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Friends Don’t Let Friends Go To Private School Without A Scholarship

If you haven’t heard, there’s a student loan crisis. Some $1.1 trillion in student loans is owed in the U.S., with an average loan debt of $27,253 as of the end of 2012 according to FICO. Surely things have gotten worse since. What’s more concerning is that 11.5% of student loan debt is more than 90 days past due or is in default.

Take a look at the red line in the chart below. There are more people delinquent on their student loans than on their credit card payments. The Health Care And Education Reconciliation Act under the Obama administration might be able to alleviate some of the pressure. On the other hand, there’s always moral hazard to deal with with debt forgiveness plans.

So what is the solution to the student loan problem that is preventing the younger generation from buying their own homes, and forgoing saving for retirement in their 20s and even in their 30s? Cheaper education that provides a higher return, of course!

Delinquencies and debt


For the first 13 years of my life I went to private school overseas until I came to the US for high school, college, and graduate school, all of which were public institutions. Given I went to both private and public school for an almost equivalent amount of time, I’d like to share some thoughts on why I think the easiest solution to the student loan crisis is to either go to public school or only go to a private school that gives a scholarship equivalent to the tuition cost of a public school.

According to the College Board, the average cost of tuition and fees for the 2013–2014 school year was $30,094 at private colleges, $8,893 for state residents at public colleges, and $22,203 for out-of-state residents attending public universities. Given the median household income is roughly $51,000, paying $30,094 a year without financial assistance is an enormous gamble. The only way for many families to “afford” such tuition is to get into debt.

I first want to discuss several myths about private school vs. public school.

Myth #1: Private schools provide better job opportunities. Although some companies have specific target schools for recruitment, one company can’t hire everybody from Harvard, just like how Harvard doesn’t admit everybody from Andover or Exeter prep schools. Once you get into an elite private college, the distribution curve happens again where most return to average. It can be argued that it is therefore harder to get a job out of an elite private college, just like it’s harder to graduate valedictorian from a magnet school vs. non-magnet school.

I’m looking around the marketing room and I have colleagues from Princeton, Brown, Holy Cross, UC Santa Barbara, University of Michigan, and The College of William & Mary. The distribution is 50/50 and we all ended up in the same place, although titles, incomes, and ages are slightly different. Look around your office and observe the mix of public and private school attendees. I’m sure there’s a good mixture as well with similar incomes and titles.

Myth #2: You make more money graduating from private school. There is no such thing as paying a starting analyst in any department more money just because they went to private school over public school. In fact, that would be illegal and discriminatory. Some private school attendees might have a leg up at certain firms, but the same can be said for some public school attendees who apply to companies whose employees come predominantly from public schools.

According to a survey that came out in July 2014 by the Department of Education’s National Center for Education Statistics, College grads from private four-year schools earned about the same as those from public four-year schools, about $50,000 a year. Of the 16% of students who took home degrees in science, technology, engineering or math, they were paid around $65,000 a year. The findings are based on a survey of 17,110 students conducted in 2012, about four years after the students obtained their bachelor’s degrees.

Myth #3: You have a stronger alumni network going to private school. Getting a job and moving up the ladder often has to do with who you know. According to the National Center For Education Statistics (, in 2013 nearly 7.5 million students went to public 2-year institutions, and 0.5 million attended private 2-year colleges. Roughly 8.2 million students went to public 4-year institutions, and about 5.6 million attended private 4-year institutions. In other words, 50% more people went to public 4-year institutions. 

Two-thirds of the CEOs of Silicon Valley’s 150 largest public companies earned their undergraduate degrees in the United States at taxpayer-funded public universities, state colleges and regional schools, according to a Mercury News survey in 2007.


It’s reasonable to argue that the less tuition students pay, the less debt students will have. In a world where education is fast becoming free thanks to the internet and pioneers like the Khan Academy, MIT Online, and MOOC, it seems backwards to pay rapidly inflating tuition prices.

Given the Department of Education reports that public school and private school students make roughly the same $50,000 a year upon graduation, the clear variable to receiving a higher income and lowering debt is selecting a major that is in high demand. Take a look at the top earning majors according to

Pay by Major

I don’t know how many people want to be petro engineers, but if a high return on your education is important, then studying engineering, mathematics, computer science, and physics is the way to go. You can see an excellent 129 majors list from Payscale here with Child & Family Studies ranking dead last with a starting median pay of $30,300.


If your family is wealthy enough to send you to Yale for $42,000 a year, then definitely go. How can you turn down a world class education from one of the most elite universities in the world? But if you are smart enough to get into Yale, but somehow don’t receive enough financial aid, you are probably smart enough to get a scholarship from a great public university like Berkeley, UCLA, UCSD, William & Mary, UVA, Virginia Tech, Georgia Tech, Wisconsin, Michigan, and CUNY.

The reason why I went to William & Mary for $2,800 a year was because my sister was already attending Smith College, a private liberal arts school that cost $25,000/year in tuition in the early 90s. My parents were squarely middle class as government employees and I felt guilty.

Below were all the questions and fears that ran through my head:

“What if I graduate from private school and have to live at home with my parents because I can’t find a job?”

“What if I graduate from private school and end up back at McDonald’s?”

“What if I graduate from private school and end up getting the same job with the same pay as my public school friends?”

“What if I bleed my parents to the point they have to work many more years to afford retirement?”

“What if I drop out of private school halfway through, thereby wasting all that time and money?”

I asked myself these questions over and over again during my junior year in high school. My parents weren’t rich as State Department employees, nor was I smart enough to get large amounts of scholarship money from private schools. I felt extra pressure to make the right choice because we simply didn’t have a large financial cushion.

In the end I decided there was no way I was going to attend a private school for $25,000 a year in tuition back in the 1990s if it wasn’t a “top 10 school.” All subjects are taught off the same text books anyway. Because I also feared failure, I knew that worst case, I would graduate unemployed and get my old $4.25/hour job back at McDonald’s to pay back the $2,800 a year in W&M tuition (4 months working 40 hours a week). It would take 3 years at $4.25 an hour to pay back one years’ worth of tuition at a private school.


I’ve spoken to a lot of high school students about their decision to attend college since I’m a tutor and teach tennis to several high schoolers. Most of them tell me, “It’s all about the right fit.” I think this is a cumulus answer with a high probability of damaging one’s finances. None of the high schoolers ever discuss tuition costs and therefore, a return on investment.

Parents, on the other hand, are much more cognizant about costs because they are usually the ones paying, or have already gone through the college experience. But somehow there continues to be a disconnect between child and parent when it comes to selecting the best college to attend.

There has to be a clear family conversation about the costs and benefits of going to XYZ school not just whether the culture feels right. You don’t want to have a scenario where you or your disillusioned child graduates from college with massive amounts of student debt, angry because nobody told them any better.

Getting a great job, or even any job after college is no longer a given, even from a top school. Roughly 17% of recent college grads are underemployed according to the Economic Policy Institute.

Run multiple post graduation scenarios and highlight exactly how long it will take to pay back all the tuition at the current minimum wage. I’m confident that once we do the math, better decisions will result.

Readers, did you go to a private college or a public college? Would you change your route if you could do it again? Do you think students are fully aware of the cost of tuition? What if we made all students either pay 100% for their tuition, or sign a promissory note to pay back all the tuition within 10 years? Why do you think tuition prices are skyrocketing when information is becoming free? Is tuition that inelastic, even though all the data shows that income for public versus private university graduates is similar?

Photo: Penn State graduation, Flickr creative commons.



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  1. Robert

    Look to the U.S. Midwest, like the University of Oklahoma as an example. Much lower cost of living, quality education, great university town and friendly people. Of course I am biased.

  2. Mitchell

    My Asian parents once hoped that I would attend an Ivy League school; but because of financial reasons, I decided to go to one of the service academies as they provided education, room and board and a guaranteed job post-graduation. It made absolutely no sense to incur huge debts when my goals in life didn’t include lucrative professions. Anyhow, eight years after my fateful decision to join the Long Gray Line, I ended up graduating with a degree in medicine.

  3. Mandy

    Hi Sam
    I am from Sydney(originally from Manila) and my goal is for my son to be accepted to a good US University.
    My son is in Yr10 and will start Year11 in Term4 hoping to go to university in the US in Aug2016. He goes to a good Govt school and currently their no1 player in Div 1 Tennis. Thanks to you and other readers for all your comments as I am trying to get some ideas about US College.
    Feel free to comment please if you have some advise that I can take on board


    • Financial Samurai

      Hi Mandy,

      Come to the US! Lots of opportunity here. Do you know where exactly you are thinking? Hopefully he can get a scholarship as university is expensive here.

      • Mandy

        Hi Sam
        I have relatives in the East Coast and some friends in the West. All I want is a good University academically but I have really no idea. I have been spending time in the web looking around. A friend has recommended Berkeley and my son’s friend from the same school is going to UCLA this year. Ivy schools seem unreachable as I heard it is very tough to get in.

        • Financial Samurai

          As a UC Berkeley MBA grad, I highly recommend the institution! It depends on how independent your son is. The less handholding needed, the more selection he has.

  4. gilstrac

    I briefly considered joining the military but instead I went to a technical college with the goal of getting a job. I took a lower paying job at a company that had 100% tuition reimbursement. I used this to pay for 4 year and graduate education. Although, I will say the employer capped the total reimbursement while I was in my third year. I was able to stay under the cap for the most of my education. I am pretty sure it was for what I consider abuse of the benefit by about a dozen other employees that started attending a private college where a part time semester cost twice what a full time year cost at the public college. I know of none that finished that program. As a side note, I am pretty sure I brought the program to my peers attention. I shared the results of my research with my co-workers. But I discarded it as having a poor value proposition. Due to cost and what I considered a degree that would make getting a good job harder. No, it was not engineering.

  5. Bob Ketcham

    The article fails to recognize that the decisions about a college and which degree to pursue are more than financial. You should focus first on the right school and life interest for your child and not simply on the economics.

    Your economics are also a bit misleading. Your comparison of private tuition and public tuition leaves out the cost of room and board (an equalizer in crowded public schools in towns with housing shortages). It also fails to assess the impact of crowded classrooms and class availability – five years has rapidly become the norm in many public schools. Then there is transportation, etc.

    When we did the numbers for our kids, the overall differences between their in-state public, private and out of state public choices were around 20%. That played out fairly accurately over the four years. As an added benefit, both were able to obtain double majors and one obtained two degrees. Add the benefit of study abroad, our kids got our money’s worth.

    You were very lucky to get into William and Mary, especially in-state. Our daughter went there at out-of-state prices. I know from her experience that William and Mary provides an education equivalent to many Ivy League schools. It is not your typical public education and advice to others should not be based on this exceptional experience.

    The most important part is to set up a 529, or equivalent savings plan early on. We purchased prepaid tuition plans from the Texas Tomorrow fund while our kids were still very young. We posted the certificates on their bulletin boards. It sent a message – “we’re planning for your college education, are you?”

    Both of our children graduated from college debt free. Goal achieved.

    • Financial Samurai

      Hi Bob – What are your kids doing post private college?

      I took out room and board b/c they are fixed/sunk costs that are highly variable.

      Given the student loan problem, I’m urging kids and parents to think more about the financial repercussions of school. “The right school” and “life interest” are nice, but if that’s all one talks about, and their parents don’t have the financial muscle, then problems can really arise down the road.

      • Bob Ketcham

        Yes, room, board and transportation are variable, but so are tuition, financial aid and scholarships. All must be considered in a proper financial analysis of the cost of a school. Focusing on tuition (where the difference between public, public and out-of-state is the highest) skews any analysis toward public. Since you are writing to say that public is the best option, when you leave this out totally (whatever your reasons may be), it leaves your journalistic integrity open to question.

        I never said that “the right school” and “life interest” should be all one talks about. My son’s experience stands out in my mind. As a high school student, he took all AP classes, but underperformed, too often failing to turn in assignments.

        He was accepted at the University of Texas, where he would have been lost in a very large crowd, with all the great distractions of Austin, housed off campus in a high rent town, and probably have taken five years to finish (if he did).

        He was also accepted at Elon University in North Carolina, a small private school. 40 years ago, it was a bit of a B-list school. But a terrific long term plan has turned it into quite a wonderful center of learning. One of the specialties that was part of their strategic efforts was the turnaround of underperforming young men. They delivered on their promises with him. In four years, he earned dual degrees – in Finance and Accounting – and a minor in Economics. He is now three years into his career in banking in Manhattan. He thinks attending Elon was a terrific decision and has spent the last two years as President of their New York area alumni chapter.

        As I mentioned, our daughter attended William and Mary. She is now in LA pursuing a career in Cinematography. It has taken her a while to find that right career. She is very balanced between right and left brain skills and Cinematography requires utilizing a good mix of technical and creative skills. She saw both my wife and I (both graduates from a great public university – Virginia Tech) with “careers” (aka jobs) in the chemical industry and decided engineering was not her choice. She struggles financially but is financially independent, and she is very happy pursuing a career that she loves.

        Her experience show us happiness in life is so much more than just making your education about your expected future job. After being raised by my school systems to be an engineer, I learned from her the value of a great liberal arts education.

        A college education is so much more than training for a financially successful trade. And just as it fails to mention saving for college as necessary, it fails to even recognize this. Properly done, the selection of a college should have so many more dimensions than your narrow focus indicates.

        • Financial Samurai

          Phew! Good thing I’m not a journalist. Tuition is the pertinent variable to compare, because one can live like a King and eat luxuriously, or one can decide to live more frugally by renting a room and eating ramen noodles. But however one chooses to spend his/her money on shelter, clothing, and food does not impact the cost of tuition.

          I think we will always be biased in where we spend our money and where we go. If you think spending $30,000 a year in tuition for Elon University is worth it, then that is great.

          I am trying to figure out a way to solve the student loan crisis that many middle class Americans face. It seems to me that one way to solve the problem is to pay less tuition, hence my argument in this post.

          • Linda

            Kind of weird Bob doesn’t get that comparing tuition costs is an apples to apples, appropriate comparison.

            Bob, in science, you must isolate the best variable. The best variable is tuition.

            Living expenses are HIGHLY VARIABLE.

        • Perry Seal

          Bob, I’ve never heard of Elon University, but I did look up the tuition all in costs and ouch!

          How did you afford $41,000 a year? Did your son pay for it, or did you pay for it?

          It’s understandable to be defensive about paying for private school after the fact, but I think Sam makes some good points about parents and students actually calculating expected returns.

          Tuition is the proper comparison, living expenses and food are highly variable.

          It’s good your son got a job. But I would say for a large majority of people, spending private school tuition from a non-elite school in the Top 25 is a very, very risky proposition without a scholarship.

    • Overtaxed

      “The article fails to recognize that the decisions about a college and which degree to pursue are more than financial. You should focus first on the right school and life interest for your child and not simply on the economics.”

      I’m sorry, but this advice cannot go without comment. You MUST focus on the financial first with schooling. Would you suggest that I “focus on the right car and my life interests first” when buying a new car? If so, I’ll realize that I enjoy golf and that a RR would be a great car to take my bags to the local club. It would also generate a ton of envy and may even get me better golf partners. Shoot, might even make new business contacts because of the wealth people would assume I had. Unfortunately, I, like most, cannot afford a RR. So, I focus on my finances first; I can afford a car that costs X, let me find the best car for me in that range. That’s the conversation that parents should be having, or those people heading back to school as adults use as determining factors.

      Simple facts; private schools, much like a RR automobile, are for rich people. We’ve figured out a way to make it “affordable” for the middle class, but that does NOT mean you should do it. No more than I should buy a RR because leasing rates are great and, if I stop eating so much every night, I’ll be able to keep up with the payments.

      If you can’t get into the absolute top tier school for your major, it’s not going to matter very much/at all anyway. If you want to go for engineering and you can get into MIT, you might have a good reason to try to pay for it. However, if you want to go for early childhood education and can get into William and Mary, you’d be absolutely out of your mind to pay the cost (assuming your family isn’t rich).

      This is the conversation that we need to have with our children, not “follow your dreams”. We don’t tell them that when they are car shopping, we shouldn’t tell them that when shopping for an education!