College savings plans not enough? Consider trade school.
College savings plans aren't enough to cover the steep cost of college for some. For many students, especially those not at the top of their class or without a robust college savings plan, a trade school might be a better option.
For a lot of people, going to a four year college seems like an automatic choice when they graduate from high school. The reason is obvious – more income. According to the National Center for Educational Statistics, a college degree accounted for $15,000 in additional income per year versus a high school diploma ($30,000 versus $45,000). Over a thirty year career in the workforce, that adds up to a $450,000 difference.
However, there are a few drawbacks with this happy picture.
For starters, a bachelor’s degree typically takes four years of study, which means that people who enter the workforce after receiving their bachelor’s degree aren’t doing so until age 22. That shaves some years off of a person’s career.
Another drawback is the cost. The average bachelor’s degree in the United States costs $127,000.
A third drawback: some people simply aren’t prepared for the rigors of a four year college. The Institute of Education Statistics estimates that 40% of attendees at a four year college drop out before completing their degree. If you find yourself as a part of that 40%, not only have you incurred some of the expense of college, you left without receiving a degree.
My response to these statistics is that people approaching high school graduation should seriously consider trade school, particularly if they’re not at the top of their class. Trade school offers a pretty compelling career path, particularly compared to the college path described above.
For starters, the salary isn’t that much of a drop-off compared to a four year degree. SimplyHired.com estimates that a trade school graduate will make about $42,000 per year. Over the course of thirty years, the difference between that trade school graduate and the four year college graduate is only $90,000.
Another factor that helps with trade school is that you’ll enter the workforce two years earlier. That amounts to two additional years of income in which the trade school graduate will make, on average, another $42,000 each year, adding up to $84,000. That means that at age 52 (after 30 years in the workforce versus 32 for the trade school graduate), the college graduate will only be ahead by $6,000 on lifetime income, even excluding the loan.
At the same time, the average trade school degree costs $33,000, which, compared to a $127,000 bachelor’s degree, means a savings of $94,000. But that’s not all!
If you assume that these students are fully financing their education with loans at 4% over ten years, the bachelor’s degree will cost $154,000, while the trade school degree will cost only $40,000. That’s a savings of $114,000 just on the degree.
Of course, most students in both cases won’t fully finance their education. They’ll work and find other sources of income to help with the process, meaning the gap will be smaller in the average case.
Yet another advantage of a trade school is that most of the jobs you’ll get are extremely difficult to export to another country. It is much easier to export, say, computer programming work or other information economy work than it is to export carpentry or electrical work.
It should be noted that I’m not opposed to a four year degree; instead, I’m simply making a strong case for an option that many people overlook when deciding what to do after high school. The advantages of a four year degree are numerous: you’re going to earn much more later on in life and you also have the door wide open to continue your studies and earn substantially more with a masters degree or doctorate. Trade school graduates are very limited on opportunities to continue to bolster their education.
I’ll leave you with an anecdote. My wife’s cousin graduated from high school at roughly the same time my wife graduated. Her cousin went to electrician’s school, while my wife went to college. Her cousin started working three years before my wife and incurred much less student loan debt. Today, he makes a little bit less than her, but the difference isn’t too much, plus he had very little debt after school.
This past May, my nephew graduated from high school. He’s now attending electrician’s school as well. I think it’s the wisest move he could have made.
If you’re graduating from high school soon, think seriously about trade school. If you have a loved one who’s approaching graduation, encourage them to at least consider trade school as an option.
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