Is College Worth It?
John Stossel Is College Worth It? 20/20 ABC News
Watch last night’s segment from 20/20 exposing the scam that higher education has become in America.
The following is a very insightful scenario described by a recent law school grad commenting on this very situation on one of the more popular law boards. It just proves how poisonous debt can be to one’s financial future and how the magic of compound interest can propel one’s wealth over the course of time.
“I think this is a more interesting financial lesson:
If on my 18th birthday, my parents had stuck my college tutition (say $120k) in a trust earning 8%, it would be worth ~ $760k on my 40th birthday.
And if on my 22nd birthday, I had put the cost of law school (say $140k) in a trust earning 8%, it would be worth ~$480K on my 40th birthday.
Bottom line, if I avoided school and real work my entire life (and instead worked ski patrol in the winters and worked in a surf shop during the summers – i.e. an awesome life), I’d have $1.24 million in the bank at age 40.
Instead I went to an expensive college and law school, neither of which were top 10 schools. Now I work at a V50 firm in manhattan and, according to the surveys cited by Okamoto, earn an income in the top 10% for lawyers. After 3 years of practicing, I’m 29 and have about $150K in the bank and save ~50K a year. I have two to three more years of biglaw in me, before I’ll have to go in house or switch to a smaller firm that pays a lot less. I won’t make a bonus this year and expect bonuses in 2009 to be pretty shitty. Anyway, asuming I can keep making the same salary for the next 11 years doing a job I hate, when I turn 40 I’ll have saved a grand total of $1.25 million in the bank (assuming my savings compound at 8%).
So if I’d skipped college and law school completely and spent the first 22 years of my adult life chilling and never saved a dime, I’d only be worth $100K less.
It makes the investment in education pretty hard to justify.”