Are You Paying a Luxury Tax for Your College Degree?

If you’re reading this, then it probably means you have some interest in money. Or, you liked the headline of this post and you’re already thinking about clicking away if I don’t grab you soon.

Those who love money in a Warren Buffet kind of way instead of a Kardashian* kind of way often sneer at the thought of paying a 1000% mark up for a good simply because the label slapped across the front or the notoriety associated with the color/shape/texture – here’s looking at you Birkin bag.

There is so much chatter about not keeping up with the Jonses and being a minimalist and living below your means once you’re earning a living – but why not fixate on an earlier problem?

The college degree problem.

College is important. Perhaps it will become increasingly less so in the future, but right now, a college degree helps springboard you into opportunity. Well, sometimes. College is also an ideal place to network and build a community from which you can later call upon to help you find a job. (That’s what happened for me.)

I’m not about to make a bold claim that you should ditch college entirely – although I will strongly encourage those who don’t find a four-year degree enticing to consider trade school. Why do we constantly overlook trade schools?! But that’s a rant for another time.

Hannah Rounds over on Unplanned Finance recently discussed why a college degree is no longer a safety net and guaranteed job security – even degrees in STEM. She’s right. This fact just fuels my need to scream from the highest Internet mountaintops: DON’T PAY A LUXURY TAX FOR YOUR COLLEGE DEGREE.

via GIPHY

The luxury tax on your college degree

We’re far too fixated on where the degree is coming from instead of what it’s meant to accomplish and how well a person is suited for the school. And it isn’t just high school seniors that are the problem. Plenty of parents obsess over wanting their children going to a name brand college. The Louboutin, Chanel, Louis Vuitton and Guccis of the collegiate world when a Kate Spade, Tory Burch or Coach will serve you just fine. Heck, why are we overlooking the TJ Maxx, Marshalls and Home Goods options?

Opting into the high-end world of colleges means significantly higher sticker prices (for most) and much of that burden gets placed on the child’s shoulders.

Graduating with a piece of paper validating that you were smart enough to make it through Harvard or M.I.T or Yale is great – but here’s the secret: no one is really going to care in a few years. Unless you feel the need to whip out your paper and measure up against someone else to get an elitist feeling of superiority of course.

via GIPHY

But sometimes it’s worth it to pay a luxury tax, right?

Sure, I might be willing to buy that argument. If you are highly advanced in a specific field and the crème-de-la-crème professors and peers will help push you to be the best version of yourself at a school – then sure, pay the luxury tax. Well, pay it if you can afford it or are going to get a high-paying job afterwards that will make the ROI for that degree so obvious I should be embarrassed for writing this rant in the first place.

But ultimately, I don’t think it truly matters where the self-starters go to college.

[Insert cliché list of famous women and men that didn’t go to a top school or dropped out *cough* Bill Gates *cough*]

Maybe one argument can be made for when paying a luxury tax is worth it: if you’re planning to get your Mrs. degree. (This is sarcasm…sort of).

It isn’t about the brand; it’s about you (and graduating debt free)  

IMG_1285_2

Shout out to my family at graduation

Listen, if you’re going to be a big deal in life, then you’re going to be a big deal. A fancy school isn’t going to be the determining factor. It may help you in certain ways by giving you a valuable network of high-powered individuals. Just remember, you can network at smaller schools too and most schools still have some illustrious alumni. And don’t discount how a school makes you feel – beyond the name brand.

Or going name brand may leave you crippled with debt and therefore clinging to a mediocre job for far too long because you’re too afraid to take a risk.

Graduating debt free turned out to be a huge advantage in my life and a reason I’m far more willing to take career risks.

Is all this just because you didn’t go name brand, Erin? 

You know, maybe I’m biased. Most of you have probably never heard of the school I attended. St. Bonaventure is a small liberal arts college “nestled in the foothills of the Allegheny Mountains” and “cradled by the Allegheny River” (read: in the middle of nowhere).

I applied to St. Bonaventure out of tradition (21st in the family to graduate from there), but truthfully never really planned to go. I’d actually sent in a deposit to Wake Forest before the fateful conversation with my father changed my mind and instead I switched over to becoming a Bonnie (that’s the mascot, it’s a wolf…?).

Do I regret it today?

Absolutely not.

Not only did I make wonderful friends, and meet Peach, but I also received a lot of individualized attention that helped develop me as a writer. Frankly, I don’t think much of my success today would’ve been possible without the Journalis31833_412558826136_3194986_nm department at St. Bonaventure.

It also didn’t hurt that being a Bonnie means an intense network. Most graduates probably say this about their schools, but here’s a little taste of what my “off-brand” school did for me:

Summer internship with CNN’s Atlanta Bureau – Did I have to be good? Yes. But a Bonaventure connection got my foot in the door and my name on the right desk.

IMG_2144First job out of college as a page for The Late Show with David Letterman – This is my closest thing to being in Greek life. A then page and fellow Bonnie from class of ‘10 got me an interview and I replaced him, then I (class of ’11) got another Bonnie an interview there (class of ’12) and he replaced me.

Second job out of college working in public relations in NYC – While I often gripe about how much I disliked working PR, it can’t be overlooked that a Bonaventure alumnus helped me get an interview (and coached me a bit) for my first career job post-college.

Please, just think it through

This may come off as a crazy rant (hopefully it at least made you laugh), but I sincerely hope that current high schoolers and millennials that are now parents themselves, think twice about paying a luxury tax for a college degree. Or hey – maybe college isn’t even the right fit at all.

*But props to the Kardashians for building that empire. They’re laughing all the way to the bank – if their faces can still allow them to express such emotion.

Posted in Millennials, Saving money Tagged with:
27 comments on “Are You Paying a Luxury Tax for Your College Degree?
  1. I’m with you – I went to a pretty no name music school in Texas. DEFINITELY not one that anyone would classify as an incredible school…but it was cheap. I ended up not really using that degree (other than a creative writing class I guess) anyways.

    I always told my former students that they should do the community college thing and transfer up after 2 years or go to a cheaper school, but there is a lot of pressure from parents and high schools for kids to jump into prestigious (read expensive) colleges. Sucks.

    • Broke Millennial says:

      I agree that the community college to transfer option is a great one (assuming your credits are compatible and you can actually enter as a junior). It’s another little financial hack that not enough people use. Also, ditching the in-state option just to get out of your hometown… There are SOOO many good state schools that come with a pretty bargain price for in-state kids.

  2. Anna Y says:

    Having gone to a very inexpensive Wisconsin state school (actually receiving an athletic scholarship to graduate debt free) I am also a huge advocate for the degree over the name. Dave Ramsey even writes in his Total Money Makeover book to do anything you can to not take out a loan, if it means to a 2 year college first.
    Thank you so much for trying to get this point across! It was the best decision I ever made to be debt free.. and I still got the job I wanted after graduation this past May!

  3. Hannah says:

    This is actually an incredible point. I went with a more expensive school, and I don’t think I necessarily gained a ton from it (though I loved it, and I also wound up with mad connections). I think at the end, my grandparents (who covered the gap between my scholarships and tuition) paid about $20K more than if I had gone to an in state school, and I paid about $8K more for living/travel expenses than if I would have been nearer to home.

    Getting the Mrs. Degree has some of the highest ROI in the world. It’s worked out for generations of my own family (though somehow has failed for me and my sisters).

    But seriously, even if you are going for the MRS, you need to be pretty smart about the whole operation. Make a point to meet a lot of men. Maintain your appearance like crazy, work to attract men with high earning potential. Really, the whole operation is easier 2-3 years after college when you can narrow down the candidate pool based on actual earnings.

    • Broke Millennial says:

      While I’m very against the idea of an Mrs. degree (from a feminist stand point) I have to admit that I get the argument for picking from the best and brightest if that’s your rationale for going to college.

      I’d rather have someone marrying me because he wanted a “Mr.” degree 😛

  4. What a great post! I wish you would have shown this to my family 28 years ago when I was born!

    My mother never finished college and has regretted it her whole life. She’s spent her career working in jobs she hated that break her down mentally and physically, and she always thought if she had a degree her life would have been infinitely better.

    So, from the time I was born my parents ingrained it in me that I WOULD go to college, whether I wanted to or not. Anything less would be a failure.

    Now, I’ve got $55K in student loans, 2 degrees, and I’m making $32K/year in a job that is eerily reminiscent of the position my mom works in, that was the original impetus for me getting a degree(s)!

    I don’t blame them, I just wish that circumstances were different and maybe I would have been given more realistic expectations. I love my degrees and the job I would have if I could get one. But for right now, at least, it wasn’t worth it.

    • Broke Millennial says:

      Thank you for sharing your story. I hope you’re able to find the job that you want or that other doors ultimately open up because you have that college degree and the ROI turns out to be there.

  5. Will Parker says:

    Went to a no-name school for Undergrad. The SAME no-name school for Grad School (MBA). Neither mattered. I got fired from my job selling insurance and pretty much wandered into the career I have now… 5 years later and a few promotions turns out the school didn’t matter.

    Maybe it does for people with a clearer path, i.e. doctors, lawyers, etc. but for the majority of the working class, I found life lessons pay better than class lessons.

    • Broke Millennial says:

      My roommate and I were recently pondering whether or not you even put your college on a resume after 4+ years out of college? It seems like your work history should be speaking for itself at that point.

  6. I was just discussing this the other day with a friend of mine. We were talking about how college is one of the only things where, as the price increases, demand increases. This is an insightful post, and I really don’t know why people don’t consider trade school a viable option. People are like, “Hey, that school costs a lot of money. It MUST be good!”

    • Broke Millennial says:

      Interesting…I guess I never quite thought of it that way. I think Planet Money has tackled this issue before, but I’m not sure if that’s the angle they took.

      My guess with trade school would be that it’s considered an inferior option, so why would you want your kids down that path? In reality, trade schools often set people up for jobs with salaries in the $40,000 – $80,000 range. You could ultimately be your own boss. Not to mention, lots of those jobs are pretty recession proof (ie: plumbers, electricians, auto mechanics, even hair dressers).

  7. I completely agree with you. I received my bachelor’s degree in psychology from the University of Minnesota (one of the most expensive state universities in the country). I was worried about finding a well-paying job with a BA in psychology, so I decided to get my master’s in business. The business school at the U of M is well-known (at least in MN) for being highly competitive, so I naively believed that a master’s from this school would be my ticket to an amazing career. I work in HR now, so I know firsthand that recruiters typically don’t care where you went to school. They care MUCH more about your relevant work experience.

    I definitely agree that we should encourage high school grads to go to trade school or complete their first two years at a community college. I have a friend who has a two year degree in HR and she makes the same amount of money as I do. A four year degree is not the only path to success anymore…more often than not, it’s just a path to student loan debt.

    • Broke Millennial says:

      It’s great to hear that you have first-hand experience with the notion that work experience matters more than the fancy degree.

  8. The name of the school only helps for those starting years early, but the experience is more important and those portfolio you bring to interview. That said, I still prefer to pay luxury tax for my college as I know this would help me a lot find a better job to get into the career path I want myself to get into.

    • Broke Millennial says:

      Thanks for your thoughts, Jayson. I personally don’t see the value because I don’t think my career could’ve had much more benefits with a “name brand” but it certainly does depend on your major/career trajectory.

  9. Jamie says:

    Now, one that on the top of my resume is my work experience. It used to be my education, which now I believe doesn’t matter any more. Hiring managers look for portfolio and good employment history nowadays.

    • Broke Millennial says:

      I haven’t had to submit a resume in about three years, but I was wondering if I’d even bother putting a degree up at the top anymore. Seems like a bit of wasted space when my experience could go there!

  10. So true!
    Although I know the finances are different here in the UK, there’s still very much a sense of ‘brand name’ universities and courses. I do a liberal arts undergrad course that has 10 students per year group and people are always asking me ‘what I’m going to do with it’… I have however done a lot of networking and work experience to support any job applications so I see my time at uni as developing more than just a vocation… not that there’s anything wrong with that either!

    • Broke Millennial says:

      A traditional four-year college is about much more than developing a vocation, it’s also about the network and life experience. The network is just, if not more, important with a liberal arts degree. I hope it all goes well for you!

  11. LOL on the Mrs. degree article. That is so ridiculous! I went to a fancy pants school too which makes me more critical of this article! Maybe the men there got near perfect SATs but The argument that you are self-selecting the best, brightest and the richest is suspect. One thing to point out for those considering going to a luxury school to earn their Mrs. is that with higher earning potential comes higher social pressures for homes, cars, houses. Someone with lower earning potential but more realistic expectations could actually be wealthier than that Princeton grad – if money is all you care about!

    • Broke Millennial says:

      Ah, yes! I love that counter-argument. And frankly, if someone is going to college for an MRS. degree, than I’m willing to bet she’s more susceptible to the keeping up with the Joneses mentality. Judgmental of me? Probably. But I’m sticking to it.

  12. Rachel says:

    I am going to be transferring from an in-state school soon, and it is very likely that I will be going to a “name-brand” school akin to the type you mentioned. While I can definitely appreciate the arguments you make, I also would like to point out that 4-year “high-end” schools can also have excellent financial aid packages. For me, as a result of a 40k need-based grant and an athletic scholarship (both from the university), I will be paying less to attend this “fancypants” college than the state school I currently attend.
    Also, I like the smallness of the school and the mentality of the people there much more than I do at my current school. Money is not the only thing that should be taken into consideration when choosing a college.

    • Broke Millennial says:

      Yes, some of the name brand schools do have great scholarship packages, but so do a lot of smaller colleges looking to attract top-notch students and athletes. It’s part of how I ended up getting 50% of my education paid for. Planet Money has an excellent podcast about the sticker price verse what students usually end up paying: http://www.npr.org/sections/money/2014/06/25/325497878/the-real-price-of-college

      However, many students need to be wary about financial aid verse scholarship. Some people forget that loans through the school still need to get paid back, but it sounds like you’re on the path of grant/scholarship so you won’t be in the hole.

      It sounds like you’re also taking the smart route of paying the more affordable price in the first year or two and then transferring, which is a great move.

      I’d love to say it’s about more than just the money. In a few cases, sure, I’d agree. It’s about feeling comfortable, getting a good education and building a strong network. But I do think people highly over value name brand schools in this country and wax poetic about it being the best time of your life (it isn’t, you should be having loads of fun after college too!) and end up putting themselves deeply in the hole, which ultimately limits options as a recent graduate.

      Best of luck to you! Sounds like you’re evaluating your decisions well and setting yourself up for success.

  13. Hazel Owens says:

    I agree that people who don’t want to go to a four-year university should at least consider trade schools. There will always be work out there for plumbers, electricians, and construction workers. Going to a trade school to learn such a skill should mean that you’re able to find a job anywhere, regardless of how bad the economy is. Thanks for the article.

  14. Hey! This is my first comment here so I just wanted to give a quick shout out and say I genuinely enjoy reading your articles.

    Thanks alot!

  15. Bobby says:

    Food for thought, and I tend to agree with you. For most people a no-name college is going to be just fine. But salaries for STEM workers can be so high that financial independence is EASILY achievable before 35.

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