Economic and Career Impact of College Education

From: alexhormozi

The decision of whether to attend college is a significant one in the “game of life” [00:00:00]. This article explores the economic and career impacts of college education, analyzing its costs, benefits, and alternative paths based on available data and personal experiences.

The Rising Cost of College and Student Debt

The cost of college tuition has significantly increased over the last few decades, doubling while median starting salaries have largely remained the same [00:00:32]. This disparity has led to a massive accumulation of national student loan debt, reaching $1.76 trillion [00:00:59]. This amount exceeds the GDP of all but the top 10 countries globally, meaning young adults are taking on more debt than entire nations produce [00:01:08].

A critical aspect of student loan debt is that it cannot be discharged through bankruptcy [00:03:21]. This means borrowers are obligated to repay these loans, often for the rest of their lives, with high interest rates [00:03:17]. An 18-year-old making this decision may not fully comprehend the scope of a $250,000loan,whichcantranslateto$400,000-$500,000 in post-tax money paid back over a career due to interest [00:04:42]. Such substantial payments can burden individuals into their late 30s and early 40s, impacting major life milestones like starting a family, getting married, or buying a home [00:05:17].

Median Lifetime Earnings by Education Level

Generally, higher levels of formal education correlate with higher median lifetime earnings [00:03:33]:

• Less than High School Diploma: Less than $1 million [00:03:44]
• High School Diploma: Approximately $1.3 million (30% better) [00:03:51]
• Some College: $1.5 million [00:03:56]
• Bachelor’s Degree: $2.2 million (more than double a high school diploma) [00:04:02]
• Master’s Degree: $2.6 million [00:04:06]
• Doctoral Degree: $3.2 million [00:04:08]
• Professional Degree: $3.6 million [00:04:12]

While higher degrees generally lead to higher income, the earning power often materializes later in one’s career, and the higher the degree, the longer it may take to reach peak earnings [00:05:54].

Is College Worth the Cost?

The key question is not just whether more education makes more money, but “is it worth what it costs?” [00:08:11], applying Warren Buffett’s investment principle of comparing what you pay versus what you get [00:07:49].

College degrees do not guarantee higher earnings. For example, 27% of people with a doctoral degree still do not make more than those with a bachelor’s degree [00:08:40]. Many college advertisements may suggest a guaranteed path to success, but statistics show this isn’t always the case [00:08:52].

The value of higher education also varies significantly by industry:

• Less Impact: Personal services, blue-collar jobs, health support, sales, and office roles [00:09:15].
• More Impact: Science, technology, health professional (doctors), managerial, and professional fields [00:09:28].

For formal careers like accounting, law, or medicine, a college degree is often essential [00:09:43]. However, for roles in sales, marketing, or blue-collar jobs, it may not be as necessary [00:09:53].

Socioeconomic Factors and College Value-Add

Research suggests that the “value-add” of college can differ based on an individual’s background. People who attend college often come from higher socioeconomic families [00:10:32].

• If controlling for factors like SAT scores and socioeconomic status, white and Asian individuals may see “no value-add from college” in terms of earnings [00:10:46].
• For Latino and Black individuals, college can lead to a significant 30-40% increase in median earnings [00:11:00].

The speaker’s personal experience at Vanderbilt, a top-ranked school, led to a successful career, but he notes that everything he does professionally today was not learned in college [00:11:18]. He questioned the financial sense of pursuing an MBA from Harvard Business School, opting instead to invest in starting a business, which proved more beneficial in terms of learning and earning [00:13:13].

One of the strongest predictors of earning income is the zip code an individual is born in [00:11:47]. College can figuratively “change your ZIP code” by altering your environment and social circle [00:11:51]. For those from less privileged backgrounds, college can provide significant networking opportunities and expose them to higher earning peers, leading to a shift in behavior and aspirations [00:12:03]. This makes a strong case for being the first person in a family to go to college, as it can change the trajectory of future generations [00:12:24].

The Value of Experience vs. Formal Degree

Modern businesses prioritize experience and the likelihood that a candidate can do the job well, often without regard for where they went to school, their major, or GPA [00:02:43]. Many current jobs lack formal school training because the economy has changed faster than educational curricula [00:02:49].

The speaker, an entrepreneur who owns a portfolio of companies with over a thousand employees, emphasizes that he would choose a candidate with four years of sales experience over a philosophy degree holder for a sales job [00:22:04].

Alternative Paths to Education and Skill Acquisition

For those not pursuing formal college, prioritizing informal education is crucial [00:22:22]. This involves continuously learning, taking time and money to gain new knowledge and skills [00:22:28]. Instead of formal degrees, individuals can:

• Learn on the Job: Get paid to learn and gain real-world experience [00:22:45].
• Pay Experts: Pay individuals with desired skills by the hour to learn from them [00:23:05].
• Utilize Resources: Access courses, books, and videos from experts [00:23:12].
• Show Initiative: Entrepreneurs and skilled individuals are often willing to help those who take initiative [00:23:26].

The first few years of a career should be seen as an opportunity to “get smart,” not just “get rich” [00:23:58]. This often requires humility, accepting minimum wage, and being willing to “suck” at new things while learning [00:24:11].

Social and Networking Aspects of College

College provides a unique social experience, offering opportunities to meet many people of similar age, potentially find a partner, and engage in social activities [00:14:50]. While one could theoretically pay to “buy” a network or party outside of college, the density of same-age peers is harder to replicate [00:15:05]. Therefore, for those prioritizing social experiences, college can be a pro [00:15:49].

When College Makes More Sense

College makes significant sense under specific conditions:

• Financial Aid/Scholarships: If an individual qualifies for financial aid, grants, or merit-based scholarships (e.g., for sports or academics), they receive the “upside without the downside” of debt [00:15:56]. Some states even offer tuition-free bachelor’s degrees [00:16:09].
• Top-Tier Institutions: Attending an Ivy League or a top 20 nationally recognized school (e.g., Harvard, Princeton, Stanford, Yale) can significantly impact one’s personal brand [00:16:29]. The name alone can shift perceptions, accelerate career progression, and provide access to influential networks. Graduates from these schools often achieve very high incomes [00:16:57]. These elite schools often have generous endowments, allowing significant financial aid for students from less privileged backgrounds, making the “trade” even more worthwhile [00:18:14].
• Required Degrees: If a desired career path, such as being a doctor, lawyer, or accountant, legally requires a specific degree, then college is a necessary choice [00:20:52].

Conclusion and Recommendations

The choice between college and an immediate career path depends heavily on individual circumstances and goals.

• For those from lower socioeconomic families who qualify for significant financial aid (50% or more of tuition): College is highly recommended [00:19:58]. It provides a valuable network, improves one’s “zip code,” and changes the family’s future trajectory, receiving substantial benefits for less cost [00:20:08]. When attending college, it’s crucial to maximize learning and networking opportunities by joining clubs, fraternities/sororities, taking many credits, and even graduating early [00:26:15].
• For those from highly educated, higher socioeconomic families with no significant financial aid: It makes less sense to attend college [00:20:14]. Such individuals already possess many of the advantages college offers and can start their careers earlier, avoiding debt and gaining four years of income and experience [00:19:17].

Regardless of the chosen path, the primary objective should be learning, not just earning [00:27:43]. Both paths require individuals to be “professional students” – whether in a formal academic setting or through continuous, paid-for learning in the workforce [00:27:50]. Discipline is key, as is the willingness to learn from those with more experience, even if they seem “less educated or less polished” [00:24:28].

It is vital to have a clear plan for what you want to do with your life; college itself will not provide one [00:21:01]. Parental expectations, while often rooted in love, may not align with the changed economic landscape where information and skill acquisition are more accessible outside traditional institutions [00:24:55]. The economy and job market have evolved, making direct experience and continuous learning paramount [00:02:52].