Alternatives to College if it Doesn’t Make Financial Sense

Alternatives to College - Air Traffic Controller

Train to become an air traffic controller.

$870 billion.

That was the total outstanding student loan balance in the United States as of the third quarter of 2011, according to a study completed by the Federal Reserve Board of New York.

That’s more than the outstanding credit card balance ($693 billion) and the total auto loan balance ($730 billion), and it averages about $23,300 per student.

In addition, with the economy still floundering, student default rates are sky rocketing.

Those who graduated during the heart of the recession earned approximately $30,000 less per year in their first job than those who graduated just before.

Meanwhile, job prospects for students with only a high school degree are also pretty grim, with one study finding a drop during the recession in full-time employment rates from 30% to 16%. Moreover, the higher a person’s level of education, the less likely he/she is to be a member of the working poor.

If these statistics are old news to you, it’s not surprising; the media and cultural narrative in this country has long been a dichotomous fight, one in which college is pitted against high school as if they are a young person’s only two options. What society fails to mention is that there are a range of other options out there for young adults. Some are more traditional (the military, trade school, etc.) while others are distinctly modern.

The 20 Under 20 Fellowship is one of them – a program started by PayPal founder and major Facebook investor, Peter Thiel that provides twenty students under the age of twenty with $100,000 to focus on self-education, research, and funds to possibly launch a business under the mentorship of experienced investors, scientists and entrepreneurs.

What does this all mean for today’s youth? With so many different routes possible, does it really make financial sense to attend college anymore? The answer, like everything in life, depends on the circumstances and the individual. Let’s take a look at a few of those routes and find out what they really mean. If you or your child insists college is not a good fit, there might still be options.

Cost of College

In order to do this comparison, we’re going to stick with the average student debt figure of $23,300, rather than separating out private vs. public schools. Why are we doing this? Because public college students often graduate with just as much if not more debt than their private school counterparts, despite lower (but rising) tuition rates at state schools.

That’s thanks to better scholarships at many of the most elite private schools, and relatively similar living expenses. At this point, the cost of college tuition is less about private vs. public and more about the specific college or program you choose.

So, what’s the payoff of a college degree? According to a pre-recession report from the census bureau, workers with a bachelor’s degree can expect to earn about $2.1 million in their lifetime, and $2.5 million when they tack on a master’s degree.

In comparison, the average high school graduate can expect to make only $1.2 million. Subtract the college debt of $23,300, and you’re still in the two million dollar range for both a bachelor’s and a master’s degree – well over the high school numbers.

But that broader rosy picture doesn’t give us an accurate view of the kinds of financial sacrifices students often have to make over their average ten-year post-graduation loan period.

  • If, using a financial aid calculator, we assume a 6.8% interest rate and $23,300 of debt, that’s a monthly loan payment of $268.14.
  • With an average starting salary for college graduates of $41,710 and a monthly salary of $3,475, that monthly loan payment can eat significantly into the amount of free cash students have to build their initial long-term wealth strategies, whether that’s real estate, Roth IRAs, or their own children’s college funds.

It’s less of a problem for the highest earning white collar jobs (such as aerospace engineering and computer science) which start at salaries closer to $59,600 and $56,400, respectively, and more of a problem for lower paying degrees, such as studio arts and social work.

“Go Big or Go Home” Entrepreneurship

While America has always been a “pull yourself up by the bootstraps sort of place,” the rise of the tech industry in the past twenty years has brought the idea of creating a startup to the forefront. With famous college dropouts like Bill Gates, Mark Zuckerberg, Michael Dell and Steve Jobs to look up to, there is no shortage of young entrepreneurs eager to follow in their footsteps. It seems like a great idea, but is such a route practical for the average Joe?

It depends, but not just on the type of skills a person is bringing to the task (i.e. intellectual ability, business sense, organizational skills, drive, creativity, networking ability, and so forth), but also on where that person is located, luck, and what kind of support network they have waiting for them. Bill Gates, Mark Zuckerberg and Michael Dell were all born into middle or upper-middle class families, which could have eased their transition towards another path should their ventures have failed.

What’s more, they didn’t actually try for the entrepreneurial route right out the gate; they stayed in college until their companies showed promise. Probably the worst bet a young student could make would be to pour the bulk of the hard-earned money their parents set aside for college into a doomed entrepreneurial venture, only to lose all the money and have nothing left for an alternative route. With startup failure very much the norm, it’s certainly a possibility and something that must be considered.

That said, with programs like Peter Thiel’s “20 Under 20 Fellowship,” we have another kind of model that combines real-world education with those potential long-term entrepreneurial payoffs without ever dipping into the parental college fund, therefore making both routes possible.

More universities are also adding an entrepreneurial track for their students on top of their normal liberal arts or science degrees. The University of Texas at Austin, for instance, runs a program for college seniors called Longhorn Startup Camp, designed to take students through courses in entrepreneurialism while also launching their own businesses.

Such programs significantly decrease the risks and increase the payoffs by merging this college vs. startup divergence.

Small Businesses and Trade School

For students lacking the tech edge, there are still many ways one can use technology to launch their own small business, either full-time in lieu of college, or on the side while enrolled. It’s far easier these days for amateur and professional photographers alike to make a living online by uploading photographs and royalty free images to stock photo sites. The same goes for self-taught designers running their own infographic and web design businesses, as it does for a range of other lucrative non-college career paths.

And don’t discount the more traditional middle class non-college careers, like being a member of the police force, an air traffic controller, or a plumber. While these careers do require a fair amount of training, it’s often provided on the job or the cost is negligible compared to that of college tuition.

Be warned though: blue collar jobs, especially in areas like the construction industry, are often among those hardest hit by recessions, and with the federal government and many states and municipalities cutting back on public funding, many of these jobs no longer carry the guarantee of stability they once held.


So what’s the take-away? Is college still worth the investment? Whether or not college will be a sunk cost depends entirely on the person applying. Only you can answer that for yourself, or for your child. The decision of whether to go to college or jump straight into the work force can be a difficult one to make; here are a few questions and suggestions to consider along the way:

1. Question: Are you (or your child) academically driven? Is there a real thirst for knowledge and academic exploration?

Suggestion: In this case, the financials may not matter as much. A thirsty mind needs feeding and will find a way to make the financials work in the long term. Head to college; explore a world of knowledge.

2. Question: Do you (or your child) seem likely to choose a lucrative career, like medicine or engineering?

Suggestion: Since the majority of these careers do require degrees, college will be well-worth the investment.

3. Question: Do you have (or can you provide your child with) a safety net should the first entrepreneurial venture not work out?

Suggestion: If there is a clear business and action plan, consider ways to finance or otherwise support the venture, whether that’s through your own investment or through a program like Peter Thiel’s.

4. Question: Are you (or your child) a born business person, or do you possess (see in them) the right characteristics to become one, such as drive, creativity, ingenuity, organizational skills, motivation, passion, and intellectual ability?

Suggestion: Even with these traits, there’s probably a lot you (or your child) can learn in college that will help along the way. But if there is an idea that has to be acted on now, take the time to make it work and trust.

5. Question: Are you (is your child) more driven and talented in an art than in a traditional academic setting? Do you (they) prefer more heavily action-oriented tasks over sitting at a desk and studying all day?

Suggestion: Attend a less expensive arts colony, trade school, or career-track job. If there is no interest in academia, there may not be any point in heading that direction.

6. Question: Are you (or your child) totally confused about what to do?

Suggestion: Take a gap year, whether it’s traveling, volunteering, or doing an internship. Gap years broaden a student’s perspective and often clarify their goals, making them much more likely to achieve in the classroom and complete a degree, or fully commit to a business venture upon their return.

College is not the magical employment solution it used to be, but, until employers change their requirements, it will remain a must for many industries. Consider your (or your child’s) strengths and weaknesses, and work on developing a path that will best play to those individual strengths when choosing a career path.

What’s your take? What do you think about doing something different than college? Have any suggestions?

Adria Saracino is a marketer and blogger. When not consulting businesses on how to make more money online, you can find her pursuing her own entrepreneurial adventure, a fashion blog and personal style service called The Emerald Closet.

Image by Official U.S. Navy Imagery

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Last Edited: August 13, 2012 @ 12:02 am