Affordable is a matter of perspective. I don’t like spending \$100 at a restaurant, that is expensive. I would have to plan out that dinner and budget for the meal weeks in advance. But if Mark Zuckerberg walked into the same restaurant, he would have no problem paying for his meal. The point is that \$100 has a drastically different value based on what your net worth is.

This is what I call the dollar dilemma.

The Dollar Dilemma

The dilemma is more than a math equation that calculates the value of a dollar based on the percentage of your net worth. It is a social problem.

I am reminded of a Friends episode where the gang goes out to eat. After the meal, they are attempting to figure out how much each person owes. Instead of each person paying for their own food, Ross calculates how much it would cost to split the bill evenly between all six of them.

Of course, the \$28 is a lot more for some of the friends than the others. They get in a fight and (spoiler) they work it out by the end of the show. But the problem presented by this scene allows us to see that money does not have a fixed value for all people.

Ok, yeah, that is common sense. Why are we discussing this?

The problem is that while we quite make this connection quite easily when it comes to the small things in our life — like the cost of food or movie tickets — we tend to throw comparative worth to the side when deciding big financial life decisions like a college education.

Once a monetary amount goes over a certain number and is spread over a longer period of time, we tend to overestimate our value. We begin focusing on our earnings potential rather than our current earnings.

Earnings potential is a valuable number, but that number is not a guarantee. Just because I have the chance to make \$100,000 next year, doesn’t mean I will. Circumstances change and with the changing circumstances, our potential changes as well.

And now, we get to the root of the issue. Colleges don’t provide a linear earnings potential based on how much they cost. But college graduates do have the potential to earn more than their non graduating counterparts.

How much do people earn (on average)?

I don’t like averages, they’re misleading. But when presented with a large enough pool, they’re quite helpful.

• High School dropout=\$20,000/yr
• Masters and above=Highly dependent on which path you choose.

These are average rates. It definitely makes sense to go to college and receive a Bachelor’s degree in something. But what happens when we look at the stats based on the “selectivity” of a school (which roughly correlates to price)?

As we can see, the college you go to doesn’t make or break your career, especially if you are majoring in a STEM degree.

What is the point?

College choice matters, but much less than you think. If your only reason for attending a college is due to the purported “alumni network” or similar reasons then you would be wise to take a step back and evaluate the true costs and benefits of a degree from each specific school. While movies like to play up the bond that comes with going to the same school, employers want someone who will get the job done. If you are competent and have the proper experience, the school you attended will not win or lose the job. Your personality and work ethic will.

Once you understand that your college choice matters less than you thought, then the prospect of paying an extra \$35,000/yr for school seems like an undue waste. You are able to take your dollar and spend it for an education worth paying for. Or, if you have an entrepreneurial spirit, you can be like Bill.

………

Originally published at grouchygrad.com on September 5, 2017.

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