Wolf here: There has been heated discussion and seething commentary in the US, including on Wolf Street and its predecessor site, about the ballooning expense of going to college, and about the pile of student loans – now over $1 trillion in aggregate – that graduates have to struggle with for many years, often at the expense of other economic activities, such as buying a home. Ultimately, the question arises whether or not a diploma is a good investment.
Here is a voice on this topic from the UK where the system is different but the problems and the math are the same.
By Jan Frank, from Britain, currently living in Spain (a Wolf Street exclusive):
I’ve got a 15-year-old granddaughter who wants to go to study at a university. I asked her what she wanted to study, and she told me she didn’t really know, but just felt it was a good idea. After all, the Government had told us all that Britain needed a skilled and trained workforce if it was going to compete with the rest of the world, and she had read that any girl who had been to university earned £250,000 more in her life time than somebody who hadn’t.
She even showed me the article, Degree is worth an extra £250,000 in lifetime earnings for women – but only £170,000 for men, which is more than I could have done at her age. Kids are clever these days.
£250,000 eh? That’s a lot of cash, almost enough to buy a house. Just for three years at a university, and even if you have to pay for the course and borrow the money on which to live, it sounds like a good investment. And not just for the country.
I could have left school at 16. I didn’t because I was a clever little boy, and my teachers told me that if I really worked hard, I might even make it to university. So I worked hard, left school at 18 with a long list of exams I had passed, and then went on to a school of architecture (which has since become a university). It took me another 6 years before I left with that important piece of paper and got myself a real job with a real salary.
So there I was, Mr Architect, complete with 3-piece suit and a briefcase, trotting off to building sites after a hectic morning in the office. At the site I would talk to builders, men who were often only a few years older than me, but who had bought their own house five years ago, drove a large new-ish car and went off to Benidorm for their annual holidays. Whereas I was living in a rented flat, drove a wreck which I repaired myself, and my idea of a holiday was 2 weeks by the seaside in Cornwall. The builder would be respectful and listen to my orders, but from a financial point of view, he was ahead by at least once around the track. What was going on?
Call me stupid, but it took me a few years to realize what was going on. I started earning a proper – but not impressive – salary when I was 26. I got married and had kids – not a particularly cheap hobby. Year by year I earned more, and pretty soon I was earning enough to start paying taxes. As my salary went up, so did my taxes. I also had to maintain my small stable of 3-piece suits, pay for business lunches, and find myself a car suited to my station in life. I was still living in a rented flat. Try as I would, there never seemed to be enough surplus to be able to buy my own flat. I just continued to work hard and try to impress the boss. Sooner or later my time would come.
Meanwhile, those builders were forging ahead. Bigger contracts, a bigger house in a better part of town, a bigger car, and perhaps their own holiday flat near Benidorm. They still listened respectfully to what I had to say, but you could almost hear their thoughts on my financial status.
Eventually I worked it out. By this time, small individual computers with spreadsheet programs had arrived, and I plugged in a few numbers, to come to the conclusion that in 1980:
That was 1980. I didn’t have to pay for my study – it was free in those days. My parents were poor, and so I got a grant to cover food and lodging; I didn’t finish with a £60,000 student debt (this seems to be the average these days). I didn’t have to spend 2 years as an intern just being paid expenses and pocket-money. I was lucky, much luckier than that granddaughter of mine will be.
So I looked at what my granddaughter would achieve, if she studied. She (or her parents, or me, if my daughter turns the screw really hard) will have to fork out something like £60,000 or so before she gets her diploma. At 23 or 24, she will probably have to work as an intern for a couple of years before she starts pulling in real money.
Whereas, if she leaves school at 16, gets a job cutting hair, sets up her own hair saloon by the time she is 20, and opens a second shop when she’s 24, she can work out that
Yes, during those last 15 or 20 years she will be earning a lot more than the owner of two or three hair salons, but long before she gets to be 55 she will want to buy a house, raise a family, see those kids off to have a life of their own, and arrange for some place where her poor old grandfather can spend his twilight years.
Maybe this country needs lots of educated and experienced people, but I reckon that a company looking for responsible and sensible managers should do well to avoid anyone with a university degree. That degree simply seems to mean that somebody cannot do their sums.
And so I shall tell my granddaughter. Whether she will listen is another matter. By Jan Frank, a Wolf Street exclusive.