PP ROI vs. College ROI (a "naiive" analysis)

[blackomen]

http://www.payscale.com/college-education-value/

Let's say you have 2 investments:

Investment 1: Gives you steady annual returns and you can cash out at any time you want with a low probability of losing your capital (although this is not guaranteed, let's assume the chances are remote.)

Investment 2: Gives slightly higher returns than Investment 1, requires you to dedicate a significant portion of your life afterwards to working, and you cannot cash out of it at any time.

Investment 1 is the PP.

Investment 2 is going to one of the top colleges on the list and paying tuition in cash.

Going back to when you were young and were given, say, $250,000 by your parents but cannot spend it and could only choose to invest it entirely in either Investment 1 or Investment 2, which would you pick (assuming you had known about the PP at this very early age)?

Note that the annual 9-10% ROI on the PP is not guaranteed in the future (aka past performance != future performance)..  but neither is the future potential earnings from any college degree (especially if what you learned became obsolete.)

From a purely monetary perspective, would the PP be a superior investment than, say, attending an Ivy League university (assuming NO financial aid)?

[MediumTex]

There is also "consumption value" in a college education that should be considered as well.

If, for example, someone wanted to take a trip to Paris, an ROI analysis might suggest it was a bad "investment", but it might nevertheless be a worthwhile thing to do based solely on its consumption value--i.e., it's just something you want to do.  College has some similar elements of consumption value.

[Pointedstick]

So many of the experiences you get in college are things you don't pay for. Just move to a college town, hang around students, and check books out of their library. With motivation, you can get 90% of what they can get out of it for 0% of the cost. Of course, you don't wind up with a shiny credential, but that's of no consequence if you start your own business or can live off your PP's income stream, which shouldn't be that hard to do if you maintain a college student level of expenditures. When I was a student, my monthly budget was about $900, and I rarely had trouble making ends meet and didn't feel deprived. Then again I didn't drink or smoke, both of which probably helped.

[Storm]

College is the better investment, assuming it means the difference between a $60K job and a $120K job.  On the other hand, you might consider skipping college and starting your own business instead.  If you're smart and write code well, I can't think of a really good reason to go to college.  You are far better off pouring yourself into an Internet-based startup and hoping it is successful.

Even if your startup is not successful, you'll have years of real world experience in running a business and writing code.  Chances are you'll be able to easily get a regular job now that you have something more valuable than a 4 year degree: real world experience.

[Pointedstick]

I second what Storm said, with the addition that there's no law saying you have to go to college at age 18. If you try your hand at a small business and fail, you can still go to college! And you'll have years of real-world experience dealing with difficult people, fending for yourself, and earning a living that will put you miles ahead of 99% of your peers. You'll also be more likely to know what you want to get out of college, as opposed to bumming around for the first two years figuring it out at a huge cost to somebody (probably you in the future).

[MediumTex]

You could also take classes while you are working (maybe one class a semester), just to stay in the school groove.

In such a situaiton, community colleges can offer tremendous value to students who know what they are looking for.

[blackomen]

Thanks for your perspectives everyone..

Although I'm still far from having a family, I'm already wondering if my future children should even attend college given the rapidly rising tuition prices and limited returns on investment from college.. this is coming from someone with 2 Masters degrees and numerous relatives with PhD's.  I'd probably still save the money for college  but then turn it over to a trust (perhaps managed according to the PP) to provide living expenses while they go to community college or pursue a trade.

[Pointedstick]

My wife just gave birth to our first child and we (both college-educated professionals) aren't saving one red cent for his college. It's just not going to be worth it. I made a spreadsheet estimating the cost of government and private schools 18 years down the road, factoring in the average rate of college tuition inflation, and I came up with such absurd figures that I started laughing. There's just no way things are going to continue on the way they are now. Online education tools like the Khan academy and Coursera and others are rapidly challenging the old bundled model of housing+food+social life+credential+education anyway. I imagine that nearly two decades of private sector innovation unleashed on the entrenched, state-infected, calcified higher education infrastructure will bring about such changes that in the future expecting people to plunk down a middle-class family's entire yearly income for a year of booze and Marxist indoctrination will seem like the joke it really is.

We're taking the money we might have otherwise put in his college fund and just socking it away in a taxable PP 

[MachineGhost]

are rapidly challenging the old bundled model of housing+food+social life+credential+education anyway. I imagine that nearly two decades of private sector innovation unleashed on the entrenched, state-infected, calcified higher education infrastructure will bring about such changes that in the future expecting people to plunk down a middle-class family's entire yearly income for a year of booze and Marxist indoctrination will seem like the joke it really is.

Amen.

[MediumTex]

are rapidly challenging the old bundled model of housing+food+social life+credential+education anyway. I imagine that nearly two decades of private sector innovation unleashed on the entrenched, state-infected, calcified higher education infrastructure will bring about such changes that in the future expecting people to plunk down a middle-class family's entire yearly income for a year of booze and Marxist indoctrination will seem like the joke it really is.

Amen.

If you just wanted to get drunk and listen to a bunch of smarty pants liberals talk, you could figure out the bars that the local media like to frequent and just hang out there.

That would be a lot quicker and cheaper than bothering with college.

If anyone asked why you were doing it that way, you could just say you were seeking a purer experience than college could provide.