Opinion: Going to College Is Still an Important Step to Building Lifetime Wealth
Ask 10 people in the real estate industry about the value of a college degree and you’ll get 10 different answers.
My BiggerPockets colleague Andrew Syrios makes an ardent case that college degrees are overrated. Another colleague, Sterling White, doesn’t go quite so far but points out that many college students simply follow the herd into college without any idea what they want to do with their lives. Still other real estate pundits propose an alternative path in the form of real estate educational programs.
We can all agree that not everyone should go to college. Not all jobs require a degree, and in some fields, a degree doesn’t even help differentiate your resume. If you know you want to become an electrician, you need to attend trade school, not college.
But what about people who don’t know exactly what they want to do? For them—even those who end up in the real estate industry—college degrees can still end up helping their career.
The Data: College Graduates Earn More Money
It comes as no surprise that college graduates earn more money than their less-educated counterparts.
One study by the Social Security Administration found that men with bachelor’s degrees earn $900,000 more than men without them. The study found a lower figure for women at $630,000, as many women drop out of the workforce when they have children and generally earn less for similar work.
Another study by Georgetown University found an even starker difference between college grads and non-college grads. Their data demonstrate that the lifetime earnings advantage of a college degree is $2.8 million.
Critics contend that these studies compare apples to oranges. That they compare accountants and executives to secretaries and checkout clerks. But isn’t that the point of going to college—to qualify for higher-skill, higher-pay positions?
The Logic: Sort Yourself Into a Higher Category
Instead of answering phones for the regional manager, you can work your way to become the manager yourself.
I can hear you objecting already: “But you don’t need a college degree to become a real estate agent or sell mortgage loans! And certainly not to become a real estate investor. If I want to go into real estate, why do I need a college degree?”
You don’t. But it still helps you.
It helps you in several ways. First, having a bachelor’s degree sorts you into a higher category than the candidates without one who applied for the same job. Given the choice between two otherwise similar candidates, employers opt for the one with the degree.
Second, college degrees put you in a better position for advancement. Your career doesn’t end with your entry-level job, despite earnings misconceptions among college students. If you want to earn more money, you need to pursue promotions and climb the ladder. And at a certain (not very high) point on that ladder, workers without degrees bump their heads against a glass ceiling.
And if you want to invest in real estate, you need capital for down payments. That capital comes from your savings rate: money you earn from your job but don’t spend. Get a degree, work your way up the ladder, earn more money, and use that high salary of yours to invest in real estate and reach financial independence young.
Related: 9 Things 20-Somethings Should Do to Be Financially Free by 40
My Experiences
I didn’t know what I wanted to do when I enrolled in college. For that matter, I had no clue even after I graduated with several not-so-useful degrees in psychology and criminal justice (with a minor in anthropology, thank you very much).
In other words, I was exactly the kind of person that the skeptics argue should have skipped college.
Yet I’ve never regretted my college degrees. To begin with, I never would have gotten my first internship out of college working directly with the owners of a nationwide mortgage lender—an internship that evolved into a full-time job as an account executive handling hard money loans to real estate investors. That job was my first exposure to the real estate investing world, which has shaped my entire career.
I didn’t need my psychology degree to write mortgage loans. Nor did I need it later when I went to work for an e-commerce company selling legal forms for landlords. But the owner of that e-commerce company bothered reading my resume because I had a college degree.
Later, when I split off on my own to found a software company, I technically didn’t use my psychology degree either. Except that our primary marketing strategy involved writing clear, articulate articles, which I learned how to do in college.
Does Your Major Matter?
For some careers, you need a specific major. You need a premed biology degree to get into medical school, for example. Teachers generally require a teaching degree, and most law schools look for a degree in English or history.
But for most careers, you don’t need a specific major. Many critics of college education point to this fact, as they deride college degrees. “See? Most graduates never even use their degree in their eventual career!”
It doesn’t matter. In the eyes of employers, having a degree separates you from the hoi polloi, the plebeians, the unwashed masses. Hard stop.
Graduate Degree vs. Bachelor’s Degree
The aforementioned Social Security Administration study shows that people with graduate degrees earn even more money still than those with bachelor’s degrees. Does that mean you should run out and get a graduate degree as soon as you graduate college?
Not necessarily. Unlike bachelor’s degrees, which serve mostly as a differentiator from those without them, graduate degrees serve as a specific requirement for one job type.
For example, my wife went to work as a paralegal after graduating college. She didn’t know what she wanted to do with her life. After a few years of soul searching, she found her calling as a school counselor, which requires a master’s degree. So she went back to school to meet that requirement.
Consider graduate degrees a means to a specific career end, rather than a floor qualification across multiple fields. Unless you know exactly what you want to do, .
The Albatross of Student Loans
Critics of college education point to the worryingly high student loan debt in the U.S. and elsewhere. They point to young adults struggling to buy a home under the weight of student loans or how they delay young adults from investing.
Related: Should I Pay Off My Student Loan or Invest in Real Estate?
They’re not wrong to be concerned. The cost of education has skyrocketed in the last 30 years, as colleges hire more secretaries than professors in an endless cycle of administrative bloat.
Even so, no one says you have to pay average tuition prices or take out student loans. There are infinite ways to pay for college, from scholarships and grants to ROTC to working part-time to employer debt forgiveness and beyond. Some students attend community college for two years before transferring to a four-year university.
Get creative with it, and find a way to do it affordably rather than the lazy route of just borrowing the problem away.
Final Thoughts
The skeptics aren’t wrong when they point out that many real estate jobs don’t require a college degree. You don’t need a degree to become a property manager or sell property insurance.
But having a degree opens far more doors in your career, both to score entry-level jobs and to climb your way up the ladder. I don’t use my psychology or criminal justice degrees in my day-to-day work teaching real estate investing or managing a property management software company. But at each major junction in my career, my degrees helped me secure the jobs that set me on this trajectory.
If you have no idea what you want to do with your life, consider taking a gap year to get to know yourself better. If you still don’t know, go to college, and find a way to make it affordable without heavy student loans.
It will leave infinitely more paths open to you in your career, whether you enter the real estate industry or not.
How has a college degree helped you (or not) in your career? If you haven’t attended college yet, what will help you make the decision?
Share in the comment section below.