Wednesday, April 18, 2018

Is College Worth the Cost? - By Michael Shedlock

New schools are popping up. Some offer one year programs but no college degree. Good idea?Ben Carlson at Wealth of Common Sense is irked by the question: Is College Worth the Cost?
Reddit co-founder Alexis Ohanian gave some advice to young people in a recent interview with the New York Times:
“Do you really need to go to college? There is a huge student loan debt problem in this country. I think there’s going to need to be a drastic change in how these universities work. And I also think we’ve lambasted the trades for way too long. You can make six figures as a welder.”
These kinds of statements irk me, especially when they come from rich entrepreneurs. This line of thinking reeks of survivorship bias.
Successful entrepreneurs must understand they’re the minority. Most businesses fail and most 18 year-olds don’t have what it takes to start, let alone run their own business. I certainly would have been lost at that age trying to make a go at it on my own.
I get what Ohanian is trying to say here. There are plenty of problems with the higher education system. It’s too expensive. Most students aren’t given enough guidance in terms of how their preferred area of study will lead to actual employment or how much that employment will pay. Student loans can also be a huge burden after school for many.
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In many ways, much like personal finance, people are mostly on their own when it comes to figuring these things out, which is a shame.
Are we really expecting 18 year-olds to perform a cost-benefit analysis on whether or not they should go to college or skip it altogether and go straight to the working world to save on the tuition costs? Better yet, how many adults perform a cost-benefit analysis when they purchase a new car or house? How many adults do you know who track their spending? Create a household budget? Pay down their debt every month? Save enough for retirement?
One Year of ‘College’ With No Degree
As a high-school senior in Hampton, Va., Aidan Cary applied last year to prestigious universities like Dartmouth, Vanderbilt and the University of Virginia.
Then he clicked on the website for a one-year-old school called MissionU and quickly decided that’s where he wanted to go.
Mr. Cary, 19 years old, is enrolled in a one-year, data-science program. He studies between 40 and 50 hours a week, visits high-tech, Bay Area companies as part of his education, and will pay the San Francisco-based school a percentage of his income for three years after he graduates.
MissionU, which enrolled its first class in September, is part of new breed of institutions that bill themselves as college alternatives for the digital age. The schools—whose admission rates hover in the single digits—comparable to the Ivy League, according to the schools—offer a debt-free way to attain skills in hot areas and guaranteed apprenticeships with high-tech companies. Together those create a pipeline to well-paying high-tech jobs.
What they lack is an accredited degree, the longtime entry ticket to a professional career, and the traditional trappings of college including a full liberal arts education.
“The degree is dead. You need experience,” says the website for Praxis, a five-year-old digital school based in South Carolina.
Stunningly Simple Choice
There is no choice here, at least for Mr. Cary. One would have to be a fool to turn down the opportunity.
There is no catch, but there is a problem. These schools get 10,000 applications for 50 spots. They will take the brightest of the brightest, knowing full well the kids can be placed in a high-paying job.
Everyone wins. Those accepted make a great salary after one year, and they finish school with no debt.
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Skip College and Go to Trade School
Raelee Nicholson earns A’s in her honors classes at a public high school south of Pittsburgh and scored in the 88th percentile on her college boards.
But instead of going to college, Ms. Nicholson hopes to attend a two-year technical program that will qualify her to work as a diesel mechanic. Her guidance counselor, two teachers and several other adults tell her she’s making a mistake.
When she was 14, Raelee rebuilt a car with her older cousin. She doesn’t listen to those trying to dissuade her from her passion. “Diesel mechanics charge $80 an hour,” she says.
Less Than Useless Guidance Counselor
Raelee should tell her guidance counselor to go to hell.
The counselor no doubt wants her to blow $80,000 or more on college, and walk away with some sort of degree in a field in which she has no interest.
With no interest in her major, she would be precisely qualified to work at Target or Walmart in a job she hated.
It’s crazy.
Let’s return to Ben Carlson who is irked when entrepreneurs say skip college.
I think Reddit co-founder Alexis Ohanian was spot on in this important sense: It is beyond stupid to go to college if you do not want to, especially if you have other viable options.
Carlson asks “Are we really expecting 18 year-olds to perform a cost-benefit analysis on whether or not they should go to college or skip it altogether and go straight to the working world to save on the tuition costs?
Fair enough. But if they cannot do that, then they also cannot figure out that going $80,000 in debt for a humanities degree is a bad idea.
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Carlson and guidance counselors give kids horrendous advice and pressure them on the need to go to college, willy nilly, even when many of the kids are bright enough to figure things out on their own.
Worse yet, those who have no business going to college at all end up in college precisely because they cannot do what Carlson asks, and also because of incessant pressure to blow money on education.
I am a proponent of trade schools, of one year colleges with no degree (if you can get in), and also 4-year degrees in colleges overseas.
Some kids are bright enough to figure this out on their own. The rest need a bit of genuine guidance instead of a preach job on the need for a four-year college education.
Reprinted with permission from Mish’s Global Economic Trend Analysis.
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management.
Copyright © 2018 Michael Shedlock