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How do you skip college and invest the tuition in the S&P 500? Ah, you can't: Of course, lenders won't give out large loans for an individual to skip college a
by sillysaurus3 9y ago
How do you skip college and invest the tuition in the S&P 500?
Ah, you can't: Of course, lenders won't give out large loans for an individual to skip college and dump tuition into the stock market, this is just a hypothetical scenario.
So this article is unrealistic.
- efa 9y agoIf your parents were going to pay for your college you could do this.
- jamespo 9y agoYour parents being willing to pay college fees vs giving you all the money to invest are very different things
- popcorncolonel 9y agoThe people whose parents are paying for college already have more of an advantage so they would be more likely to have an ROI from college.
- pmiller2 9y agoActually, from the student's perspective, there would be a 0 investment, so ROI becomes infinite.
- ReverseCold 9y agoAh yes, the old "finding a dollar on the street gives you infinite ROI, much better than __________"
- efa 9y agoI don't understand what you mean by this. Say a grandparent left a grandchild 50k for college. It's the grandchild's money. The grandchild could choose to invest in college or the market. This may not be a common scenario but that's what I meant.
- vilmosi 9y ago> Say a grandparent left a grandchild 50k for college. It's the grandchild's money. Well if somebody gives you money for X it's not really your money since you are not at liberty to spend it however you want. Only X is technically yours.
- zxcvvcxz 9y agoNo it's not, because it's directed at our society as a whole. We can collectively change how we recommend people to allocate their time and money. And as a thought experiment, this is an important critique of the value of modern post-secondary education.
- twic 9y agoThis is the kicker. Similarly, the stock market outperforms property on the regular, but banks won't lend you hundreds of thousands of beans to get involved in the stock market, when they'll fall over themselves to give you a mortgage.
- eqmvii 9y agoBecause repossessing property is (statistically speaking) more likely to work out for the bank than repossessing whatever random stocks an investor decided were a sure thing. That's why margin accounts aren't available to everyone, and margin calls kick in to protect the investment firm before total loss. Housing is volatile, but stocks are significantly more so, and with significantly more near-total losses over time.
- kelnos 9y agoIn addition to that, the bank knows what they get back if you default on your loan: your house. If you want to invest in the market, the bank has no idea what stocks or funds you'll be investing in, and can't even remotely guess at what they'll get back if you default.
- aianus 9y agoWhen you borrow money to invest in stocks the stocks are in an account that the bank can seize when the net value is low enough. It's much much easier to repossess than an illiquid house.
- mSparks43 9y agoIts funny that you are the only mention of default on the entire page. When the majority of student loans will default. And its easy to skip them just by emigrating to a better country - of which there are lots.
- aianus 9y agoYou have this exactly backwards. Stocks are much easier to repossess and liquidate during a margin call which results in margin interest being lower than mortgage interest. You can't get as much leverage as you can with real estate but that's because of government regulation not because banks are unwilling.
- johnfn 9y agoThe article isn't actually recommending you do that. It's a hypothetical situation intended as social commentary.
- throwawayjava 9y agoBut the hypothetical breaks down once you consider it as a proposal, which makes for a dubious social commentary. Hypothesis testing is far more valuable than pure hypothetical! Governments are willing to subsidize loans for education but not investing for at least two entirely rational reasons. First, an educated populous -- especially college educated, and especially in STEM fields -- is in the public interest. We need doctors, lawyers, engineers, and, yes, even well-rounded marketing/sales teams. Could we get all of those things without subsidizing education? Probably not in the quantities needed by American firms. Second, consider the sheer mass of each college-aged adult reliably pouring six figures into investment vehicles on their 18th birthday. It would take on a force of its own. In small quantities, this works out well for the non-student. In large quantities, the tail wags the dog. And anyways, where are all these lucrative investments that pay out decade after decade and that require nothing but cash money, quality of labor market be damned? I mean, they exist, but surely not in large enough quantities to sustain an entire society of passive income earners...
- johnfn 9y ago> But the hypothetical breaks down once you consider it as a proposal, ...again, that's why you don't do that with hypotheticals intended to be social commentary. The article is saying "wow, college is sure overpriced for the amount of money you invest."
- throwawayjava 9y ago> ...again, that's why you don't do that with hypotheticals intended to be social commentary. Good social commentary helps us identify and solve problems. I don't think this particular commentary puts us in a good mindset for understanding or solving the problems with higher education funding in the united states. > The article is saying "wow, college is sure overpriced for the amount of money you invest." The article suggests thinking about the cost of college in terms of payouts to single individuals without any systems-level analysis. On the basis of this perspective, we conclude college is absurdly overpriced. Perhaps college is overpriced. But not nearly as overpriced as this mindset would have us believe. That 7% ROI from the S&P 500 isn't powered by pixie dust. It'd powered by mostly degreed people using their degrees. Social commentary that distracts from the need for an educated populace and instead focuses solely on ROI to individual students is not good social commentary, IMO. So even if we consider this as pure social commentary, my critique is the same: it identifies a problem, but does so in a way that doesn't emphasize the most important root causes of that problem. (edit: also, I stand by my previous statement: IMO unreasonable hypotheses are almost always not useful hypotheticals.)
- perseusprime11 9y agoEven if this is a hypothetical scenario, the larger point the author is trying to make is education is way too expensive and overrated on an apples to apples investment basis. There will certainly be outliers who end up making millions but the majority ends up in debt trying to pay student loans over time.
- maxk42 9y agoWell the extra four years of work experience and income are worth roughly three times the hypothetical 7.1% yield.
- dawnerd 9y agoI did about a month of college before I realized I could make a lot more money jumping right into web dev. Sure I missed out on some things, but I'm doing pretty damn well right now.
- johnmarcus 9y agounless your a trust fund baby like myself and your funding source is your parents.
- anothercomment 9y agoNow I have to ask: to lenders of college tuition consider the subject the borrower chooses? I am just curious - or is it generally the government that does the lending? Otherwise I would be curious to know how lenders see the earning prospects of different majors.
- bcheung 9y agoTrue, but not having the student loan debt means you have more disposable income and that can be invested starting straight after high school.