to hit the ground running." I don't think it really is the case in most cases.

I would agree with that. There's a lot of things that you're not going to be able to learn in college that's going to be applicable to a specific role that you're getting hired for. That was definitely the case for the company that I was working for. All of our software was proprietary, so nobody could learn that software outside of our company.

Everything had to be learned on the job. But what we were really looking for were people who were detail-oriented, people who could follow instructions, people who could communicate well. Those are skills that you could pick up at any school or just in high school as well. But I definitely agree with your point on finding well-rounded people.

So back to the topic about rankings, college rankings. I think college rankings, a lot of students and parents are obsessed with them. They're fun to look at, but they're frankly kind of boring in my mind. US News and World Report always has their college rankings every year, and it's always the same five, ten schools every single year.

It's like Harvard, Princeton, Yale, yada, yada, yada. I've written all about that. To me, it just seems irrelevant. Why do you keep on pumping out these rankings with the same type of schools over and over again? One of the things that came out of the college admissions bribery scandal, also called Operation Varsity Blues in 2019, is that I was under the assumption and I was predicting that private schools, elite private schools, would lose some of its luster, some of its prestige and reputation because we found out that already wealthy families were bribing their kids' way into these schools in the tune of it was like 10 grand, 50 grand to $6 million.

Schools such as Georgetown, Stanford, UCLA, which is a public school, University of San Diego, USC, Wake Forest, and Yale, those were the schools all involved in the scandal. I thought, "Well, I think the world is going to wake up to the fact that, huh, the system is rigged." You learned about the admissions criteria at Harvard where they have these really subjective scales and they rate people by their personality and stuff like that, and it's very different among races.

It just seemed like this whole scandal would wake the world up, parents and students, to how rigged the college ranking system is and how it's kind of all BS in a way because you can just bribe your way in through the back door or through the front door. What are your thoughts on college rankings in general and spending big bucks on private universities versus going to a more affordable state school?

I think that the rankings can be helpful when applying to college, but I don't think they should be taken so seriously as some people do. I think nobody really cares after a few years of working where you went to school. Right. The only people who care are students currently in college, the parents of students who are currently in college, and maybe one year out.

The funny joke here in San Francisco Bay Area is how do you know if someone went to Stanford? They'll tell you in the first one or two seconds. It's hilarious. I'm assuming that's the same joke in Boston with Harvard and Connecticut with Yale and so forth because when you're a student, you're a cost center.

You don't know jack. You just know stuff from the books and you kind of theorize how things are going to be. As a cost center in your early 20s, you need to be diligent. You need to get in on time. If you have to go to work on time, you got to ask how you can help and create more value because you're a cost center.

You're learning. Eventually, you're going to start earning money for the company and so forth. But in that crucial time period, hustling very hard at work, I think is very important. In terms of the college rankings, I was very pleased to see that Forbes changed its college ranking methodology. You know, it took a break in 2020 due to the pandemic, but in 2021, it decided to increase the weighting of the percentage of poor students who applied and got into school as a ranking variable.

So, quote, it said, "It isn't enough to ask which schools give the best return on investment. It's also important to evaluate what kind of students they educate and whether they make themselves accessible to those who can't afford high sticker prices. Even if like Harvard, they promise to pay full freight for the low-income applicants they accept, do they take enough disadvantaged students to make that promise meaningful?

UC Berkeley does a much better job at this than Harvard. At Berkeley, 27% of undergraduates receive federal Pell grants aimed at helping low and moderate income students pay for college. At Harvard, by contrast, the share of Pell students is just 12%. Meanwhile, the Harvard endowment is tens of billions of dollars.

And on average, 25% of students enrolled in our 600 top colleges received Pell grants. So Harvard is way below the average, like 60% below the average. So in other words, Forbes decided to look at the hard data and not just accept lip service from private schools. It's really easy for the marketers at private elite schools with massive, massive endowments to say that they're doing their best to provide equal opportunities for all people.

Think about it. A lot of schools, their goal is to try to educate people and to help people. But if they really wanted to educate as many people as possible and help as many people as possible, they should accept more people. Why not accept more people and get that education, give them that education?

The demand is certainly there. And further, they would also accept a higher percentage of students from low income households. Why wouldn't they do that? Well, I think we all know the reason why. And the reason why is once you're rich, and once you're hanging around with other rich people, you kind of just go with that inertia and you want to hang out with other rich people and other connected people and other families who are going to donate money and do this and that.

And I think it's kind of sad. Yeah, this actually reminds me of our preschool application process where we were looking at a bunch of different preschools across San Francisco. And a lot of them will say in their marketing, "Our school values diversity and inclusion." And then when you go and you go to an open house, for example, or you just learn more about what's really going on at that school from people you know who have attended there and whatnot, you find out that very few of these schools are actually doing what they claim they are.

Right. I mean, it's all lip service. We went to, I think, five preschool open houses, and they talked about diversity and inclusion. And I think most of the kids, like 90% of the kids were white. And it was a very homogenous environment. Whereas the city of San Francisco is a minority-majority city.

Minorities are the majority, in other words. And so to be so different in terms of reflecting the demographics of the city felt so jolting to us that we decided we didn't want to send our kids to such a school. No matter how much they say in their marketing material or the website that they're looking for different types of people.

I think it's clear, it's clear it's not true. We have gone to these open houses. And I think if you talk to people from certain elite private universities, it's so amazing what a high percentage of these families already come from wealth. Yes. So if you're curious about the Forbes College Rankings for 2021 and 2022, they are from top to bottom, Berkeley, Yale, Princeton, Stanford, Columbia, MIT, Harvard, UCLA, UPenn, Number 10, Northwestern, Dartmouth, Duke, Cornell, Vanderbilt, Number 15, UC San Diego, Amherst, USC, Williams, Pomona, UC Davis at number 20, Georgetown, Michigan, University of Chicago, Rice, and University of Florida at number 25.

And I think obviously there's going to be some uproar, some pushback from the traditional institutions that have always been in the top 10, especially if you're an alumni. And that's totally understandable. I would fight and say, "Ah, that's BS. How can these schools be above my school?" But it's all kind of subjective.

But if you understand the methodology, I think it is something that we need to be aware of and how other ranking systems, whether it's from The Economist or any other magazine, they are probably going to be changing their variable weightings going forward to reflect changing society, changing demands of society.

And if they don't change, so if US News and World Report doesn't change, I think they're going to be looked at as out of touch. What are your thoughts? I totally agree. Times are changing and the rankings should change with it. Yeah. I mean, I think everything is changing, so you got to change with the times.

You know, I think back to my high school days, my family didn't have the money to pay for $2,000 Princeton review classes and $50 an hour after school tutors. Instead, my parents told me to go to the library and borrow an SAT book. And the SAT book was already all marked up and scratched.

And I would say 90% of the time, the answers are already filled in. And I'm like, "Okay, yeah, yeah. So that's the answer." I'm not properly learning. And so when I got a mediocre SAT score, they just told me to try again. And when I could score no higher, that was it.

They weren't like in a panic, "Oh, you didn't get a 1200. We're going to have to put money behind you raising your score." They just said, "Yeah, that's the way it's going to be." I mean, what was it like with your family? Mine was similar, maybe slightly different. I did get my parents to get me a book from Barnes & Noble, which I don't even think exists anymore.

But they couldn't help me with the studying. They didn't have the experience or the education to know what it was like to apply to colleges. And I had to figure it out on my own. Yeah. And I guess there's a definite benefit for figuring things out on your own.

Problem solving, in other words. It's this indelible memory that drives me to keep Financial Samurai always free. I always think back to the kid sitting with me in the library, trying to study or try to go online and learn something. And if I'm going to put up a paywall, it just feels like an anathema.

I just can't do it. And so I hope more and more people can learn about personal finances, learn about other things through this podcast or my writing for free. So in conclusion, I guess I want to talk about the cost of private school versus public school again. I just love this topic.

Let's say you send your kid to private school from kindergarten through the 12th grade. So that's 13 years at $30,000 a year. That's $390,000. And if you let it grow, let's say you invested it instead, it probably would double to, let's say, $700,000 to $800,000. And then if you go to private university, that's another right now it's like $70,000 all in.

So we're talking let's say a million dollars from kindergarten through college, a million dollars. So if you could rewind back time and I told you as a 8-year-old or 10-year-old or 12-year-old, you know, "Daddy will give you a big, big check if you decide to go to public school and public university or you can go to private school and get no check." What are your thoughts?

First of all, at 8 or 12 years old, I don't think I would have any understanding of what that really means. Like, "Oh, money, that sounds great." But I don't think a child is gonna understand that question. We can convert it from money to toys, to free time, to whatever.

We can change that currency from money to something they really care about. Or I mean if you tell any child, "Do you want more toys?" They're gonna say yes, but they're not gonna really think about what they could possibly be giving up for that. Yeah, I just – the personal finance side of me just thinks, "Man, just give me the million dollars at age 22, 23.

You don't have to give it to me right away. You can splice and dice it. Let's say 50,000 the first year, 60,000 next year, all that, you know, so that I don't blow all the money because I'm so immature." But it just seems like if we're going to school to get a purposeful and meaningful job to be able to make money, to then have our own freedom, why don't we just give the million-dollar check to our kids and therefore it would buy immediate freedom right away or they could feel little pressure so they can really pursue their dreams.

I think that sounds great. However, I think everybody's circumstances are different. Even if you have, let's say, the same net worth as another family but you live in a different state or a different city, the circumstances could be totally different. Public schools vary so much even from one neighboring zip code to the next.

And for me, it's just hard to break that down to something so simple because, I don't know, I just think there's so many variables. It's so simple to me because so long as you're not getting beaten up, abused, picked on at a school, I think you are in a good enough setting where you can learn.

Now of course, right, if your child is just getting pummeled to a pulp every single week because the kids are bad and the parents are totally neglecting their own children which causes bullying, then yeah, you should change schools and protect your child at all cost. But if a school is free and it's good enough, I don't see why that's so bad.

You know I'm going to argue the other way. Why though? Well, I just think that yes, a school is there to teach children but you have to look at not just necessarily if the school is public or private but also what kind of resources does the school have? What are the class sizes?

How long have the teachers been at that school? What is the administration like? How involved is the community and the parents? There's just so many different variables for each individual school whether or not they're public or private. But I totally see where you're coming from, right, from a financial, you know, personal finance bloggers perspective.

Of course you want to help people gain financial independence sooner rather than later and going to a public school versus private is a very good way to come out with more money. But then again, not necessarily. Of course it's necessary. But where's the money going to come from? Like if you attend private school, that money could be invested elsewhere.

However, but it's not just about the cost of the school. It's also what happens after you graduate, right? How well educated are you? Were you pushed to your maximum potential? Where did you end up going to college? Where did you end up getting your first job? What kind of networks were you building?

Yeah, I'm just going to say no to that because your view is that our decisions to go to public school and public university were the wrong, were the suboptimal ones. But I think we're living a great life. I was able to get a job. You were able to get a job.

We were able to save money, invest. We were able to build a passive income portfolio so we can, we both were able to leave our jobs by 35. Now if I had gone to private school, I think my parents would be settled with a lot more debt. I think I would have felt a lot more pressure to be somebody, to make that money, to like try to get a return on the investment.

But no, I didn't feel that pressure at all. I knew that even if I was a failure, I couldn't get any job out of college. I could just go back to my day job at McDonald's or my part-time job at McDonald's back then, you know, at $4 an hour and pay my parents back the $2,800 in a relatively short period of time.

I guess, I guess where I'm coming from is I'm focused more in my head on what happens before you get to college, you know, grade school, private versus public. I know we're talking about college rankings here, but I think when you think about public versus private, you have to look at the whole picture of education that starts.

That's so subjective. When you talk about whole picture, it's just like, how do you quantify whole picture? All we can quantify is what we've experienced and we experienced public schools. I guess you went to private school for high school. I went to both. And so you see a difference.

But I also went to private international school when I was abroad and I just saw, okay, yeah, the characters or my classmates and public school were a little bit rougher, just kind of like my softball friends are a little bit, a little bit rougher on the edges. You know, you got to stand up for yourself.

But I think these situations, this is real world here. The real world is a battle. It's not, you know, we got all the money and we can shelter our children from all of life's miseries. I guess the other way, the other thing that I'm thinking about is when you're a student going to college, you've learned so much more.

You're much more mature going into college as, you know, typically 18 year old student versus in grade school. You haven't experienced life as much. So whether or not you go to a public or private college, I just think it's from a student perspective, it's very different. Okay. So you're saying you're saying you'd be more amenable to sending your child to a public university at an older age university?

Yes. Yes. Okay, good. So I've got that down. So four years out of 18 years of education, we can do the public school route. So now I got to work on the high school, right? I think, I mean, I think when you're 14, I don't know. I don't know if you're mature or our kids will be mature enough to say, okay, going to public high school is good enough.

I think it's good enough. Okay. Well, just speaking from my own experience, I was attending public school at age 14 and frankly I was pretty miserable. There was so much violence in my school and there were gangs, there were fights in the hallway. Literally, I remember walking down the hallway trying to figure out how am I going to get to class when these girls are cat fighting, pulling each other's hair out, screaming, fist fights all the time.

How am I going to get to class safely? I think you were traumatized by that experience. I was traumatized by that and so many other experiences with bullying and whatnot. And I wasn't, although our school, our public school had advanced classes that I was fortunate to be in, I still feel like I wasn't being academically challenged as much as I could have and I wasn't comfortable in so many ways.

And I ended up switching to private school in 11th grade because I begged my parents to get me out of there. Okay. I have a solution for our debate and our dilemma. And it's all about compromise. So in any good compromise, one person gives a little, the other person gives a little.

Nobody gets what they want. So since we have two children, what we should do is send one of our children to public school and another one of our children to private school and then we can do a test and see how they turn out. No. Why not? No. Oh my God.

It's such a no brainer. All right. In conclusion, I say to all of you, the school matters, but I don't think it matters as much as we all think. Over time, where we go to college, where we go to high school, middle school, elementary school, I think it's going to matter less and less because everything is online for free now.

And you just have to be aware of the changing times. I think more public universities are going to dominate the rankings going forward because society as a whole is looking to be more inclusive of the middle class, the lower income and the poor. Like why wouldn't that be the right trend?

So I think that trend will continue. So for those of you looking to save money or who couldn't get into a lead private school, I think better times are ahead for you. And at the end of the day, I don't really even think it matters because we have so many resources at hand to be able to live our lives better.

So thanks so much for listening. And if you enjoyed this episode, we'd love a positive review because it'll keep us going. And if it's a negative review, we probably will just take a long break. Thanks a lot.