Ok, I fully realize that everyone complains, and it is just how most people deal with stress. Nothing wrong with that. But I’m sick and tired of the media frenzy about college costs like it’s worse than HIV or something. Books, magazine articles, newspaper headlines. I’m here to say: College Is Cheap. And here’s why:
Tuition. I don’t know of any public university that charges more than $5,000 $10,000 a year for in-state tuition. I also don’t know of any state that doesn’t at least have one decent college. On top of that, in most states you can do your first 2 years at community college, and then transfer for your final 2 years and still get the exact same Bachelor’s degree.
Private schools cost more. Duh. If you go to one, please don’t complain about the price. Yes, you paid $30,000 a year for tuition. It’s not like these schools didn’t clearly tell you how much it was going to cost before you even spent your $50 application fee. It’s like buying an Armani suit and then walking out and complaining about the price. Whether the education is even any better is highly debatable.
Therefore, 1 year of good college learnin’ should not cost more than $5,000 $10,000.
Living Expenses. It’s college. You don’t need a car. You don’t need your own place. You’re supposed to have roommates with ‘character’. Therefore, I don’t see how living expenses (rent + food + miscellaneous + dating + beer) should cost more than $1,000 a month even in urban areas (New York City perhaps excluded).
(Many students also live at home!)
Work! Just because you’re in school, doesn’t mean you can’t work. There are sooo many flexible student jobs out there if you look. Besides the usual food service gigs, there are positions like disabled person assistant, library helper, test tube/beaker washer, tutor, that totally cater to the student population. Lots of jobs you can even study while working.
I’d say most students can comfortably balance about 10 hours of work a week during school months. At a conservative $8 a hour, that’s $320 a month. During the summer, you can work full-time hopefully at an internship or someting. Let’s say it still pays $8 a hour, that’s $1,280 a month.
$320 x 9 months + $1,280 x 3 months = $6,720. After taxes, let’s estimate it as $5,700 (~85% net, you’re in a very low tax bracket).
So now we have $5,000 $10,000 tuition, $12,000 rent (assuming you don’t go home for the summer), and then $5,700 in income. So that’s $11,300 $16,300 a year. Times 4 years, that’s just about $45,000 $65,000.
Ok! $65k. Still lots of money. But cost alone doesn’t make something expensive. A condo in San Francisco for $200,000 is cheap. So let’s look at the payoff for getting that degree. This UNT link on Why Go To College? has a lot of good information.
For example, the difference between the mean annual earning of a college graduate and a high school graduate is over $28,000 a year! You get your investment back over just two three years.
Easy Loan Repayment Plan
Finally, this goes back to my previously-mentioned theory. If you really want to pay off your student loans, keep living like a student until it’s paid off. There’s nothing wrong with living like a student, and besides you’re already used to it. Repress your upward-mobility desires for a few years. If you need to, buy a reliable used car for under $5k. Remember, most of the developing world would give you their left arm to live that well.
The average college senior graduated with about $20,000 in debt. If people did this, I bet the majority of student loans could be paid off in just a few years.
Anyways, that’s why I think college is cheap. It’s a great deal that everyone should get in on, and be happy it’s around!
* And note that nowhere here did I mention any kind of parental support. Or government aid. Or scholarships. Or grants. There’s a word for that: GRAVY!
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I go to a rather prestigious private school. I worked part-time jobs and was a community college student before I transferred in. The money that I made at my part-time jobs and the housing costs I saved by living with my folks made it to where I transferred in virtually debt-free.
It now costs me an estimated $31,200 per year for the remaining two years to get my bachelor’s degree. Yeah, I’ll graduate owing close to $40,000 to Sallie mae and $10,000 to the U.S. Dept of Ed., but since I plan on going into the field of investment banking as an entry-level career, my private college degree is worth it.
I’m a liberal arts major and investment banks and managment consulting firms personally send scouts to my campus to interview, wine & dine and recruit my school’s juniors and graduating seniors. My brother, who goes to a rather decent public school, but firms like Goldman Sachs, Lehman Brothers, and Merriyl Lynch literally won’t even visit there!
I’ve met celebrities, politicians, including former heads of state. I’ve also gotten to known key civil rights and academic pioneers leaders very well.
The post-graduation employment rate for my university 99.8% for those who choose not to first go to grad school and 70% of my campus eventually does go on to grad school.
The quality of the education that I got here is rather comparable to the quality of the education you’d get at Harvard. But, I’ll be honest… The community college education I recieved before transferring was actually much harder, even though virtually no one knows the name of my community college. But, the name of my univerisity is heard across the world.
Those extra few dollars really do pay off. With the firms I have available, I’ll be making a a starting salary of at least $65,000 plus a $10,000 signing bonus and $40,000 in regular bonuses. And, yes, I know I’m pretty much paying for a name, but the name pays me back in the job interview process.
But, I would say that if you’re planning to enter the fields of computer science, teaching, or aircraft maitenance, a private education is probably not worth it. The biggest pay-off for private degrees comes in the finance and management fields.
Liz Pulliam from CNBC has an interesting article on this subject:
Is your degree worth $1 million — or worthless?
Good college learnin’ can certainly cost more than 5K. For example, University of California is $3,716 per semester for undergrads. That works out to about $619 per month.
The critical think to look at is this: is $7400 “cheap” to you? If you’re a single parent with “some college” and are making a $43,275 salary, that’s about 17% of your net salary and a huge percentage of you take home pay. An extra $600/month expense is probably a pretty big deal. It makes it very difficult for parents to give their kids a better start than they had.
I completely agree with you on the other points: get a job and live cheaply and you can get by.
I don’t think that everyone agrees with you that the education you receive at a private instution is the same as that at a public instution (ie, in life, you usually get what you pay for ;))
Since college is so cheap, are you taking advantage of it and accumulating degrees? :-p
Calvin, K – Like I said, highly debatable 🙂 Most arguments are generalizations anyways. Some private schools are better than some public schools. Some public schools are better than some private schools.
Would I spend the extra money for my own child? Sure if he/she really wants to go, but I also won’t be complaining about how it is unreasonably expensive.
Scott – I stand corrected on the CA tuition. I just graduated less than 3 years ago from a CA university – has the tuition risen that much? I certainly don’t remember it being that high.
Who says the single parent has to pay for anything? The student can pay for it himself. That’s what student loans are for.
Besides, if the kid really has a single parent making $43k, I bet he/she will also get a decent aid package.
college – Yes, in fact I am. 😉
I find this discussion very intriguing since I am considering the pursuit of a PhD in the near future. I got my Associate’s, a Bachelor’s, and a Master’s all at public schools and at bargain prices. But, I’ve found it difficult to find a PhD program that I can afford or a program that I think is worth getting into. And then I saw the Feb. 2006 issue of Kiplinger’s Personal Finance magazine. This issue lists the 100 best values in public colleges. The number one in this list is the University of North Carolina at Chapel Hill; otherwise known as Michael Jordan’s school. In-state costs are $12,000 a year, while out of state is $25,000 a year. I am planning to pay out-of-state costs to pay for their online doctorate program so that I can pursue the degree of my choice and so that I can continue to work full-time. I’ve always worked while going to school. I think that this is the best way to gain experience and to avoid a large debt. Deadline for applications is at the end of the year – wish me luck
There are several public universities that charge more than $5000/year. You don’t know of any? Just pick up your annual copy of U.S. New and World Report College Rankings. In Pennsylvania, there are several state funded universities that charge well north of $10000/year just for tuition. Want on-campus room and board? Add another $5k-$8k.
Here are some other schools:
UVA- $7400+
UMASS- $9200+
Wash. State-$5000+
Michigan State- $7300+
Unfortunately, it appears I have both Scott and Ron beat. West Coast colleges may still be under $5000, but I’m an undergrad at Penn State’s main campus, where in-state tuition will run me about $14,000 for next year, plus room and board. Granted, I could have attended a private university and paid three times as much, and I am receiving some scholarships, but the tuition amount for PSU has doubled (doubled!) over the past 6 years.
I’m sure this has a lot to do with the loss of some federal funding, and this is still a great deal compared to a private school, and this is a great advancement for any future career, but I still take note of the dramatic rises with each extra dollar leaving my family.
By the way…great blog, Jonathan! Keep up the terrific writing!
Two things: correlation isn’t causation and you should also factor in the opportunity cost of college.
Also, with scholarships, college can be even cheaper.
Actually, while there are a few public schools that are very good. Most are definately not. I would (and did) definately pick a private prestigious college rather than a public one any day.
Getting a degree from a well known school pays off even more so than just any bachelor degree. Just ask around the recent graduates that make close to 100k or above, I’m sure you won’t find many that come from public schools.
I’m curious why you think the public vs private school issue is even up for debate. Are there any articles or studies that you have come across?
Tuition for a year at Ohio State is $8,082, and it’s only the 5th most expensive public school in Ohio.
Since I just graduated from college in Illinois, I thought I’d throw in my tuition numbers. It started out fine (a little over $3000 a semester), but still above the estimates you provided. But this past year, it jumped up to $4300 per semester. That also includes a few hundred dollars in Engineering fees, so that pumps up the price a bit, but my point is that tuition hikes each year can make it cost another $10k above the $45,000 level to go to college (and subsequently pay back).
it is so not $5000 a year!! For the cheapest colleges here its a little over $5000 just for tuition not room and board PER SEMESTER – Thats the normal trend for public universities and colleges
Ron, I thought most Ph.D program has assistance or teaching jobs that will generally cover your tuition and living expense. I had a professor told me that you should never worry about cost of Ph.D, it’s mostly paid for. Maybe I am wrong.
Jonathan, your conclusion about “college is cheap” is not incorrect. But everyone’s situation is different. There are some students who can break even during school by all these calculated and disciplined moves. But most the time, college kids aren’t as calculated and disciplined. Some more competitive college programs simply give you too much so that you will have to study all the time to be able to remain in that whatever national ranking programs (unless you are a smart kid with rich parents.)
So, in the end, the people who were hurt the most are the economically disadvantaged group, because their choices are severely limited even when their children are academically advanced in high school. More limited choices (community college, state collage vs. nationally recognized universities) means less choices in their post-college economic advancement. Yeah, there are some self-made billionaires that didn?t even graduate from college. But majority people tend to stay on a much more ?regular? economic road for the much of their career.
I am planning on getting an MBA. I am in washington state which does not have a decent MBA school. I will have to move to east coast or california to a private school. It is going to cost a forture 🙁
Okay, I am WRONG on the tuition numbers. 🙂 Reran it with $10,000 state annual tuition.
I totally agree with you there’s always was to pay for school. I went to a junior college than to a Univ. Cal school graduated with no debt. No ones needs a private ed. Now I’m in the Navy and can get free grad school later on or take classes on my own now and get some of it paid for. I tried of people complaining…
Bigmouth, you are right about most PhD programs wherein which you line up your research grants and do some research assistance work to cover the tuition. But, I’m not interested in research or academia as most PhD programs train students for (too dreary of a life for me). The University of North Carolina, Chapel Hill has a doctoral program in Health Leadership where your dissertation is based on an internship at a future job postion. The programs is quite unique and is a bargain as far as out-of-state graduate school tuition goes. And accoring to U.S News and World Reports “2007 America’s Best Graduate Schools,” the top 5 in Public Health studies (my interest) are:
1. Johns Hopkins
2. Harvard
UNC, Chapel Hill
4. University of Washington
5. University of Michigan
Moneyguy, I hope you had an opportunity to look at online MBA programs (so that you don’t waste time going to class; unless this is the experience you are after). Getting to campus, as well as waiting for class to start and end consume so much valuable time. Here are some online MBA programs that I’ve considered so that full-time work is still feasible:
(Out-of-state costs)
Syracuse University $47,000/yr
University of Colorado, Denver $25,000/yr
University of Florida $37,000/yr
Arizona State University $38,000/yr
Penn State $46,000/yr
Also, check out NYU’s Master’s in Management $46,000/yr
Another alternative is to live in California for a year, establish residency there and attend the University of California. (Great MBA programs at U.C. Irvine & U.C. Berkeley) U.C. Irvine’s in-state tuition is $18,232/yr. They do not have online MBAs, unless you pursue the Healthcare MBA (a whopping $36,250/yr for in or out-of-state tuition). U.C. Berkeley or “Cal” costs $19,407/yr in-state, but does not have an online MBA program. Best of luck to you, Moneyguy.
And I concur with Matt, this is an excellent Blog, Jonathan
I agree with Bigmouth on the Ph.D. program issue. Most Ph.D. programs give funding in the form of teaching or research assistantships. For your time spent working, the school will pay your tuition, fees, and a small stipend. It’s probably much smaller than your full-time salary. But you won’t be the first or last person to make that sacrifice.
For the folks that are touting the advantageous of attending a private school, are they referring to the Ivy League or private schools in general. There are plenty of no-name private schools as well. For me personally, I would rather attend a well known public like PSU, UC-Berkeley, UCSF, UCLA, UVA than a no name private. If you are referring to the Ivy, just say Ivy League because there is a huge difference between Harvard, Yale, and UPenn vs. the likes of lesser known privates. If non-Ivy say your private school of choice, is it NYU, Northwestern, MIT, Swarthmore etc..
Penn State alumni here. Currently living in the Boston area. Sure Penn State is expensive, but it consistently outranks many of the private universities in New England(BC, BU, Northeastern) with notable exceptions (Harvard, MIT, Dartmouth). All of these private universities cost 3x+ as much to attend as PSU. Many in New England seem to be think these places are da shiz but good luck to them if they ever leave New England. Again with the notable exceptions pointed out above, these schools have zero name recognition outside of New England.
Fresh college grads get 65k out of college? That’s an inflated number. Needless to say about the location, it also depends on what major one gets… History vs. Finance…
It’s more like 30-50k nationwide for the starters.
Penn State Alums hollar…
An online MBA is close to a waste of time. You’d be better off buying an MBA book and reading it until you memorize it.
If you’re looking to improve the bucks you make, it’s about the CONTACTS you make by going to a brick’s ‘n mortar MBA school and the NAME of the MBA school.
It’s just the way it’s been since the Greeks…
College is college, some offer more opportunities to get ahead, but all of them have opportunities…you pay big money to go to name schools because the opportunities are greater–opportunities to meet leads, meet job recruiters, etc. But, in the end it comes down to what the individual made of their experience that determines whether they are successful. And what is “successful” anyway? College can definitely be had on the cheap…you can even end up getting paid to go to school.
As a new parent, saving for my child’s college tuition, I think the big “UNKNOWN” is how much will tuition rise in the next few years.
As “Buckeye” stated, Ohio State is one of the most expensive schools in the state. And, they have increased their tuition by approximately 50% over the past 6 years. 50%!!! How the heck do you save for that kind of increase? That’s crazy!
just a quick point about part-time earnings – If you are claimed as a dependant (i.e. by your parents), you do not need to pay taxes on earned income lower than $5,000, so you may want to plan ahead. earning slightly more will net you less.
I think there are a lot of online MBA programs that are a waste of time. But if you attend an online MBA program from a school with a recognized name (such as Penn State, Colorado, or Syracuse), I think this a great way of getting an education while staying close to family and while keeping your job with your organization. I also believe that it is important to make those contacts. But this can be done at schools with online MBAs like U.C. Irvine or Syracuse. You have to actually meet with your cohorts a certain number of times of year. Each school varies, but the opportunities to establish contacts and build work relations with classmates are there.
AA,
“Fresh college grads get 65k out of college? That’s an inflated number.”
Not in investment banking….
from Wikipedia:
In the United States recent graduates, typically of top universities, are hired to fill analyst positions and are commonly paid for their first year a $60,000 salary, a $10,000 sign-on bonus, and a bonus that ranges with the reputation and the profitability of the firm but is usually between $40,000 to $60,000. The base salary increases about $10,000 a year and the size of the bonus increases by about $15,000 a year for analysts.
Just ask around. You’ll find out how much some recent grads with no experience are getting ridiculously paid.
“Needless to say about the location,”
That salary properly fits the cost-of-living in Lower Manhattan in New York.
“it also depends on what major one gets… History vs. Finance…”
Well, a Finance major might make in the rounds of maybe 30,000 per year more than a History major in most industries. But, the investment banking and managment consulting industry is unlike others. Here you’ll find that the difference is really around $5,000 – $6,000. This is because investment banks do extensive on-the-job training.
“It’s more like 30-50k nationwide for the starters.”
That’s the salary range of your typical recent graduate, but definitely not the average for the finance industry.
Is that quote regarding MBA grads or undergraduates, because there is quite a difference in the salary range.
Ron’s on the money.
i-Banks can’t be cheap when it comes to the salary figures because it would reflect badly on their strength as wealthy financial institutions, so about 50% of yearly income is allocated to employee compensation. To remain profitable they have employees devote their being to the firm. Yes, that’s right, devote their being (that’s what I call 100 hours x 50 weeks).
A couple of my graduating classmates have shared their offers, most are between $50k and $60k with $10k sign on bonuses. Year-end bonuses are ~50% salary.
To reiterate, the reason for the exorbitant salaries is simple, exorbitant hours. You can bet your house that if a finance person is working twice as many hours as the average college grade he will earn twice as much pay.
Still, on an hourly basis, $25/more is on par or less than many other professions’ entry-level wages.
The key (or should I say, carrot stick) is the possibility for advancement to riches beyond the wildest imagination.
In no other profession is it possible to earn middle seven figures at age 36 (i.e $3-6 million/year). This includes law, where top law partners earn between $700k and $1.5 million/year, or medicine, where a neurosurgeon will earn $800k-$1 million/year.
The I-banking firms don’t recruit outside of the Ivy League + 4 (Duke, Stanford, MIT, Chicago).
If that’s your ideal career then go for it. Personally, I’d rather be paid to think than to make nice brochures.
I do agree, however, that for the physical and biological sciences, as well as engineering, the value of an education at top public undergraduate institution such as Berkeley, UCLA, UVA, or UMich is on par (or sometimes better, such as the chemistry education @ Berkeley) with that at most Ivies.
Also, if you plan on applying to law school or medical school, it may not pay to go to an Ivy + 4 over a top public institution, especially if the public instituion is offering you a full scholarship, which is often given to students who have a choice between a public and an Ivy.
Furthermore, no one asks his surgeon or his lawyer where he attended college, and law/medical schools only care that the institution is reputable, not whether it’s ranked 14th or 4th, when deciding admissions.
Is that quote regarding MBA grads or undergraduates, because there is quite a difference in the salary range.
That’s referencing undergraduates. Most analysts are undergraduates. Rarely do MBA’s serve as analysts.
Most MBA’s are seeking associate positions that pay starting salaries in the range of $100K-230K+.
This big pay-off is why the MBA degree became so highly coveted in the corporate world. There was once a time when just your Average Joe could be working a 35K sales job somewhere, he then decides to go to an average-okay business school, and later comes out making $100K easy at some big investment banking firm on Wall Street. An MBA used to mean something big. It used to mean automatic pay raises and big-sounding job titles.
But, it’s not that easy anymore. Now just about everyone has an MBA. You can get them in as little as 6 months to a year while attending part-time and taking classes online in your basement while in your underwear. Put it to you this way… Even my neighbor’s dog pretty much has an MBA. I’m almost willing to put money on it. 🙂
Not all MBA’s are the same. A Harvard MBA will get you a job at Goldman Sachs easily but a part-time Univeristy of Phoenix “executive” Online MBA even won’t get you touched. You might get hired elsewhere, but not in investment banking. Not a chance.
Partners in investment banking top firms in the industry usually make $700K-20M+. Some partmers can even make upwards of $100M, but they are quite rare and usually are board members of many other corporations than which they are partner. The controversially “over-compensated” Chairman of the New York Stock Exchange Nick Grasso made $250M+ annually before he was forced to give up his seat on the board. (People were getting tired of seeing layoffs post 9-11 while he was making that kind of salary.) What most people didn’t know was that this was just ONE of his salaries. He also served on serveral other boards at the same time (some of them investment banks) and makes rather comparable salaries.
But anyway, yeah that’s the numbers for undergrads. Undergrads in investment banking make starting out what typical MBAs make in other fields. This is why careers in investment banking are highly sought for and coveted and ultra-competitive to get into. Having “Goldman Sachs Investment Banking Analyst” on your resume is literally a just about guarantee for a job anywhere in the Corporate America. In fact, the paid bonuses at firms like Goldman and Lehman are actually slightly lower (in the thousands) than the industry average because these firms know precisely what it means for you to put them on your resume and know that you’ll be willing to give up some change for the priviledge (which still is worth it, nonetheless).
Put it to you this way, rich people like Donald Trump have their daughters working at investment banks like Merril Lynch (Ivanka Trump actually works there in their New York headquaters). The Clintons have their daughter Chelsea working at McKinsey & Co. at an entry-level consultant. If you look at where alumni from the top firms go, they’re speckled throughout top government positions, the broadcast media and are CEOs and board members of America’s corporations.
Harvard is the straight ticket to the upper-middle class. Investment banking is the straight ticket to the lower-upper class.
For more on investment banking, visit:
1.) WetFeet Career Guide: Investment Banking
2.) Salaries in Investment Banking (with bonus)
and read these great books….
1.) Monkey Business : Swinging Through the Wall Street Jungle (a very brutally honest take)
2.) The Fast Track (one Goldman alumni’s take how to get in and stay)
There’s not much written on investment banking, and there’s a good reason why. The people competing for these positions don’t want to reveal their secrets. It’s a very cut-throat industry.
Other highly obscure, high-paying and highly competitive occupations are: venture capitalist, corporate lawyer, estate planning attorney, contracted city planner.
You can also take your chances at floor trading, but just know that just about everyone and their mom wants to be a registered stockbroker but not everyone can handle the stress of living off of commissions and having to beg people to buy stocks (even in bad market conditions).
The I-banking firms don’t recruit outside of the Ivy League + 4 (Duke, Stanford, MIT, Chicago).
Actually Eugene,
You forgot the top 2 “black Ivies”, Morehouse College (Martin Luther King’s alma mater, called the “black Harvard”) and Spelman College (Morehouse’s sister school). These two top-ranking historically black colleges (HBCU’s) are where the firms hand-pick most of their minority recruits from the cream of the applicant pool. The Wall Street Journal in 2004 reported that Morehouse outranked both Berkely and Emory University in MBA/law top school admissions.
Golman Sachs and Lehman Brothers have special on-campus recruiting programs for both Morehouse and Spelman.
But, you’re right for the most part. You pretty much have to either go to an Ivy league or top school. I happen to go to one of the schools mentioned sometime on this board, but I’ll let you figure that one out.
I’m paying about 5k/year instate and making about 10,000 back from my school working 20h/week during the year and fulltime over the summer..
oh yeah…that was my freshman year.
$ is certainly attractive if it doesn’t come from a 100 hours/week work schedule.
I don’t think food should be counted as a college expense, and I’m inclined to say the same for most of one’s housing and dating expenditures.
You’re going to eat whether or not you’re enrolled in college. You’re going to need a place to live whether or not you’re in college. And dating costs money regardless of whether you’re in school or not.
These really shouldn’t be considered ‘college expenditures’ any more than one’s medical bills or utilities.
AA,
$ is certainly attractive if it doesn’t come from a 100 hours/week work schedule.
Two to three years of hardwork in the upstart means paying off all your student loans and other debt, easily getting into a top business school, and having the business cards of company CEOs in your pocket.
And the “100 hours/week” is only during rough times at some firms. The typical work week for analysts is between 60-80 hours with an occasional 12-hour shift.
But, that’s for entry-level analysts. Associated have better hours and usually put in 45-50 a week. Even higher-ups (e.g., Managing Directors, Vice Presidents) pretty muh get to choose their schedules.
Look at it this way, if you tough in the beginning and are able to put in as little as ten years, you’ll be working about 20 hours week and making about $1M a year.
Now, I’ll warn most people. This is not a good occupation if you plan on getting married and having kids during your mid-twenties. This is a career for flexible single people, people who have no kids and an understanding spouse or people who date within the industry.
You have to have good organizing skills, be able to accept last-time assignments with swift deadlines, and have a Type-A personality.
Every study I’ve seen on the issue suggests that, apart from the top tier (meaning top 10-20 schools) in a program, there is no difference between going to a public school and a private school. Success is much more dependent on the quality of the individual than the school. Of course, this holds true as far as the salary comparison of people with and without college degrees (and the different levels of college degrees). People that don’t get college degrees make much less money than people who do, but that’s because the people getting college degrees are superior independent of their education.
“just a quick point about part-time earnings – If you are claimed as a dependant (i.e. by your parents), you do not need to pay taxes on earned income lower than $5,000, so you may want to plan ahead. earning slightly more will net you less.”
Does this mean that over $5,000 you have to pay taxes on the entire amount, or just the amount over $5,000?
The private vs. public debate will go on forever. Here is a tidbit from personal experience and is 100% factual. This of course doesn’t apply to every situation, but it applies to mine.
Person A – Went to Virginia Tech (Public VA Univ) from 01-05 for approx $21,800 (2,725/semester) in tutition and graduated with a bachelor’s degree in accounting. Currently working at a local public accounting firm making $xx,000.
Person B – Went to University of Richmond (Private VA Univ) from 01-05 for approx $116,800 (14,600/semster). Currently working at a Big Four public accounting firm (same city as Person A) making $xx,500.
You read that correctly. Both were able to find the exact same position in the exact same industry with only a $500 difference in yearly income between the public and private degree.
Which Person do you think is the one reading Jonathon’s blog?
“‘Fresh college grads get 65k out of college? That’s an inflated number.’
Not in investment banking….”
Yea, but what do you think this 65K average is composed of? 65K starting salary sounds good on paper, but you’ll be living in NYC or another expensive metro area and your 65K has the buying power of 40K.
Because IB jobs are so concentrated in very expensive cities, the starting salary average for this field is very skewed and misleading.
Just one more thing that I want to add to this blog. This is the hyperlink showing the top 100 public schools ranked by Kiplinger’s methodology based on costs, academic strenght and available financial aid. Jonathan’s blog here focuses on costs. It’s easy to look at this list of 100 and simply look at price and name recognition. Pay closer attention at the column labeled “Percent met by Aid.” Interestingly enough, UNC Chapel Hill has 100% of need met by aid (need-based assistance) -I think that is so impressive. I am fortunate to have a decent paying job, but for those less fortunate, I think it’s great that students can become a “Tarheel” and not go to the poor house after graduation.
link
One factor that makes college CHEAP is the fact that most of college teachers are underpaid! Plus the average pay raise for college professors has been mere 2% for past few years. Respect your teachers! They are hardworking, “cheap” labors.
I’d rather make $55-60k working ~40 hours a week than $65k working 60-80 hours a week. Of course there isn’t the possibility of earning $20 million or whatever, but the chance that any particular person will get that much is pretty low.
dc_publius,
But that 65K doesn’t include the 40K annual bonuses, the 10K signing bonus, and the 401K plus benefits. Not to mention, after your first year, your salary goes up 10-15K and your bonuses increase likewise. This continues year after year.
Investment banks are notorious for paying out over 50% of their billion-dollar revenues to employee salaries. One bulge bracket firm, Lazard, has it as a company guideline to payout at least 57.5% of revenues each year.
And not all investment banks are in high-cost cities. There’s plenty in Chicago and Atlanta, which are much cheaper to live in than New York, San Francisco, Los Angeles and Seattle. When I moved to Atlanta, I realized that the cost of living out here was 18% less than Los Angeles and 26% less than in new York. The housing prices are much cheaper out here too.
Ron,
Interestingly enough, UNC Chapel Hill has 100% of need met by aid (need-based assistance) -I think that is so impressive.
I’d still be careful. Financial “aid” isn’t what it used to be. Too often these days, “aid” simply means taking out bigger federal loans (15% of cost: student’s Staffords & Perkins + 85% of cost: parent’s PLUS = 100% of “aid” met). It’s possible for schools to meet 100% of your costs with “aid” and for you not to get one Pell Grant or scholarship.
With my luck I’ll probably pay for most of my time @ UNC out-of-pocket. I think this Kiplinger list referred mostly to undergraduates, by the way. A lot of their merit scholarships were generated from the revenue from their school t-shirts, jerseys and hoodies – why so many fans of these powder-blue apparel, I don’t know.
Adding to the list of schools at which top firms recruit on campus: Williams College.
Never heard of it? Go find the US News rankings for the past few years (http://www.usnews.com/usnews/edu/college/rankings/brief/libartco/tier1/t1libartco_brief.php). Williams is the #1 Liberal Arts College. (sorry they don’t teach hyperlinking). (Coincidentally Williams has also been recognized as the best Division III athletic school 10 out of the past 11 years too).
All of the major investment banks and consulting firms recruit on campus. A sample of where some close friends will be working:
Goldman Sachs
Morgan Stanley
JP Morgan (x2)
Bain & Co. (x3)
McKinsey & Co.
My $160k+ in tuition? Worth every penny.
In my experience, sticker price bears almost no relationship whatsoever to the actual price.
After I got my acceptance letters, my father and I walked into the financial aid offices with copies of our tax returns, projected budgets, and the aid packages offered by other schools. We got the best offer expanded, and asked the others to match. It worked, and I went to my top choice (a selective private university) for less than I would have paid at my in-state ‘safety’.
It’s manageable. Or, at least it was when I was in school (I graduated in ’00). I can’t imagine things have changed all that much since then.
Well I would say the cost of living argument is true for most high paying employee-type jobs (i.e. those jobs not including independent workers such as doctors).
For example, anything outside of the desert areas of California, any safe area of D.C., Seattle, and Boston will have much higher cost of living expenses than the national average for urban areas.
NYC is certainly expensive if you rent an apartment in Manhattan, probably 2-3x national average for urban areas.
However, if you live in any of the other boroughs of NYC, the cost of living is maybe 1.5x the national average for urban areas.
While it’s true that not all investment banks are “in” NYC, some boutiques are headed in Silicon Valley, others in VA/Chicago/Atlanta, all the bulge bracket firms are in NYC (that is, the major players). When I say “in” I mean have their head offices there. All the bulge-bracket firms also have smaller offices elsewhere in the country, but the main offices where those exorbitant salaries are paid and where all the managing directors work are in NYC.
I agree on Mackie’s advice on reading Monkey Business. It’s an amusing and insightful read. I had my girlfriend read it last month and it absolutely changed her mind about going into i-banking.
College was my biggest waste of time and money. I should have done more research into my field and realized experience is what counts. It would have been cheaper for me to work a low paying entry level job for 2 years and work my way up the ladder then waste 4 years of my life and a ton of money on college. My co-worker at my first real job graduated high school and worked her way up the ladder in two years and was slightly higher than me in pay and title as I entered as a recent college graduate.
So in my case, college was expensive because I didn’t need it and would have done better with out it. Seven and a half years out of school and still regretting that I went to college.
There is no point in going to private schools. Most, almost all, hire faculty who are graduates from public schools- so, they pay less to their faculty vs. public school faculties. That’s how they make money! You are sitting in let’s say Columbia taught by an adjunct who had his education at the city university! Ironical!! Just go to a public school and then save on loan debt. Way to go!!
College IS unfortunately.. Expensive. I’m getting ready to graduate in tons of debt from loans. My parents didn’t save up for my education or pay out of pocket. We’ve both accumulated mountains of debt. But– was it worth it? — Yes. Because everyone has a degree so I need one to have the opportunity to even begin searching for a job.
The bad side– Not all jobs start students at $65. I have a liberal arts degree. I will most likely be starting somewhere between $30000 and $40000. I’m hoping to be closer to the other end.
I worked through college– usually taking 4 courses at a time. I was fairly active in the student body.. and I’m working full time now while taking my last two courses. I’m older than your average college student. I’m 24. I want to move out of my parents house– but when looking at my salary … and the increasing cost of housing, I don’t know that I’ll ever be able to do anything other than rent without the help of my parents. My parents are not willing to help me out– and yes. I find this stressful.
Everyone isn’t coming from your background. Keep this in mind before stating that college is cheap.
College is expensive. Worth the expense… but moving forward in life is just as delayed with college as it is without it. Instead of gaining work experience, I now have a degree to “make more” .. but the “more” is really going into my debt expenses.
— As for private schools— I love my private education. I started in a public school– and it was way too large. I was overwhelmed even though I was from a large city. I didn’t share the same obsession with drinking and partying as my classmates and I hated not knowing much about my professor and needing the say something amazing in order to get a moment alone with my instructor during office hours. Private schools have small classes. I’ve learned more. I think that makes me more prepared for the work world.
But in reality– that difference depends on your employer. I’m happy I paid to learn as opposed to paying for a paper that merely implies I did.
PS. I found this post when googling to find out more about how much I would need to make to comfortably pay for a $200,000 condo. Like I said.. I want to buy– but I don’t believe I’ll be able to afford paying for the cheapest I’ve seen in my city just yet.
Got any pointers for that?
These posts are turning into interesting comparisons and tips about the many university and career options out there. Wished I had access to such information when I needed it.
I went the route of private undergrad and public grad school.
The goods about the private undergrad: 1) Free tuition scholarship, after 2nd year I received free room and board for working in the residence halls; 2) small class size and strong Chemistry dept
The cons about the private undergrad: 1) not well known 2) limited recruitment opportunities and not in metropolitan area
The goods about the public grad school: 1) School of Pharmacy was strong and had established name; 2) Free tuition and living stipend; 3) located close to metropolitan area with low cost of living
The cons about the public grad school: None really except that I got a little too comfortable where I was and stayed for 6 years (Masters and PhD).
I was hired after graduation into the Biotech/Pharma field w/ a starting pay of ~$80K w/ 15% bonus (’05), which is pretty good because w/o the right degree and referrals, PhDs often have to do several years of Post Doc.
As of 2008, the entry level pay for Bachelors is $49-60, Masters is $60-79, PhD is $76-98, MD is $123-160 (K per year). With the recession, these rates might stagnate and bonuses might be non-existent.
Certainly not all private schools are well known and not all public schools offer a lower quality or prestige. Having the right referrals for the area you want to be in, whether it be the school or the prof’s name, will open doors, but you still need to have the goods and have paid your dues. I certainly see the difference when I flash my undergraduate degree vs. my graduate degree.
If I could do it over again would I do it the same way? Probably because I had some really good times, but I will say that I feel like I have paid the price in time (being in university for 10 years).
My current employer and many others offer excellent educational assistance benefits. Here’s another example of an educational/career route using those benefits:
-private university in computer science, student worker in IT dept
-switched to full time position at IT dept, abandoned degree
-a number of years later, used dept benefits and enrolled as part time student while working full time
-BS received 6 years later, went on to received 2 other Masters (while still working full time)
Pros of the above route: 1) significant savings in education cost; 2) entered work force much earlier than most, accumulated savings/retirement/benefits higher
Cons about the above route: 1) going back to school after a number of years is not easy; 2) juggling full time work and part time school is not easy
An observation given to me by a fellow grad student: get higher degrees in increasingly more prestigious places. If you skip the order, BS from Stanford and PhD from KU, people will ask why, even if the answer is obvious or personal.
A look at the Michelle’s and Barack’s academic pedigrees will tell you that there are many routes to success. One size often does not fit all, and mistakes might turn out to be serendipitous.
Hello. I just read the info between bloggers and “Calvin Mackie Says: June 26th, 2006 at 6:31 pm” concerning getting into Investment Banking. I need a little career advice.
I am a Black woman that graduated from Penn. Upon graduation, I followed my dreams and went into independent filmmaking and writing. Now at the age of 37, I want to get into Finance as either a broker or investment banker. I understand the economy is dire, but what are my chances of even being considered – especially concerning the age and the economy?
What would be the most time efficient way of getting in the door?