Alternatives to College if it Doesn’t Make Financial Sense

Alternatives to College - Air Traffic Controller

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$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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  1. @TheMilitaryGuid Thanks for the tweet and all the positive comments, Doug.

  2. Mac Hildebrand says

    I like the idea of young people who are willing to invest in an entrepreneurial venture. I’m not familiar with many high school graduates who have this commitment and the skills. Usually, the drive it would take to start a business means that students are academically driven enough to excel in college which is a more safe choice, even with student debt. I would like to see more initiatives like the 20 under 20 Fellowship equip recent graduates with the direction and resources to make their entrepreneurial venture a reality.

    • adriasaracino says

       @Mac Hildebrand Hey Mac, thanks for your insights, I agree with you, but I think there are ways around it that don’t end in the student still having to go to college.
      Essentially, the fundamental flaw with these types of programs is that they just gives the money, but the training to help them explore if this is something they are interested in is missing…and I might be so bold as to even say that the problem is with our HS system not grooming our children’s entrepreneurial spirit, but rather drilling in their head that there is only one way to succeed, and that is with a college degree. I think in its current form, you’re right, that these type of programs are probably better for recent grads, but I think it’s still an option for some of our HS population, and could be for more given the right attention.

  3. Great post, PT, thanks.  Our kid turned out to be Q#1 & #2, but I think she got that from her mother.  
    As you know, the military option is not as straightforward as it seems.  I put up a guest post about it  last week over at Punch Debt In The Face:
    The “good” news for a young adult in the military is that after a few years of that lifestyle, they become very very motivated to obtain a college degree.  Even better, they have the active-duty benefits (plus the GI Bill) to help them do it.

    • adriasaracino says

       @Nords Thanks for pointing out this article. I definitely agree with you, and it’s something I didn’t know how to incorporate without going on a tangent. But personal story, I know someone who enlisted in the ARMY right after school, and is now going to college 10 years later because he realized that education helps you move up in ranks in the military, and it’s the one thing he regretted not doing. He described there is an “internal class system” within the ARMY that you feel if you did not get an education. I’m not sure if this is true for all military branches, but it is something to consider if one of the goals in the military is for you or your child to move up in the ranks. If that’s the case, maybe education does make sense.

      •  @adriasaracino  It’s getting to be that way in all branches of the services.  At my final two commands we were organizing college classes in our buildings (after hours) and running study groups.  
        I think the military makes servicemembers realize that college isn’t as scary hard as they used to think.  It also gives them skills like perseverance and time management.  If they’d gone straight to college after high school then they probably would have dropped out… and joined the military.

        • adriasaracino says

           @Nords That’s really interesting to hear more from someone who has experience with this. Do you think those ROTC programs and the like offer alternatives to the classic college experience? It seems that maybe if your child’s end goal is college but he/she’s not ready yet or is unsure, but has an affinity for the military, maybe they will end up in college at the end of their service because it gave them the skills they need to succeed and appreciate college.
          The end result is still the same, there isn’t only one path to a successful career. It may end in college but it doesn’t need to be HS, college, career in all cases.

        •  @adriasaracino ROTC is actually a full-time college scholarship for 2-4 years of tuition.  (The student still has to handle room & board and some other expenses.)  Midshipmen/cadets take eight extra classes in military subjects and additional summer training with active-duty military commands.  After they get their bachelor’s degree, they’re commissioned as Reserve ensigns/second lieutenants.  The typical service obligation for the college scholarship is five years’ active duty and three years’ inactive Reserve, but that varies with the type of degree.  For example,
          ROTC is certainly different from the typical college experience, but not as intense as a service academy.  The ROTC staff are very good at helping their charges through the academic and military challenges, and of course the students have to learn leadership, self-discipline, and time-management skills.
          When I graduated high school 30+ years ago, I would’ve partied my way right out of college after one semester.  The U.S. Naval Academy gave me the “supportive” environment that I needed to grow up and develop my skills– as painful as that was.  Today our daughter is a junior at Rice U getting at least $150K from the Navy to study civil engineering, and she wants to be a submariner when she graduates in 2014.  But of course she grew up in a family that helped her develop her own self-discipline and time-management skills.  It’s paying off.
          Many enlisted servicemembers end up in the military because they don’t want (or drop out of) college.  Eventually they get motivated to advance their military careers with a college degree, or at least to get that degree before they leave the service to start a civilian career.  Whether they do their degree on nights/weekends (with military tuition assistance) or through a service academy/ROTC scholarship, they’re much more ready to handle the college challenges.
          You’re right about many paths to the same goal.  The military tries to direct all its servicemembers to a college degree eventually, but there can be quite a few other stops along the way…

        • adriasaracino says

           @Nords Wow thank you for that thorough response! That was really informative, as I don’t have much experience with ROTC and other military programs. I’m glad to see that your daughter was given the tools needed to find her path right away, and it sounds like the military will help those students who do not have that structure early on in life. Thanks again, really insightful!

  4. The Empowered Dollar says

    Great article! I totally agree with taking a gap year. It’s always smart to take a step back before rushing into a huge financial and career commitment like college.

    • adriasaracino says

       @The Empowered Dollar Glad you agree! Did you have the opportunity to go on a gap year or send your child(ren)? I also recently read an article about a family that home schools their children on the road, traveling to help them learn more than they can learn in the classroom. I thought this really interesting and definitely something worth considering.

  5. I liked the filter questions. Good resource for a young teen trying to decide. I wish I’d have thought harder about it at that pivotal time. 

    • adriasaracino says

      Thanks Paul! To be honest, a lot of times we are so drilled with “college as the next life step” that it’s hard to think of the alternatives without fear of being ridiculed or setting ourselves up for failure, so I think a lot of us have been there!

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