Is college really worth it? That depends…Do you really see it as an investment, or free pass to the middle class?

Sep 17, 2018 | Blog, College, Financial Planning

“Dad, why is college going to cost me $160,000 when I’m older.” – My 10-year-old

Is 4-years of college with a mortgage of debt the best path to equip our kids to be financially successful?

An investment, or a hasty middle-class checkbox?

I was in Boulder this summer for work; the most “educated” city in the United States.

After a great boxing session at a local gym, I was popping on my suit in the locker room.

“Excuse me sir; I need to get to my locker. How’s your day going?” I said.

“Well my daughter’s graduating from CU (Colorado University at Boulder).”


“Well, at least I’m done paying for it. She probably won’t use it anyway.”

If $3K would’ve been lost on her business idea his friends would of most likely labeled him as a deranged reckless dad that made a terrible financial investment.

Not me.

Real valuation: discounted cashflows of a college degree

In finance 101, we learn to value assets based on expected future cashflows, and the riskiness of receiving those cashflows.

As soon as the expected future cashflows decline, the risk rises on a security, and the current price declines.

Why don’t we value a traditional 4-year college education the same way?

There’s some serious domain dependency going on here.

The financial return on the current price of many 4-year degrees do not make sense.
PLUS the increasing interest payments start looking more uncertain in a rapidly changing world.

Does the current generation even need a degree?

In “Boomer” times, “tracks” seemed to work.
Western society’s rules were tuned up tighter:

High school.
Decent job.
More education.
Great job.
Ascend to partner.
Call it a lifetime.

Something happened.

Something Generation X, and the Baby Boomers don’t want to admit without being called crazy…It stop working.

Ernst and Young,
think so too.

They don’t require a college degree

So, Why do you require one for your kids?

Peter Thiel awards grants of $100,000 not to go to college.

Instead he will give them a GRANT to pursue an idea and start a business.

As the co-founder of Paypal, and the first outside investor in Facebook, he views this as a less risky choice for motivated kids…

Why not do this for your kids at a smaller scale?

Small start-up seeds versus the future cost of an undergraduate degree in tomorrow’s dollars of $160K

What If I gave my daughter a $2k seed capital investment to start each business?

She’d have enough to start 80 businesses…EIGHTY…8 zero. Read that again.

ONE business class at Colorado University of Boulder costs $3K…
An academic that never touched a business, can never get fired (tenured), preaches outdated religious text from a book printed 10 years ago is a better investment of time and money?


Even with the same content free and accessible at a library, or online?

What would an alien from another planet say about this resource allocation of time and money?

How would you explain it to them?

Today, costs to start a business are ridiculously low: laptop, internet connection, a semi-good value proposition, a few customers, and you’re in business.

If you hate your job working for a corporation that treats you like a disposable widget, why on earth would you create the same track into a future prison for your own kids?

The lessons of success from real world failure versus an “A” in a classroom

An “A'” from typing 30 pages in a 2AM binge session stream of consciousness is not “success.”
It’s a game with no transferable skill set…

When you can’t buy groceries because your business is in start-up mode that’s a little a different.

Why would we not give our kids the greatest opportunity to take risk while they are young?

Like investing in stocks young?

Maybe it’s better when they are established at 40 with a marriage, two kids, a big mortgage, and those dam student loans they still haven’t paid off…

Yes, they may decide they hate entrepreneurship.

Great, now they understand how hard it is, so they don’t take the investment in their education for granted.
Just like having them work construction for the summer.

Let them sweat.

Financial advice to get disbarred?

A four-year college degree is a very loose safety net; like using a single premium immediate annuity in retirement planning.

You’ll always be able to slap the degree down, and “a job” will start spitting out income.

Where’s the upside though?

What If I advised an 18 year-old to buy a single premium annuity on margin?

That’d be a slam dunk lawsuit.

I can hear the courtroom deposition now…

You cost this fine young lady the most valuable opportunity cost in her lifetime, reduced her liquidity, and you advised her to take out excessive debt to purchase the annuity…

What do you have to say for yourself?

No….More….Cheap tickets to the middle class.

Start them on something. ANYTHING entrepreneurial.


It’s the best money and time you’ll ever spend teaching them something, and learning with them.

It is for me.

Disclaimer. Part A

Let it be known, I was the first one in my family to graduate with a four-year degree.

Ya, I have “credentials.”
Don’t think for a second I don’t question the opportunity costs of all those years in a classroom and library.
What would of been my alternative identity had I realized another path sooner!?

Disclaimer. Part B.

We do have a growing 529 plan investment for my daughter.
Veterinarian, virologist (her top choice currently), or something where a clear alternative does not exist besides keeping it traditional.

She’ll have a chunk to get started.


To my knowledge, I currently, have the only detailed podcast episode on our state’s 529 plan as well, so yes I value understanding both paths.


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