Why College Is More Expensive Than Students Realize

In 2000, I was an 18-year-old high school dropout without a GED and I was faced with the decision of whether I wanted to go to college. For certain, I couldn’t attend an Ivy League school or even a State University. I would have to take some courses at my local community college and complete my GED before I could actually enroll as a full-time student there. 

A quick story of how I got to be in that position: I got sick in the 9th grade. I didn’t know what it was, but I was exhausted all the time, even after a full night’s sleep, I felt like I hadn’t slept at all. My grades dropped so low I got a final grade of 22% out of a possible 100%. After that, I took home school but was still too tired, so I just didn’t do the work, and essentially dropped out. It would take twenty years to find out I actually had Lyme disease, an invasive bacterium that one can get from ticks and similar sources. More on that another time. 

Back to college: By 2000, I was still feeling drained but not as severely as in high school. Still, I had a choice to make: How was I going to provide for myself going forward? I had some money saved up, so I could live for about a year or two, but after that, I’d be broke. 

The first thing I needed to do was figure out if going to college made sense. Because I was sick and didn’t know the cause, I felt a real sense of dread at the thought of spending 4 years in college. These were my prime years, I didn’t want to spend them in a classroom, I wanted to get out and experience life. I took one class in economics at my local community college, just for the experience. I ended up getting a 3.9 GPA in that class, and while it was obviously just a community college I felt good about it. 

At that point I decided it wasn’t for me, I’d rather be out in the real world. So I started thinking about what I could do. I had taught myself to do software development when I was a teenager but I never thought of making a career of it (this seems ridiculous with what software development is today, but in 2000 it wasn’t all the rage like it is now). I figured it was worth a shot, so I accepted a position paying $8 an hour. Even back then it was a pittance for a software developer, but I had my foot in the door. It got me a lot of experience and paid the bills. Looking back it was a great decision.

Over the years I’ve out-earned nearly all of my peers from college, other than the few who’ve started their own companies. Now, of course, that isn’t a reason to dismiss college as being useless or a scam. I have a huge survivorship bias. I was one of the few people who were high school dropouts to earn as much money as some NBA players (the lowest-paid ones of course). To do that you have to have a pretty insane work ethic (I did), be driven (I was) and you have to be pretty smart (maybe), it also helps to be at least somewhat personable (compared to the Miltons of the world, sure). 

So it would be easy to say, “Look! I did it! That’s proof that college is a waste!”, but that would be disingenuous. The real reason I say college is a scam is how I view money, and how often college ends up being a disaster for students.

What is college or university? 

The stated goal of college is to help you earn more money and have a career you can use to be more successful than you would otherwise. For the most part, it achieves that goal. College graduates will generally earn more than high school graduates. That has led to a general consensus that you should go to college at all costs, at almost any cost, which students have done, many of them racking up huge debts while not being prepared for a job that will actually give them a good return on their investment (ROI). 

As someone who loves numbers, that’s what I want to know: What is the ROI?

That has a complicated answer, so before we get to that let us look at some of the problems college students are facing.

Students are racking up enormous debt

College is more expensive now than it ever was. Even back in 2000, I had a friend who went to the Art Institute of Philadelphia to be a web designer. He left school with $85,000 in student loans. He’s done well enough in his career but over the life of the loan, he’s paid close to $115,000 when you take into account the interest he’s had to pay. During that time his only concern was paying his bills and paying back his student loans. 

After college, he got a job for $50,000 a year, and I think now he’s earning around $100,000. That’s great, no complaints there, but he certainly wasn’t investing in the greatest bull market to ever occur during that time. His concerns were paying back the money as fast as he could. 

Costs are out of control – Especially at For-Profit Universities

The average student debt loan is about $40,000, much less than my friends, but keep in mind, that’s the average. Many students have $100,000 in debt or more. The University of Phoenix, a popular for-profit school has an annual tuition cost of about $15,000 a year, which doesn’t even consider anything like housing. That leaves you with a debt load of $60,000 and presumably, you’ll have to live somewhere and eat during that time. Currently, there are 70,000 students enrolled at the University of Phoenix. If you figure that it would cost at least around $15,000 a year to live on top of college costs you are looking at $120,000 for 4 years of college at the University of Phoenix.

Here’s a screenshot from UofP to show how down to earth their costs are! $400 per credit hour, ouch!

In-State Schools are just as bad

I live in New Jersey, so I’m going to pick Rutgers which is a solid, mainstream University in Jersey. It has a 58% acceptance rate so it’s not terribly exclusive. As you can see, commuter costs aren’t too bad, but it’s about the same as the UofP, $28,000 a year times 4 years is $112,000 total.


If you go to live on campus with the other 35,000 students, you are looking at leaving college with a pretty substantial debt load of $112,000 to be exact. Can you imagine graduating and becoming a teacher at $40,000 a year?

Here’s what that take home looks like in NJ:


$33,000 take home divided by 12 months is $2,750 per month. Meanwhile, you are paying $1,170 per month to service your student loan.



That leaves you with $1,581 per month to live on. Considering many people in NJ will pay $700+ for a month just for a room to rent, you can see how it can be extremely hard to get out of debt. Obviously, many teachers will earn more than that, shows the median entry-level teacher job in NJ being $48,000 a year. So, after taxes maybe you keep another $500 a month. It would certainly help but it’s not a game-changer.


Colleges leave you unprepared to deal with the real world

This is probably true for High School as well honestly. You don’t learn about debt, credit cards, managing your credit rating, avoiding bad influences, or good practical decision making. Nope, you learn about trigonometry. What percentage of people ever use that in their daily life? it has to be under 1%. Algebra has a lot more practical realities but it’s amazing the things that are taught and not taught. But, hey, at least high school is free.

When you go to college you think you are going to be prepared for the “real world”. While this is starting to change, that idea is not generally true. Even in Computer Science, it has been the tradition to teach esoteric languages that are never used in the real world. Mostly because it’s at the Professors whim. Gee, that’s helpful. If you succeed it’s almost in spite of the college rather than because of it.

You will learn some theory, but the practical realities aren’t there. If you think about accounting for a moment, how many accounting/finance majors can tell you the practical realities of running a business? In reality, most folks learn most of what they know from day to day activities at their first job. That is why an apprentice-based teaching model makes so much more sense, you can learn on the job. It’s not great for everything but it’s fantastic for many fields. A teacher gets someone to help them for free, or at a low cost and the student can pick up all the practical realities from the teacher. 

Opportunity cost

This is the most important factor of all. While these college students are in school their high school graduate counterparts are able to earn money. How big of a difference could that make? Well, the average High School graduate earns about $38,000 a year, whereas the college grad earns about $65,000. (source:

Let’s take those numbers as valid and extrapolate what that means. My main priority is to retire as soon as possible, which is what I did by retiring at 38, so keep in mind I’m always looking at this from the perspective of, “When can I stop working for others”. Note: Obviously this isn’t what either party makes straight out of high school or college, it will take a couple of years for that HS grad to ramp up to 38k, and similarly for the college grad to get to 65k, but as these numbers grow at a comparable linear rate they are close enough.

Huge income differences, or not?

The difference between these two incomes is $27,000 per year. But it’s not that simple of course because we need to pay taxes. Take-home pay of $65,000 would be $50,622. On $38,000 that would be $31,606. That’s a difference of $19,000 a year. Obviously, $19,000 a year is a lot more to take home but don’t forget: for the 10-year loan payback period that person will need to pay $1,169 per month or $14,029 per year for 10 years. That leaves the real difference to only be $4,000 a year, for the first 10 years. 

But Wait, There’s More!

We haven’t taken into account the fact that our college graduate hasn’t been making any money for the first 4 years. To make things even let’s say both parties will live on $20,000 per year when they graduate from their respective schools. That doesn’t apply to the college grad for the first four years because we’ve already included his costs of living at the college for 4 years. 

That means that our HS student will be saving $11,606 per year or $46,424 over 4 years ($31,606 take home pay – $20,000 in living costs = $11,606).

Okay, I hear what you are saying now, “Yeah, but let’s be realistic, $45,000 isn’t that much, the college grad is going to catch him quick”. To which I’d say you should never forget Einstein who said that the most powerful force in the universe is compound interest.

Proof That College Is A Monetary Mistake

So, going back to my example, let’s take these numbers and see what my friend who went to college could have done vs what I did. For simplicity, we’ll use the numbers above. Let’s see how things would have progressed for me, who didn’t go to college vs my friend who did. 

Now our college student won’t be able to save any money from 2000 to 2003 because he’s in school. Our High School grad will though. In fact, let’s say he invests in a simple Nasdaq index fund. How would he do? Here is a graph of the Nasdaq from that period till now.

Assuming he invests $11,400 per year in each year from 2000-2003 his $46,424 would have grown to $539,886. That’s right, an uneducated investor who is investing his money as simply as one can, would have nearly $540,000 at 39 years old. He wasn’t earning big money, but just by NOT going to college, he’s got an incredible nest egg. Meanwhile, his buddy has nothing to show for those years. The college grad had earned $-115,000 in 4 years, while our high school grad earned over $620,000 if you include the money he lived off of. 

The Real Cost Of College

So what did college really cost our college grad? Nearly $740,000. What impact would that have on his life? Well think of this: At 39 years old the High School dropout could retire! He could do so pretty easily at that. We aren’t even talking about all the extra years of money he brought in. From just those 4 years he could count on a roughly 4% return after inflation on his $540,000. That would yield about $21,000 in extra income each year, for the rest of his life. The best part is that long term capital gains are 0%, so he could take all that money out tax-free. 

When you look at the real cost of college it’s eye-opening. Now, most 18-year-olds may not be smart enough to invest their money, but if they were, even though their income isn’t incredibly high, it goes to show the power of compound interest and what effect it can have.


When you add everything up, many people are being duped into going to college. Sure, you get life experiences you maybe couldn’t quite get elsewhere, but in reality, it depends on what you value. For me, I wanted to retire early, and I was able to do that. That freedom was worth more than any experience. Ironically I could easily go back now if I had any interest in doing so, and it wouldn’t have a negative impact on me financially.

Looking back 20 years to my decision to work instead of going to college I can say that I don’t regret my decision one bit. That’s why I tell young people today, “Look closely at the cost of college and your expected ROI because it might be a whole lot different than you expect”.

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