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Make the best college decision – An employer's and risk manager's perspective

Updated: Oct 22, 2023

This article explores college decision-making and provides an effective college decision-making approach. We help you decide what is important to you about college by exploring the perspectives of others - namely, the people who will hire you and the people who look out for your interests. These are the employers' and risk managers'. To this end, we provide a risk management and future employer-informed framework for making the best college decision. After exploring this framework, we show that college costs and academic signaling drive college outcomes. In most cases, college selectiveness is not a significant determinant of college outcomes. The chief aim of this article is to help the reader make the best college decision, by optimizing the value-to-cost tradeoff. To assist in implementing the framework, we suggest choice architecture and decision science-enabled tools to help with the college decision.

This article is presented in the following sections:

  1. Introduction - Our college hope

  2. What do employers think of college graduates?

  3. What are the risks of college?

  4. Conclusion and a college buyer’s rule of thumb

  5. College decision support

  6. Notes

About the author: Jeff Hulett is a career banker, data scientist, behavioral economist, and choice architect. Jeff has held banking and consulting leadership roles at Wells Fargo, Citibank, KPMG, and IBM. Today, Jeff is an executive with the Definitive Companies. He teaches personal finance at James Madison University and provides personal finance seminars. Check out his new book -- Making Choices, Making Money: Your Guide to Making Confident Financial Decisions -- at

1. Introduction - Our college hope:

There seems to be little doubt that a college education is beneficial. Economists call this the “acquisition of human capital.” College is not the only way to acquire human capital, but it is a standard way. The history of this standard includes the landmark 1971 Supreme Court case Griggs v. Duke Power Co. [i]. The torchbearer of this narrative is the U.S. Federal Government’s Bureau of Labor Statistics. Their analysis demonstrates that higher educational attainment delivers:

  1. A higher average salary;

  2. A higher probability to attain that salary. (via a lower unemployment rate)

This seems to be commonly accepted by our culture. Beyond the "is college a good idea?" question, there is the "which college is best to attend?" question. There is a long-held belief that the “better” the college’s reputation, the higher the college’s value. Thus, the message for high school students and their parents or caregivers is, “Attend the ‘best’ college you can, the cost will pay for itself in future earnings.” In this article, we generally refer to the "best colleges" as selective colleges like the Ivy League, Stanford, MIT, Chicago, and similar. Less-selective colleges are generally all other colleges. For simplicity, we place colleges in these two selectivity groups. In practice, “selectivity” is on a continuum, based on college acceptance rate and other factors. Our culture supports the “attend the ‘best’ college you can” selective college narrative in powerful ways:

  1. The U.S. Federal Student Loan system supports this narrative by enabling the "best" college education possible as a neutral short-term financing decision. In other words, since repayment does not occur for many federal loans until after college is finished, the student does not need to consider either a) the impact of higher college costs while they are attending college or b) the significant retirement value impact caused by differences in long-term debt repayment balances and payments. Our own brains naturally discount longer-term impacts via a naturally occurring cognitive bias called salience bias. [ii]

  2. This narrative is also supported by the “best” colleges themselves. It is not entirely unexpected that these selective colleges also have massive endowments and marketing organizations to manage branding and the selective reputation. For example, Harvard has the highest endowment of U.S. colleges at approximately $40 Billion. In general, the most selective colleges are focused on research. Selective colleges have been increasing procurement of research funding while maintaining modest growth of undergraduate enrollment. This behavior speaks volumes about selective college incentives and self-interest. Chris Paxson, the president of Ivy League member Brown University, said in a 2022 interview: “….where we can really expand knowledge is through our research. And that’s an area where we’ve made a lot of investment.”

The United States, compared to other developed countries is an outlier when it comes to the cost of higher education. [iii] Higher Education in the United States is expensive and has been increasing significantly for decades. In fact, U.S. News & World Report said: “….tuition and fees at four-year National Universities are significantly outpacing inflation.” [iv]

Anchoring Question: This article's anchoring question is, "What is the purpose of college?" In this introductory section, we outline this anchoring question by describing “Our college hope” in terms of learning and other practical, education-related factors. The rest of the article then expands on the anchoring question to address: "What is the most effective approach to achieving this educational purpose?"

The purpose of college is a nuanced and dynamic question. Our purpose of college perspective is generally impacted by our intensely personal and evolving hopes.

Our college hope for learning: Many students, parents, or caregivers have evolving college hopes. That is, depending on our background and current position in the college decision process, our hopes may vary. Our hopes are generally anchored by the educational objective. This includes the development of significant critical thinking skills, study habits, and otherwise learning to learn. But there is certainly more value to the college experience. Living in the college social community is fun! College helps students develop emotionally. This includes better handling change and managing expectations. They become more emotionally intelligent. They learn to make better, longer-lasting relationships. Many of their good college friends will become lifelong friends and/or become part of their professional network. They may meet their future spouse. College helps develop citizenship and a sense of community. College helps students develop important life skills, like preparing food and other life necessities, living a healthy lifestyle, maintaining personal security, keeping commitments, and handling money.

Our practical college hope: It seems obvious a college education is helpful to getting a good job and earning a living. The connection between college success and income is certainly aligned with the BLS perspective. This article generally adheres to the “college education as a means to earn income and build wealth” objective. But college success is not guaranteed. Given the dramatic increases in college costs, there are certainly risks to achieving the desired outcome. The risks could be realized if a student:

a) spends significant financial resources,

b) regardless of whether those resources are sourced from family or loans, and then

c) does not achieve the desired college outcome.

This result would likely be financially devastating. Also, what about employers? How do they view college graduates? If getting a good job is a primary desired outcome, then understanding the employers’ perspective is critical to college success. In the next two sections, we will dig into the college decision from the employer’s and risk manager’s perspectives.

2. The employer’s view:

Colleges generally attract employers to recruit their soon-to-be college graduates. Employers are not always uniform in their approach to college recruiting. In professional services, for example, there is a “pecking order” that generally ranks firms. The most prestigious firms (like a small, boutique law firm, consulting firm, or investment bank) may have a direct relationship with a particular selective college. A selective college like in the Ivy League. Larger professional services firms tend to recruit broader. While the smaller boutique firms may get the “first pick,” the larger firms have an advantage because of the volume of college graduates they hire. For example, large consulting firms like “The Big 4” (KPMG, Deloitte, PwC, and EY) hire a large number of college graduates every year. While these firms may defer the “first pick” to boutique firms, they do hire some very talented graduates. Also, from a practical standpoint, the U.S.’s selective colleges are too small. Less than 1% of undergraduates are currently enrolled in the most selective colleges. [v] There are not enough selective college undergraduates to move the needle on total employment needs for larger employers. As a former Big 4 Managing Director, I led recruiting at a large university. For me, this was a part-time job, as my primary role was to lead consulting practices. This did give me experience in the global firm approach to professional services college recruiting. This employer’s view section is taken from my firsthand experience. The important point is, because of their size and ability to hire in large volumes, this article considers big firms as representative of the general college hiring perspective. [vi]

The importance of compliance - In general, all firms are very focused on complying with the Equal Employment Opportunity Act (EEOA) and other hiring laws. Firms maintain structured processes to ensure hiring law compliance. Also, most firms are sensitive to their equal employment reputations concerning hiring based on gender, race, and other legally protected classes. Firms will often advertise their positive employment “list rankings” to support their equal employment narrative. [vii]

Thus, firms will meet legal and reputation requirements by ensuring a fair and objective recruiting process. To this end, many firms seek objective performance criteria to support their hiring decisions. For example, criteria such as academic major [viii] and Grade Point Average (GPA) are typical applicant screening criteria for interview pool consideration. GPA is a critical component of being invited to the applicant interview pool. [ix] The firms will then follow a structured assessment process to rank order all the pool candidates. It is this downstream interview assessment where more subjective criteria may be considered to “break the tie” of those initially passing the recruiting screens. Based on the interview assessments, firms will make employment offers from the top of the ordered candidate pool.

This is a mutually competitive process. Students are competing for the best firms and firms are competing for the best recruits.

  • From a student’s standpoint an important aspect of getting hired is to pass the initial criteria screens at multiple firms. An expanded employment alternatives set enables wider choice and the opportunity to learn which employment environment is best for them. [x]

  • From a firm’s standpoint many offerees will go to other firms or otherwise become unavailable for hire. Because the firms understand there is a high recruiting pool attrition rate, they aspire to keep all pool alternatives “warm” in the event there is a need to fill a vacated recruiting spot.

Recruiting criteria screens serve another purpose, they are defensible from a legal disparate impact standpoint. As a case in point, consider a firm that does not hire an applicant that is a member of a protected class. The fact that they filter applicants based on GPA or similar objective criteria provides the firm with legal protection. In the eyes of the law, GPA is generally considered a “fair” way to differentiate recruits. This is not to suggest that new hires may not come from family and friend firm referrals. They absolutely do. But referrals are the exception, and they generally are required to pass the same screening criteria. Think of a referral as more of a tiebreaker than a hiring guarantee. In this context, referral-based networking may not be as powerful as some may believe.

Beyond legal and reputation concerns, firms generally follow a “dispersed talent” recruiting approach. Most large professional services firms follow the experience-based belief that strong talent exists in all colleges. That is, no individual selective college has a monopoly on talent. All colleges produce talented graduates. The challenge is to find and recruit talent. As such, most large firms recruit broadly across many colleges and narrowly within colleges. Also, HBCUs (Historically Black Colleges and Universities) are certainly part of the broad college recruiting approach. The firms generally manage the protected class distribution of their incoming recruiting class via their broad college approach. This way, they will have an increased opportunity to attract protected class recruits while maintaining their GPA and other objective performance criteria.

Finally, this leads to the advice I generally provide high school students when making college decisions.

College is not a “Yes” or “No” question, it is a “Now” or “Not Yet” determination.

Go to a college where you can get a good GPA. Simply, a good GPA may be acquired if you have good study habits. [xi] If you are concerned about your study habits, then consider going to a community college or other lower-cost options to prove to yourself that you possess the needed study habits. [xii] Besides community college, lower-cost options may include vocational school, the military, volunteering, or others. [xiii] The important point is to build good study habits via your experiences. Once you convince yourself of your study habits, “Not Yet” becomes “Now.” You are now ready for a four-year college.

Think of GPA as the “3 C’s” employer’s recruiting signal. That is, your grades signal recruiters the trinity of:

  • intellectual Competence → ability and willingness to learn

  • Conscientiousness → hard worker

  • Collaborativeness → team player [xiv]

(see our notes for more context on the “3 C’s”)

For many firms, it is this signal that helps open the door to a successful career-oriented job.

3. The risk manager’s view:

Warren Buffett is one of the most successful investors in history. Mr. Buffett commented:

“Price is what you pay, value is what you get.”

This is a risk manager and an investor’s perspective of the world. That is, understanding the value of a good, like a college education, is very different than determining the cost (aka, “price”) of the same good. Understanding value is challenging. Especially in the case of college, the value will be realized years or decades in the future, whereas the cost is born today. Our “Employer’s view” section provides a straightforward approach to achieving value. Later in this article, we suggest a decision sciences-enabled technology to help clarify value. The chief aim of this article is to help the reader make the best college decision, by optimizing the value-to-cost tradeoff.

Most investors look to arbitrage the value-to-cost tradeoff. That is, when an investor is provided with a group of similar investment choices, they will seek to pay as little as possible for a similar value. [xv] Also, risk managers and investors like Warren Buffett consider both risks and return for investments. While many college pundits suggest “College is a good investment” they rarely cite the risk side of the college equation. To an investor, this would be like buying a mutual fund based on historical return only, without considering the risk of the same investment. Risk ratings are regularly provided for financial investments. [xvi] It does seem strange, given investors universally consider both risk and return when making mutual funds or other financial investments, that many downplay the risks of the college investment. On the other hand, perhaps it is not so strange that college risk is downplayed, given the two "selective college narrative" support points offered in the introduction. Either way, given the employer's view, this suggests a rational person may want to pay as little as possible for a good GPA. But this still leaves open the question of college risk. Is the risk meaningful?

Is it worth taking a risk paying a higher college cost as compared to a lower-cost college alternative?

The short answer is, on average: Probably Not.

First, to explore this short answer and college risk, we need to discuss what risk is. In the traditional risk world, we define risk by frequency and severity. That is:

  • Frequency What is the likelihood a risk will occur? and if it does,

  • Severity How much will the risk cost us?

Frequency risk: In the context of college, frequency risk relates to the probability that a high school student, at the time the college acceptance decision is made, will not achieve some beneficial outcome in the future. The following graphic shows several frequency risk outcomes, based on the level of frequency risk significance [xvii]. This is based on U.S. aggregate data from The Wall Street Journal and Pew Research.

Per the graphic, only about 30% of high school students, ten years after entering college, achieve a college degree and can obtain a job requiring a college degree. (green and light green colored slices) Even within the 30% group, only about 9% of the population (the darker green slice) can get a degree, a job requiring a college degree, and not have student debt. The remaining approximately 70% have progressively higher frequency risk-impacted outcomes, such as not graduating, not getting a job requiring a college degree, and defaulting on a loan. Our frequency risk thesis suggests the college investment payoff relates to higher-paying jobs and higher-paying jobs often require college degrees. Based on this view, four-year colleges have significant frequency risk.


DIGGING DEEPER: If there is so much college risk, why does the BLS graphic show such a different perspective?

At the beginning of the article, we showed a positive “College Pays” graphic from the U.S. Bureau of Labor Statistics (BLS). There is such an interesting inconsistency between the frequency risk graphic and the BLS narrative. The reason the BLS graphic is so different is that they only look at return-based education outcomes. This is a ‘cherry-picked’ outcome reported long after the decision to go to college is made. Our analysis from the Wall Street Journal and Pew Research uses a vintage technique (aka, static pool) that considers future outcomes based on when a high school student originally makes the college choice. The vintage approach is the standard decision analytics approach for risk managers and others to make a good decision at the time one has multiple decision alternatives. [xviii] Keeping in mind, “Not Yet” is a valid option. Also, ironically, the BLS average income analysis only considers gross income. Collectively, United States citizens have over $1.75 Trillion outstanding in student loans. [xix] To properly evaluate, the BLS could net the average gross income against the higher debt service needed for many with higher educational attainment.


Severity risk: Now, we address “how bad the risk could be.” For this, we use a long-term wealth substitute opportunity cost approach. That is, we compare the difference between:

  1. "Savvy School" - Acquiring a four-year college education that costs less, so no college debt is required.

  2. "Dream School" - Acquiring a four-year college education where the average debt is required.

According to the Education Data Initiative, average monthly student loan payments are $393 and the average loan takes 20 years to pay off. For each young person with the average student loan, the long-term financial impact of paying back a student loan instead of saving for retirement is over $3.5 million. [xx] By substitution, this means a new college graduate that recently started loan repayment is paying $393 a month in loan payments instead of placing $393 a month into a retirement account. This is the negative impact of delaying getting on the time value of money wealth-building ladder. This begs the question:

"Is taking on debt for a more expensive college worth reducing retirement by $3.5mm compared to a college option not requiring debt?"

To help answer this question, in our notes is the U.S. Federal Reserve’s perspective on the tragically low level of U.S. retirement savings. [xxi]

This analysis suggests the long-term negative financial effect of substituting college debt for an investment like a 401(k) retirement account contribution is quite large.

To summarize the risk management perspective:

The frequency risk, based on the average high school student starting college is HIGH. Approximately 70% of those starting college will not achieve the desired outcome including a college degree and a job requiring a college degree. Only 9% reach the desired outcome without college debt.

The severity risk, based on the financial outcome of substituting debt service for a retirement contribution is HIGH. The average loan payment will reduce retirement savings by $3.5 million.

Thus, many Americans starting college do not achieve the desired college outcome. This inability to achieve the desired outcome likely impacts long-term financial capacity and retirement savings.

Having HIGH frequency and HIGH severity risk indicates the need for careful consideration when deciding between colleges. When the college decision is made, the high school student will know if they need loans or not. [xxii] Thus, they are aware of whether they will start in the darker green or lighter green slice. If they are light green, they already know the average severity will cost them $3.5mm for retirement. At this point, the key is minimizing the chance their frequency risk slice gets hotter in color. Historically, almost 70% of Americans do transition to a hotter slice.

To this end, it is important to overlay the employer's perspective to help manage the risk. In other words, to reduce risk, one should position themselves to achieve a major and GPA that maximizes the likelihood of a positive college outcome. (Please see our discussion about study habits in the notes section. [xi])

Keeping college costs down will help manage severity. This is true even if the student does not need loans for college. One should always be a good steward of resources. Below, in the College Decision Support section, we mention a solution to help optimize the chances of a positive college outcome.

4. Conclusion and a college buyer's rule of thumb

Making a good college decision is challenging. Our culture suggests that college is an excellent investment. The truth is, it can be, but the trick is not overpaying for the value. We suggested that large firms often recruit broadly across many selective and less-selective colleges. Many firms also consider objective performance criteria as a gatekeeper to the interview process. As an example, let's say you go to college and graduated with a reasonably marketable major. Let's also say you either a) went to Harvard and got a 2.5 GPA or b) went to a less selective public college and received a 3.5 GPA. The Harvard "you" would likely not be interviewed by many firms. Whereas the less-selective public college "you" would be heavily recruited. As further confirmation, research by Dale and Krueger suggests the return to selective colleges is insignificantly different from less-selective colleges across large groups. They determined this by controlling for those colleges applied to and accepted across a large group of high school-based college applicants. They utilized long-term earnings to measure the performance of those different groups. [xxiii] (There are some exceptions to Dale and Krueger's findings, please see our notes.) Per our College Hope comments earlier, Dale and Krueger's research suggests “hope” outcomes like networking, emotional well-being, life skills, and others will happen regardless of which college is attended.

The idea is this: There are approximately 4,000 U.S. Colleges and Universities. Almost all of them know how to put on a good “College Show” and are capable of delivering “our college hope for learning.” More important is to properly make the high school student’s “Now” or “Not yet” determination. This is the key enabler for delivering “our practical college hope.”

Next, we explore the segments offered in the earlier graphic:

The Challenged segment is where there may be long-term financial damage and slower employability because of the lower GPA.

The Slow start segment has a better debt situation but may take longer to start building wealth because of the challenge of getting a good job.

The Treadmill segment is where you are more likely to get a good job, but much of the income goes to pay college debt.

Finally, the Great Start segment is where the benefits align. A higher GPA helps you get a good job and a lower debt situation allows you to build personal wealth faster!

Now, to be fair, these segments are more likely, but they are not exact. In fact, I have a great friend who recently reminded me that he went to an average college and got a 2.0 GPA. Upon graduating, he was in the "Slow start" segment. Today, he is the CEO of a successful mid-sized company and has created significant wealth.

Everyone’s story is different. However, when you are faced with an uncertain future, going after the Great Start segment will increase the likelihood of your long-term success.

In the main, there appears to be little incremental benefit to selective colleges from a large firm recruiting standpoint. Beyond this, the risk is a significant factor. The risk of getting it wrong is significant, both from a frequency and severity risk standpoint. Certainly, if you are confident that 1) you can get a good GPA and 2) it would not cost you any more than a public college education, then a selective college may be worthwhile.

Not overpaying for a good GPA is a rule of thumb for high school students entering college. Even though our culture and selective college marketing messages may suggest something different!

(example marketing message observed at BWI Airport, 5/16/22)

5. College Decision Support

Finally, it is important to note, that the risk manager and employer perspectives are just that.... perspectives. You may feel differently about these perspectives. Each high school student and their caregivers still need to consider their multiple criteria - the many "what is important to them" college preferences. Their criteria need to be applied to their college alternatives - the 5-10 schools they will seriously consider both applying to and accepting. Being a good risk manager and channeling your future employer should be considered in the criteria and alternatives-rich framework. The non-profit Definitive Social provides a smartphone app called College Xoice® to help high school students through the challenging college decision process. It provides education and the criteria / alternatives-based decision science in a fun-to-use, high school age-appropriate capability.


6. Notes

[i] How college education has become the standard way to acquire human capital in the United States has an interesting history. The 1971 supreme court case "Griggs v. Duke Power Co." is an important case defining the college and university system's role in American society. This case established that neutral employment practices that have a discriminatory effect can violate Title VII of the Civil Rights Act of 1964, even if the employer did not intend to discriminate. Prior to 1971, Duke Power had a practice of requiring employees to pass a standardized test to be promoted to certain management positions. These tests, conducted by the employer, were deemed unlawful because they had a disparate impact on protected classes as asserted by the Civil Rights Act and determined by downstream rule writing and law. As such, this ruling effectively reassigned the evaluation of employment readiness to colleges and universities. GPA, major, and other university-provided employment readiness mediators used by employers to screen candidates are generally considered lawful. As Jonathan Last suggests:

“So what employers do is this: They launder their request for test scores through the college system, because colleges are allowed to use such considerations.”

To be fair, GPA could easily have a disparate impact and thus, run afoul of the Civil Rights Act regime of laws, rules, and habits. But as is a U.S. norm, some practices tend to be allowed in legally questionable contexts - like the way a driver may exceed the speed limit with little enforcement.

Also, many companies have adopted recruiting practices that reduce the chances of disparate impact. For example, behavioral interviewing is a well-accepted interviewing approach. This is the approach where an interviewer asks a recruit open-ended questions that start with “Tell me about a time when…” Behavioral interviewing has the advantage of allowing the recruit to answer relevant employment questions in the context they are most familiar. I.Q.-based recruiting tests run the risk of being contextually unfamiliar to those taking the test.

Editors, Griggs v. Duke Power Co. (1971), Cornell Law School, Legal Information Institute, 2022

Caplan, The Case Against Education, 2018, see page 88 for Last’s quote.

[ii] Student lending decisions are impacted by the commonly occurring psychology-based cognitive bias known as salience bias. By making it easy to finance any college today, selective or less selective, the future impact of loan payments is naturally discounted by the college student's brain processes. This discounting may be exacerbated by 1) the variable and higher levels of adolescent hormones and 2) a not yet matured executive functioning mental capability as found in the prefrontal cortex. Also, from an economic standpoint, there may be agency misalignment. Agency misalignment, known as the Agency Dilemma, may occur since it is often the parents (transaction agents) that will make the college decision. However, it is generally the students (transaction principals) that are ultimately responsible for the debt and are the beneficial owners of the college decision. This article discusses the less salient but very significant long-term risks of student loan debt in section 3, under the severity risk sub-topic. Please see the following articles for more information:

Hulett, Our Brain Model, The Curiosity Vine, 2020

[iv] Boyington, Kerr, Wood, 20 Years of Tuition Growth at National Universities, U.S. News & World Report, 2021

[v] Editors, Undergraduate Enrollment, National Center for Education Statistics, 2021

Stephen Dubner interview with Morton Shapiro, The University of Impossible-to-Get-Into, Freakonomics Radio, 2022. Shapiro is the President of Northwestern University.

[vi] See these articles for more information on the Professional Services approach to managing employees. This includes how firms may exploit the "Exempt / Non-Exempt employee" arbitrage permissible under current U.S. law and enabled by American culture:

Hulett, Why convexity is a helpful career guidepost, The Curiosity Vine, 2021

[vii] Many accolades are provided to firms regarding workplace inclusion. Firms consider these as a success-proof point - that is - that they have successful hiring and human resources policies and culture. As an example, Fortune Magazine regularly publishes The 100 Best Workplaces for Diversity award list. Positive firm list rankings are regularly provided on employee recruiting materials and advertised to employees.

For more information on “protected classes” as related to employment discrimination, please see the Equal Employment Opportunity Commission.

[viii] Choosing a major is sometimes a struggle. People worry about whether they will like the major and then worry whether they will like the career for which the major prepares them.

We take a practical, neuroscience-based perspective on “liking.” “Liking” is not nearly as mysterious as some may believe, in the context of dopamenic-based neuro-feedback processes. The short answer is that practice and positive feedback will lead to liking. The key is finding majors that lead to careers that are in economic demand. “Liking” will generally take care of itself via economic demand-enabled feedback. We discuss this in more detail in the following article:

Please see the “Background - our attitudes, behaviors, and career segments” section.

[ix] Indeed, a job search and recruiting company, provides a supporting perspective on how employers consider the GPA, particularly for college recruits.

Indeed Editors, Do Employers Care About GPA?, 2021

[x] This recommendation relates to negotiation theory and the concept of the "Best Alternative To A Negotiated Agreement" or a "BATNA." Building multiple BATNAs is critical to building a successful choice set and making the best choice between alternatives. Please see our article:

Hulett, Negotiating success and building your BATNA, The Curiosity Vine, 2021

Gentry does a nice job demonstrating study habits as the key determinant for college success.

When it comes to capacity for college, our belief is the vast majority of people are capable of doing well in college. That is, all people possess the mental capacity to develop the necessary study habits needed for college success. This belief is based on the observation people are generally born with a full set of neurons. On average, people are born with 80 Billion neurons and spend the first few years of life developing the synaptic pathways that serve them for the rest of their life. Thus, people, by a gift from their mom and maker, are all provided the mental capacity to be successful in college. This is a given.

The real question is whether they happen to be ready for college at age 17. While 17 may be the cultural standard age for high school graduation, actually being ready for college at 17 is a random coincidence. The individual college readiness age is impacted by a number of environmental factors and individual learning needs. Some may be ready before 17, some after. I am hopeful that someday our culture will adapt to more fully accept this reality. Time in life should not be the college standard. Readiness, as demonstrated by individual study habits and related subject mastery, should be the college standard. In the next note, we discuss how community college may be a low-cost option to validate your study habits.

[xiv] Admittedly, the 3 C’s description puts significant information value pressure on the GPA. It is much to ask from a single number! The following article provides more context on the employer's hiring perspective that utilizes the GPA as a 3 C’s signal.

[xv] For more information on the college decision process as related to economic discrimination and price discrimination, please see the article:

[xvi] Editors, Morningstar Risk Rating, Corporate Finance Institute, 2022

A position or score that is given to publicly-traded ETFs (exchange-traded funds) or mutual funds.

[xviii] Vintage analysis is commonly used in banking and financial services-related risk analysis. More generally, vintage analysis is also known as static pool analysis. A static pool analysis is commonly used to measure the effects of a randomized controlled trial or "RCT." RCT is commonly used to differentiate between multiple groups with scientifically controlled variations. The following are resources for vintage analysis in financial services and RCT in scientific studies:

Credit Union Examiner guidance, Static Pool Analysis: Evaluation of Loan Data and Projections of Performance, National Credit Union Association, 2006

Cantarero-Villanueva, et al, The Effectiveness of a Deep Water Aquatic Exercise Program in Cancer-Related Fatigue in Breast Cancer Survivors: A Randomized Controlled Trial, Archives of Physical Medicine and Rehabilitation, 2013

[xx] Financial Model developed by the author, assumes a 10% annual pre-tax yield, beginning at age 22 and ending at age 67. Loan data and term assumptions are from the Education Data Initiative,

Another approach to describing the same model is to consider retirement outcomes based on delayed savings impact. The following graphic shows the "tyranny of the exponential function." Notice that just delaying 5 years from age 22 to age 27 decreases potential retirement value by 40%.

Even if one is fortunate to not need a loan, severity risks are resident in the cost of a college education. If the family is paying for an education, a higher cost of college will reduce the estate or other multiple generational-based inheritances. See our article where we model a $4.7 million impact example. This is based on retirement outcomes without student loan debt.

[xxi] Our begged question is whether $3.5mm is meaningful for retirement. Based on current estimates, a vast minority of Americans are properly saving for retirement. Please see this Federal Reserve infographic. As such, a $3.5mm substitution for college debt would be very impactful to the vast majority of Americans.

[xxii] As part of the Federal Student lending process, a high schooler and their family determine loan qualification via an application known as the FAFSA (Free Application for Federal Student Aid). The aid eligibility will be provided in the form of SAR (Student Aid Report). The student loan determination will be made by the individual colleges, based on their cost of attendance.

Editors, Complete the FAFSA® Form, U.S. Department of Education, Federal Student Aid website, 2022

[xxiii] Dale, Krueger, Estimating the Return to College Selectivity over the Career Using Administrative Earnings Data, NBER, 2011 - As an exception, Dale and Krueger did identify certain first-generation college cohorts as benefiting from selective colleges. This suggests the additional college resources generally found at selective colleges and provided to those with less family college experience have some incremental benefits.


Further Reading:


High School Students

College Students

Career and Beyond

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