Throwback: College - To Go or Not To Go? | Ep 926
In this episode of The Game, Alex Hormozi explores the financial implications of choosing between college education and direct workforce entry. He examines the current state of student loan debt in the U.S. and presents data on how education levels correlate with lifetime earnings, while explaining how different socioeconomic backgrounds can affect the value proposition of a college degree.
Hormozi draws from his experience to discuss strategies for maximizing returns on either path. For college students, this means fully engaging with academic opportunities while avoiding costly distractions. For those skipping college, he outlines alternative approaches to education, including seeking mentorship and investing in self-directed learning, emphasizing that continuous education remains valuable regardless of the path chosen.
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College vs. Career: Financial Costs and Benefits
Alex Hormozi examines the complex financial implications of pursuing higher education versus entering the workforce directly, highlighting both the challenges and opportunities of each path.
The Financial Reality of College Education
Hormozi points out that U.S. student loan debt has reached $1.76 trillion, exceeding most countries' GDPs. He explains that these loans, which cannot be discharged through bankruptcy, often become a significant burden due to high interest rates. For example, a $250,000 loan could cost $400,000 to $500,000 over a career. However, education does correlate with higher earnings: lifetime earnings range from under $1 million for those without a high school diploma to $3.6 million for those with professional degrees.
The Role of Individual Circumstances
According to Hormozi, the value of college education varies significantly based on socioeconomic background. For students from wealthy, educated families, college might offer diminishing returns compared to immediate career entry. In contrast, for disadvantaged individuals, particularly Latino and black students, college can boost median earnings by 30-40% and provide valuable networking opportunities that can transform family trajectories.
Maximizing Value in Either Path
Hormozi advises that students attending college should maximize their investment by maintaining a full course load and actively engaging in campus life, avoiding excessive partying that could negate the value of their education. For those choosing not to attend college, he emphasizes the importance of self-education and hands-on learning. Drawing from his own experience, Hormozi suggests paying mentors, investing in courses, and maintaining a "professional student" mindset focused on continuous learning rather than immediate earnings.
1-Page Summary
Additional Materials
Clarifications
- The financial implications of a $250,000 loan costing $400,000 to $500,000 over a career are due to the accumulation of interest over time. This means that in addition to repaying the initial loan amount, borrowers also pay interest, which can significantly increase the total amount repaid. The longer the repayment period and the higher the interest rate, the more the borrower ends up paying over time. This highlights the importance of understanding the total cost of borrowing, including interest, when taking out student loans.
- Student loans in the United States are typically not dischargeable through bankruptcy due to legislation passed in the 1970s. This means that even if a borrower declares bankruptcy, their student loan debt will generally remain intact and must still be repaid. This policy was put in place to protect the government's investments in education and ensure the availability of student loans for future generations. The stringent criteria for discharging student loans in bankruptcy court make it very challenging for borrowers to have this type of debt forgiven through bankruptcy proceedings.
- In the context of college offering diminishing returns for students from wealthy, educated families compared to immediate career entry, the idea is that individuals from such backgrounds may already have established networks, resources, and opportunities due to their family's status. This can potentially lessen the additional benefits that college education might provide in terms of networking and skill development. In contrast, for students from disadvantaged backgrounds, college can significantly enhance their earning potential and social mobility by providing access to resources and connections they may not have had otherwise.
Counterarguments
- The correlation between education and higher earnings does not necessarily imply causation; other factors such as personal drive, networking, and opportunities play significant roles.
- The high cost of student loans may not be justified by the potential increase in earnings, especially in fields where salaries are not significantly higher for degree holders.
- The assumption that college provides valuable networking opportunities may not hold true for all individuals, as networking success can vary widely based on personality, career field, and the quality of the institution.
- The diminishing returns of college for students from wealthy, educated families may not account for non-financial benefits such as personal development, cultural enrichment, and the acquisition of soft skills.
- The advice to maintain a full course load and actively engage in campus life may not be feasible or beneficial for all students, particularly those who need to work to support themselves or their families.
- The emphasis on continuous learning and self-education for those not attending college may overlook the structured learning and accreditation that formal education provides, which can be important in certain career paths.
- The suggestion to pay mentors and invest in courses may not be accessible to individuals with limited financial resources, potentially exacerbating socioeconomic disparities.
- The focus on median earnings increases for disadvantaged individuals attending college may not reflect the individual variability in outcomes, where some may not experience such benefits due to systemic issues or personal circumstances.
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College vs. Career: Financial Costs and Benefits
Alex Hormozi discusses the daunting financial reality facing college-aged young adults, considering both the financial implications of student loans and the potential earnings associated with various levels of educational attainment.
College Is Costly, With $1.76 Trillion in Student Loans, Often Surpassing National Gdps
Hormozi highlights that the collective debt among college-aged young adults in the U.S., standing at $1.76 trillion, exceeds the GDP of most countries.
College Costs Impacted by High Interest Rates and Non-dischargeable Student Loans
He notes that one of the most burdensome aspects of college debt is the high-interest rates. Moreover, student loans can't be discharged in bankruptcy and remain until they're paid off or until the debtor dies. This dilemma often begins at 18, without a full grasp of the long-term repayment implications of a sizable loan, which could ultimately cost $400,000 to $500,000 over a career on an initial $250,000 loan due to soaring interest.
Earnings Rise With Education: $1M for High School, $3.6M for Professional Degree
Hormozi provides data on lifetime earnings relative to educational achievement. He states that those without a high school diploma typically earn less than $1 million over a lifetime, while holders of professional degrees have the potential to earn as much as $3.6 million.
Earnings Take Time to Materialize; Higher Degrees Have Longer Delays
Earnings, especially for those with higher education degrees, generally do not peak until an individual reaches their late 30s or early 40s. This delay is significant as it often coincides with significant life events like starting a family or buying a home.
Earnings Increase With Education Level, From 7.3% For Non-grads to 83% With Professional Degree
The likelihood of out-earning someone with a bachelor's degree rises with each educational benc ...
Here’s what you’ll find in our full summary
College vs. Career: Financial Costs and Benefits
Additional Materials
Clarifications
- Non-dischargeable student loans are loans that cannot be eliminated through bankruptcy proceedings. This means that even if a borrower declares bankruptcy, they are still responsible for repaying these loans. Unlike other debts that can be discharged in bankruptcy, such as credit card debt, medical bills, or personal loans, student loans typically remain with the borrower until they are fully paid off or under specific circumstances like death or permanent disability.
- Earnings typically reach their highest point in a person's late 30s or early 40s due to factors like career experience, skill development, and professional advancement during the initial years of one's working life. This trend is often observed as individuals progress in their careers, take on more responsibilities, and potentially move into higher-paying roles. It's a common trajectory where income tends to increase steadily as individuals gain expertise and seniority in their chosen field. This age range is a critical period where many professionals have accumulated enough experience and expertise to command higher salaries or secure promotions.
- As individuals attain higher levels of education beyond a bachelor's degree, their likelihood of earning more than someone with just a bachelor's degree increases. This means that the probability of having a higher income compared to those with a bachelor's degree grows with each additional educational milestone achieved. The data suggests that pursuing education beyond a bachelor's degree can significantly enhance one's earning potential. This trend underscores t ...
Counterarguments
- The high cost of student loans may not accurately reflect the potential return on investment for all students, as individual career paths and job markets can vary significantly.
- The assumption that higher education always leads to higher earnings may not account for the saturation of certain job markets or the value of trade skills that do not require a college degree.
- The data on lifetime earnings does not consider the variability in cost of living across different regions, which can significantly impact the net value of those earnings.
- The peak earning age for higher education degrees may not account for the increasing trend of career changes and the growing importance of continuous learning and adaptability in the job market.
- The statistic that 27% of doctoral degree holders do not earn more than bachelor's degree holders may not consider non-monetary benefits of education, such as personal fulfillment, intellectual growth, and social contributions.
- The focus on financial outcomes may overlook the intrinsic value of education and the broader soc ...
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Considering Individual Circumstances and Goals In Choosing College or Career
Alex Hormozi delves into the varying impacts of college education on individuals based on their socioeconomic background and the importance of evaluating personal circumstances when making decisions about higher education versus immediate career entry.
For Wealthier, Educated Families, College Benefits May Be Less Than Immediate Career Start
Hormozi discusses the overrepresentation of those from higher socioeconomic backgrounds among college attendees. He questions the incremental benefits of college for wealthier, more educated families compared to the immediate start of a career. Hormozi states that college may simply reinforce the values and advantages these individuals already possess, suggesting that for these families, the decision to go to college might be tradition rather than a strategic choice that adds value, given that they could achieve similar success without a college education.
Socioeconomic Advantage Reduces College Benefits
Expanding on this perspective, Hormozi argues that wealthy families may reap less significant benefits from college. These students often incur debt and may miss out on potential career development opportunities that could have been gained through immediate work experience. If you're not the first in your family to attend college, the benefits may diminish due to pre-existing advantages like a strong network and economic stability.
College Boosts Earnings, Alters Family Trajectories For Disadvantaged
Conversely, Hormozi contends that for disadvantaged individuals, particularly Latino and black individuals, college can significantly boost median earnings, sometimes by 30 to 40 percent. This effect suggests that college has the potential to alter family trajectories and provide a transformative zip code change.
College Networks and Exposure Transform Disadvantaged Students
For those from less advantaged backgrounds, college can be an entry point into a new social environment, offering exposure to networks that can lift an individual out of their original socioeconomic status. Hormozi emphasizes the transformative power of college in creating new opportunities and changing family trees for students who are the first to receive formal education.
Degree Requirement in Certain Career Paths
Hormozi acknowledges that certain career paths, such as those in science, technology, law, or medicine, necessitate a college degree. However, he also argues that for those without a clear career di ...
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Considering Individual Circumstances and Goals In Choosing College or Career
Additional Materials
Clarifications
- Wealthier families may experience fewer incremental benefits from college education due to already possessing advantages like strong networks and economic stability, potentially leading to questioning the necessity of pursuing higher education for career success.
- A "transformative zip code change" signifies a significant improvement in one's socioeconomic status or living conditions as a result of educational or career advancements. It implies a shift from a lower-income or disadvantaged neighborhood to a more affluent or opportunity-rich area. This change can be catalyzed by factors like increased earnings, expanded social networks, and access to better resources and opportunities. Ultimately, it represents a positive transformation in one's life circumstances due to educational or career achievements.
- Leveraging college for networking opportunities involves utilizing the connections and relationships you build during your academic journey to enhance your career prospects. College provides a platform to interact with peers, professors, alumni, and professionals in various fields, which can lead to job opportunities, mentorship, and valuable insights. Networking in college can help you access hidden job markets, gain industry knowledge, and establish a support system that can be beneficial throughout your career. Building a strong network during college can open d ...
Counterarguments
- College can provide wealthier students with unique opportunities for personal growth, intellectual development, and exposure to diverse ideas that may not be available through immediate work experience.
- The value of college extends beyond immediate financial benefits and includes the development of critical thinking skills, which can be beneficial in any career.
- The networking opportunities and prestige associated with certain institutions can be particularly beneficial for students from wealthier backgrounds, potentially leading to opportunities that are not as easily accessible through immediate career entry.
- For disadvantaged students, the debt incurred from college can sometimes outweigh the benefits, especially if they do not complete their degree or if the degree does not lead to a well-paying job.
- The transformative power of college for disadvantaged students can be hindered by systemic barriers that persist even after graduation, such as discrimination in hiring practices or unequal access to high-paying jobs.
- While certain careers do require a college degree, the rising costs of higher education and the availability of alternative education paths, like online courses and vocational training, ...
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Maximizing College Value or Career Without a Degree
In the pursuit of a successful future, Hormozi lays out approaches to maximize the value of college or pursue a fulfilling career without a formal degree.
Treat College Education As a Full Course Load for Maximum Learning
Hormozi advises students to take college seriously by tackling a full course load, joining clubs, and engaging in college life to get the most from their educational investment. He cautions against squandering time and money on partying, as such activities negate the value of the financial investment made in college education.
Partying and Minimizing Effort Negate Financial Investment Value
Hormozi is stern in his warning that too much partying and slacking in school leads to wasted financial investment, as failing to learn depreciates the value of being in college.
Forgoing College? Focus On Self-Education and Hands-On Learning, Possibly By Paying Mentors
For those considering an alternative to college, Hormozi highlights the importance of self-education and hands-on learning. He shares from personal experience how he started working at a minimum wage at a gym and paid a mentor to learn valuable skills.
Discipline in Continuous Learning Offsets Lack of Formal Degree
The secret to offsetting the lack of a formal degree, according to Hormozi, lies in the discipline of continuous learning. He emphasizes paying experienced individuals for knowledge, investing in courses or books, and showing initiative, which are often rewarded with guidance from successful entrepreneurs and skilled professionals. Hormozi underscores that necessary skills for life and business are often acquired outside of college classrooms, via self-education and practical experience.
Objective: Develop Skills and Knowledge Beyond Income
Hormozi debates college necessity, suggesting success can also be achieved through self-taught knowledge and real-world experience. Focused learning and t ...
Here’s what you’ll find in our full summary
Maximizing College Value or Career Without a Degree
Additional Materials
Counterarguments
- While taking a full course load can be beneficial, it's important to recognize that not all students can handle the same workload effectively, and overcommitment can lead to burnout and stress.
- Engaging in college life is important, but there should be a balance; social activities, including parties, can be valuable for networking and developing soft skills such as communication and teamwork.
- Self-education and hands-on learning are valuable, but they may not always be recognized by employers who prioritize formal education credentials.
- Discipline in continuous learning is important, but without a structured environment like college, some individuals may struggle to maintain focus and direction in their learning.
- While developing skills and knowledge beyond income is a noble goal, practical considerations such as financial stability and job market demands often necessitate a focus on income-generating skills.
- The 'professional student' mindset is idealistic, and while prioritizing education is important, it mus ...
Actionables
- You can maximize your college experience by creating a personal development plan that includes academic, extracurricular, and social goals. Start by setting clear objectives for each semester, such as maintaining a specific GPA, joining a new club related to your major, and attending a set number of networking events. This approach ensures you're actively engaging in diverse aspects of college life and not just drifting through your years at university.
- Develop a self-education routine by dedicating time each week to learn new skills through online platforms. For instance, allocate two hours every Saturday to take a course on a site like Coursera or Udemy that complements your field of study or interests. This habit will help you gain additional knowledge and skills that may not be covered in your formal education.
- Create a 'professional student' accountabi ...
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