BiggerPockets Money Podcast - 293: Why 40% of Master's Degrees Aren’t Worth It (and Which Are) w/Preston Cooper

Episode Date: April 18, 2022

A master’s degree shows quite simply that you’re a master (at least to some extent) in a certain subject. For decades, getting a master’s degree has been seen as a financially savvy move to open you up to higher pay, better job opportunities, and golden networking connections. But times have changed, and as more students see college as an inferior option to working, it begs the question: is a graduate degree worth the price? You can’t know the answer unless you compile tens of thousands of pieces of data. Thankfully, we didn’t have to do that, we just invited Preston Cooper on the show to explain the research he and his team at FREOPP did. You may recognize Preston from his previous episode on the BiggerPockets Money Podcast where he mapped out which undergraduate degrees were worth it. Now, he’s back to show which master’s degrees have the highest (and lowest) ROI. You’ll hear Preston answer questions like when is the right time to go back to school, which master’s degrees are fatal for financial freedom, and how students should go about choosing a degree or a combination of degrees. So, whether you’re pondering going back to school to get a degree in underwater basket weaving, horse training, or law, Preston has the data to help you make that decision!  In This Episode We Cover Why different schools can have dramatically different degree ROIs The best (and worst) master’s degrees to pursue  How degree combinations can help you make more money in a related career  When is the right time to pursue a graduate degree (after college or after working)? The common misconception about MBAs and why most graduate business degrees aren’t worth the cost The future cost of college tuition as admission rates drop and inflation continues to rise  And So Much More! Links from the Show BiggerPockets Money Facebook Group BiggerPockets Forums Finance Review Guest Onboarding Scott's Instagram Mindy's Twitter Apply to Be a Guest on The Money Show Podcast Talent Search! Subscribe to The “On The Market” YouTube Channel Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets  Hear Our Previous Interview with Preston on Episode 251 Check Out Preston’s Grad Degree and Bachelor Degree Study: More FREOPP Higher Education Resources  FREOPP Is A Master’s Degree Worth The Pay Raise? Connect with Dave on BiggerPockets Check the full show notes here: https://www.biggerpockets.com/blog/money-293 Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, show number 293, where we talk to Preston Cooper from the Foundation for Research on Equal Opportunity about the ROI of your graduate degree. From a purely financial perspective, pursuing the degree earlier is going to be better. But that doesn't necessarily mean that you absolutely should pursue the degree earlier because it's important also to take some time in your career to figure out, well, what is it that I really want to do? And if you get the MBA at 23 and then you decide, at 25, you know, I really hate business. I really don't like doing this. That's not a great situation for you to be in. So while I would say that, you know, from a very narrow financial perspective, yes, it is going to be better to get that degree earlier. That doesn't mean you should always pursue it earlier because it is important to be sure that this degree is what you want, that this degree is what is going to help you advance your career before you take the plunge and decide to enroll in graduate school. Hello, hello, hello. My name is Mindy Jensen. And joining me

today are two co-hosts, Dave Meyer, Bigger Pocket's Resident Numbers Nerd, and the host of our latest podcast called On the Market, where he dives deep into his favorite subject, data about the real estate market, along with an impressive rotating panel, including Kathy Fecki, Jamil Damgey, James Daynard, and the Henry Washington. Wow, Mindy, thank you for that very descriptive intro. I appreciate that. Well, thank you for joining me today, Dave, and Scott Trench is here too. I know there's a need to be economical with your intro, but dang, that's a... You got the slight, man.

We don't have time. We have Preston Cooper here today. He's back. He's going to talk to us about graduate school degrees, and he has so much information. We don't have time for chit-chat. But we do have time for our normal intro. So, Scott and Dave and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting. That's right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate, start your own business, or just determine if going to college or getting that master's degree is worth it. We'll help you reach your financial

goals and get money out of the way so you can launch yourself towards those dreams. I am so excited for today's guest. It is Preston Cooper. You last heard him on episode 251 of this same show where he talked about the ROI of your undergrad degree and or your potential undergrad degree. And it was very interesting what he shared with us then. And he's back today to share with us the ROI of more than 11,000 master's degrees and 2300 advanced degrees like PhDs or professional degrees. And I thought it was a lot of fun. Dave, what did you think of today's show? I am constantly impressed by Preston. I think we all sort of fawn over him a little bit. I don't know if he gets uncomfortable by how impressed we are by him, but it's genuine. His work is just so good and it's so thorough. He really has an answer for everything and really understands this topic really deeply. And it's a super important topic. So I hope everyone out there listens to the very end because he gives some great advice on how you should think about a graduate degree. Preston Cooper, you could say, is the Dave Meyer of the higher education space and the ROI of that

kind of stuff. Or maybe Dave Meyer is the Preston Cooper of the real estate space here. But I think you guys have a very similar skill set in terms of how you think about and like to exhaustively analyze your fields of expertise. And, you know, I love the way that he has thought of every conceivable impact and influence on college ROIs is completely open to new things, is genuine excitement. when we bring questions that maybe we're part of the study, but he thinks are great considerations like the tax thing that we discuss later on in the show.

So I think it's a very similar mentality, the approach that you bring, Dave, to your real estate data and analytics. All right. Well, thank you, Scott. That's very nice of you being compared to Preston is always an honor. But if you are interested in the type of work that Preston and I do, where we analyze different data, news, and current events, you should definitely check out Bigger Pocket's newest podcast. It's called On the Market. And we actually

have a new episode out today. Who's it with? So each week, I actually chat with a panel of real estate experts. We have Henry Washington. We have Kathy Fecky and Jamil Damgey on this week's episode. And we are talking about the best housing markets to invest in in America. So each one of our experts is coming in with their two favorite markets, explaining all the data and economics behind why they like these markets. And you can get in on these excellent markets ahead of everyone else if you listen to on the market today. Yeah.

I think also you give out a little goody in some of the episodes that will have the list of, you know, the data-driven best markets, perhaps that you can download available only to listeners of On the Market as well. So if you want that data, got to go check that out at Dave's new show on the market, available wherever podcasts are hosted. Yeah, absolutely. So we do this thing where every couple of weeks, we release a data drop where I prepare all sorts of information, sort of like what Preston does for his incredible study,

but we do it for the real estate market. And if you listen, you might hear one of these data drops where we give away this incredible information for free. But there's also all sorts of great discussion, perspectives every week on the market. So I really hope you check it out. It's a really fun and worthwhile show. and we hope you see you there. You can listen to Dave's episode that releases today at biggerpockets.com

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Preston Cooper wowed us with his impressive, exhaustive research on the ROI for undergrad degrees way back on episode 251 of the Bigger Pockets Money podcast. And if you have anyone in your life considering attending college and haven't listened to it yet, you need to and they need to listen to it too. It's kind of eye-opening and a little bit surprising at some of his findings. At the end of that episode, Preston casually mentioned that he was working on similar research for graduate degrees as well. And I asked him to let me know when his research was complete so we could have him back on the show.

Well, he's finished up his study and the results of this one are equally surprising. Preston Cooper from the Foundation for Research on Equal Opportunity. Welcome back to the Bigger Pockets Money podcast. Thank you, Mindy. It's great to be back on the show. And thank you for your kind words about my research. I can't imagine how much time you spent looking at numbers and, like, I was reading your report and it's just like combing through all of these things. And it's like, we checked in this and checked in that.

And I'm going to let you describe all of that. But holy cow, wow, it's so impressive. I love it. And we are going to talk for about 100 hours. And I want to jump right into it. But can you give us a quick overview of what your most recent research covers? Absolutely. So what we're looking at in my most recent research is what is the financial value of graduate

school? So we took 11,000 different master's degrees and about 2,300 different doctoral and professional degrees. And we asked, well, what are these actually worth financially? So what is the increase in earnings that you can expect for having gotten this degree? And what are the costs associated with getting that degree? What are you going to pay in tuition? How much time do you need to spend out of the labor force in order to earn that degree? Basically, we did the math to add all these costs and benefits up. And we came up with the answer for each of nearly 14,000 graduate degrees. you know, what are these actually worth?

What can you, how much, how much further ahead can you expect to get financially for having gotten one of these degrees? Okay. I just want to clarify, a master's degree is about two years of full-time school. But when I looked up how long it takes to get a PhD, the timeline varied greatly from the extremely rare 12 to 24 months to as all the way up to six to eight years. So I just want to be clear that there is not only a financial commitment, but there's a pretty serious time commitment in getting your advanced degree. So I just want to plant that seed in case

anybody was confused on how long it takes to actually get the degree time-wise. Absolutely. And this opportunity cost aspect is so important to consider because I think often when people are considering a higher education getting a master's or advanced degree, they look at the cost of tuition, which is super important, no doubt. But it's also important to consider, you know, what else could you be doing with your time? You know, if you're in a job earning $80,000 a year right now, and you're going to take two years out of your life to get an MBA, that's certainly a cost that you need to consider, that you'll be out of the labor force for two years, giving up $160,000 potentially in lost earnings. And it's something that is definitely

something you should keep in mind when you're deciding whether to pursue graduate school. I think there's a bunch of questions that pop into your mind when going through this. And so I'll just kind of spitball a few for you with this. But one thing that I think a lot of I think you mentioned that MBA is the most popular degree in your study. And a hypothesis I would have had coming into the study would be, hey, you know, a degree from Harvard or Chicago or, you know, Wharton is going to be dramatically different from an ROI perspective from one from, you know, maybe the local state school with that,

based on the reputation that those name brand top league Ivy schools have, especially in the NBA department. can you walk us through something, your thoughts or what the research has to say about that hypothesis? Absolutely. So I think, you know, when we're talking about, you know, what does the research say on MBAs? It's important to consider, you know, that there are multiple components to ROI. So there's realized earnings. If you get the degree, what are your earnings going to be for the rest of your career? But then there's also counterfactual earnings where if you didn't get the degree, but you were still the same person, you know, in that parallel universe where you don't have the graduate degree, what would you have earned? And it turns out that counterfactual is going to be very different for different graduate degrees. And the reason is that different college majors are going to feed into different graduate degrees. So an MBA is more likely to draw students who have undergraduate degrees in finance, economics, business, not universally, but disproportionately it's going to be those majors.

But, you know, a degree like the Masters of Social Work, that's probably going to draw people who have bachelor's degrees in, like, psychology, sociology, anthropology, sociology, social work is an undergraduate degree. degree, so they're going to have very different earnings potential from the people who have a bachelor's degree in economics or finance. And so that kind of brings me to the question of MBAs. So you'll see reporting in the media that basically says, you know, MBA salaries are crazy high this year. They're 100K or whatever. They're really, really great. But it's also important to consider what is the counterfactual for those MBA degrees? Because if you have a bachelor's degree in finance or economics, you probably already have, you know, a pretty firm foundation, you know, earnings-wise. And so it's not entirely clear that the MBA is actually going to add that much more.

So what we did is, you know, we crunch the numbers. We said, what is the median earnings that you get with an MBA? And what are the median counterfactual earnings for those people who are getting an MBA? But if they were in a parallel universe where they didn't have that degree, what would they have earned? And the gap is actually not that big. So we estimate that median earnings for someone with an NBA are about $88,000, but median counterfactual earnings are about $83,000. So that's only about a $5,000 increase that the median MBA is getting. And, you know, once you stack that up against the fact that you have to spend two years out of labor force to get an MBA,

that you have to pay tens of thousands of dollars in tuition usually in order to get that degree, you're not always going to come out ahead for that. And what we find is that 62% of MBAs and other business-related master's degrees do not pay off. They have negative ROI. So 62% of programs, the median student is going to be worse off for having pursued that MBA. That's not, you know, 62% is not 100% and there's certainly exceptions, but that is a big red flag for people who are considering an MBA. So another way of saying that, and please let me know if this is the right way to think about it, is if I am ambitious and smart enough and hustling hard enough to get into Harvard Business School

after my undergrad in economics five years later, then I'm going to earn a ton of money whether I go to Harvard Business School or not. And Harvard Business School may only increase my actual earnings potential modestly. It's because of who I am and the counterfact the reality and the circumstances I'm in that would enable me to have that option. That's what's going to propel me to those high earnings in a future state. Is that how to think about it? Yes. So we need to be thinking about, you know, both the person and the degree who's pursuing one of these, who's pursuing one of these advanced degrees. But I'm really glad that you brought up Harvard Business School because Harvard is kind of the exception that proves the rule. So we actually calculate that for the top 20 MBA degrees,

so, you know, the degrees from Harvard, from Yale, from Chicago booth, from Penn Wharton, these MBAs kind of buck the trend. So for most of these schools, you know, the top 15, 20 MBA programs, the ROI is going to be above two million. These are some of the actually the best master's degrees that you can possibly get. The problem is that they're not representative of all MBAs. And so there is this very long right tail of elite master's degree programs, elite MBAs that are going to get you a lot of earnings, you know, a lot of earnings. But the average MBA is not going to be in that category. And the reason I hypothesize for this is that, In an MBA program, professional connections are very important.

It's all about the networking and less about what you're actually learning in your coursework. And if you go to one of these elite schools, you're going to be, for an MBA program, you're probably going to be rubbing shoulders with people who work on Wall Street. And, you know, people you're going to have access to an alumni network that probably is going to be able to get you into a number of very lucrative jobs. So if you're going to Penn or Harvard or Yale or Chicago for your MBA, you are probably, going to be doing pretty well. But the problem is when we generalize that experience of the top 20 MBA degrees to all 500 MBA programs across the country. You know, at schools where the professional connections are not quite as great is much less likely that the MBA is going to pay off.

That's fascinating. That is fascinating because that is not in the MBA brochure at all. Hey, this isn't going to pan out for you. I bet the MBA programs that you didn't just mention are like, Preston, stop, stop. I was going to ask, are there any degrees where it doesn't matter what program you go through having the MBA is, or I'm sorry, having the degree is still worthwhile? So the master's degrees that are going to pay off most often are probably not super surprising, but they include a lot of computer science, engineering, mathematics, nursing, you know, programs that are, you know, also pretty good at the undergraduate level, you know,

And if you're getting this master's degree, that's probably teaching you skills that are going to enable you to graduate to a promotion or to a raise, you know, get you that additional level of skills that will enable you to increase your earnings potential. And we find out that most master's degrees in those fields, computer science, engineering, nursing, they are going to pay off. And that's good news for people who are considering a degree in one of those fields. What about what are some of the most likely to be negative degrees? We already discussed MBAs outside of the top 20, but what are some of the ones that have the worst ROI? So the ones that have the worst ROI are usually in the arts, the humanities, theology fields, which again, I don't think is terribly surprising, but it tends to be the case that people who pursue, say, Master of Fine Arts, MFA, they're usually not going to get a big enough earnings boost from the MFA in order to justify the cost of graduate school, which is, I think, kind of a shame,

because I think people who are, you know, majoring in an artistic field as an undergraduate, you know, say an art or a music field. And then they say, you know, the earnings associated with this bachelor's degree just really are not what I've hoped for. But maybe if I get a master's degree, that'll help out help me out some more. It turns out not to be the case, you know, that the additional earnings that you're going to get for having gotten that MFA are usually not going to be enough to justify the cost of spending a year or two in an MFA. program and spending that time out of the labor force. So, you know, if you're looking to do an MFA in order to increase your earnings potential, I would say you might want to look elsewhere. Now, if you're doing an MFA because you just, you love the idea of learning and you want to get a

master's degree, you know, it's a free country. You should be allowed to do that. But I don't want you to have any illusions that you're going to get a huge financial benefit from this degree. Preston, one of the things I loved about your original research that we talked about was that you adjusted for completion rates, and you saw that certain schools that might have a positive ROI for people who actually complete the program, when you look at it in aggregate, had a negative ROI because so few students actually graduated. Does the same phenomenon exist with graduate schools, or do you see more students actually completing these programs? That's a great question. So the completion adjustment difference that you alluded to,

So at the undergraduate level, this basically says, yes, if you get the degree, you're going to get a big bump in earnings from this, but there's only a 60% chance or so of actually completing. And that's a big problem because there's this huge risk that you'll drop out and you'll be left with the debt, but none of the benefits of the degree. So this turns out to be less of an issue at the graduate level because completion rates for master's degrees, professional degrees, are already, you know, pretty high. they're north of 80%. Even for very difficult programs like medical school, it's still north of 85% completion rates. So the completion adjustment, which we do do in this paper, just doesn't tend to make that much of a difference.

Now, there is one very massive exception, and that is PhD programs, which have a much lower completion rate than other graduate degrees. And in that case, PhD programs, which are all we're already, not that lucrative to begin with, the likelihood that those are going to pay off goes down considerably once you factor in

completion rates. One of the things I found surprising with this was the really destruction of value that comes with educational master's degree. I know a lot of teachers, and they all seem, or most of them, the vast majority of them, seem intent on getting that master's degree in education. Do you have any thoughts on the phenomena going on with that particular degree and why that that's so low ROI? Sure.

So that was also a bit surprising when we saw that education master's degrees had had fairly low ROI because, you know, most states, their salary schedules for public school teachers are going to give you a benefit if you get that master's degree, you know, that the salary schedule is going to say for somebody with a master's degree, they're going to be earning more than someone with a bachelor's degree with a similar amount of experience. But it turns out that, you know, going to get an education master's degree is hard and expensive. And, you know, it requires taking time out if you're teaching to your career to go and to go and pursue that degree. And it turns out that even though there is an earnings benefit associated with a master's in education, it tends to not be great enough to cancel out the cost of graduate school, which I think is kind of a shame.

How do you think about the costs, the fact that a lot of masters, the two questions, two part question, the part that a lot of costs of these degrees are defraied by the employer, in some cases, employers may pay for their employees to go and get these advanced degrees to help aid with retention or development of their people. And then second, if I'm a parent and I have an adult child who's 25, 27 years old, and I pay for their graduate school. How does that change the dynamic there for a lot of these degrees? Is it generally worthwhile to do the degree in both of those situations? Good. That's a great question. So, yeah, just to clarify the way that we calculate, you know, tuition expenses,

we take into account, you know, aid that's kind of come from the school or from, you know, the federal government, you know, if you're getting veterans benefits or whatever, you know, if you're getting aid in order to assist you with graduate school, we're going to take that into account and say, you know, only your net tuition is what's going to factor into the ROI calculation, not the gross tuition before age. But we don't necessarily have the data to calculate if, you know, employers or parents or these other third parties are coming in to help out with your graduate education and to defray tuition costs. So we didn't calculate it. with respect to, you know, zero tuition, you know, if your parents are fully paying the bill.

But obviously, you know, that's going to make it a higher probability that the education is going to pay off if that tuition expense is going down. But, you know, I would say if you're a parent and you're considering, well, you know, I've got some extra money laying around, you know, I've had a good career and I want to help my son or daughter better themselves, getting a graduate degree, you should probably be taking a look about whether that graduate degree is going to pay off or not. Because if the increase in earnings associated with that degree is small enough that if the increase in earnings associated with that degree is too small, then you might be better off just giving your son or daughter that money as cash, you know,

which I don't necessarily think is something that you might want to do as a parent. You know, that might kind of go against the parent code just to write your son or daughter a big check. But, you know, if your goal is to is financial security for your son or daughter, then often, you know, just taking that money as cash is going to be a better investment than getting a graduate degree, depending on which graduate degree it is, of course. I'm going all over the place with these questions here. But another thing that I'm seeing here is that in your top 25, you've got basically law and dentistry as the two most likely to pay off things there. And what I notice about the law degrees is that these law degrees are all coming from elite Ivy League institutions for the most part, right?

There's a couple of exceptions in there. But you're seeing familiar names like Pennsylvania, Harvard, Stanford, those kind of law programs. And then for the dentistry programs, you're seeing all over the place. And it looks like there may be a more cost focus there that's leading to the extreme ROI, like West Virginia and Eastern Carolina and those types of things. Any thoughts on the law or dentistry professions? That's a great point. So, you know, law, dentistry medicine, these are the professional degrees that are really, you know,

the gold standard for, you know, financial value in higher education. You know, over 90% of law and medical dentistry degrees are going to pay off. And often pay off in spades, you know, over almost 50% of medical and dentistry degrees are going to have an ROI of over one million. And as you mentioned, you know, the very top of the list, the degrees that are going to have the hugest, hugest payoff, you know, talking millions of dollars over the course of your career are all in law and dentistry fields. And I think you brought up, you know, a very interesting kind of nugget of information from that list, which is that, you know, if you look at the list, of the top law programs. We're all talking about extremely prestigious schools, you know, Columbia, you know, Harvard Law, Yale Law, you know, places that produce Supreme Court justices and so forth. But if you look at the dentistry schools, you know, I think the top one is from the

University of Colorado, which is still a great school, of course, but it usually doesn't make the, you know, the top of the U.S. News and World Report ranking. And I think that kind of signals that something about why these degrees are valuable. you know, that with law degrees, it might more be about who you know and, you know, what kind of professional connections you're making at the school, what kind of, you know, summer work, summer internship opportunities are available to you. And what are the jobs that you're going to get out of school that will enable you to have a great and very lucrative career?

You know, it's more about the connections than about what you learn. I think with dentistry, it might be the opposite that, you know, there are some dentistry schools that are just going to do much better than others at, you know, teaching you the skills you need to 16th. And, you know, that there, these, the list of schools that are teaching you the best is not always going to align with top US News and World Report ranked, ranked universities. And it might, it might be in dentistry, at least, much more about the skills that you're learning than about the professional connections that you're making. We always have very good dentists here in Colorado and can definitely recommend some. But Preston, I had a question for you. So,

So I got a master's degree and deliberately chose to continue to work while I did that. And that was difficult, but it was based on this opportunity cost. So I'm curious, have you looked at the data for these so-called executive programs where they're made for working professionals and how that would impact the ROI of a master's degree? That's a good question. So were you pursuing your master's degree full-time while you were working? Were you doing both full-time work and full-time school? Yes, and it was self-managing seven rental units at the same time.

It was a very bad decision. Very bad decision. Wow. Yeah, it wasn't full-time. I took two classes at a time, so I think that's probably less than a full workload. But and then you did it basically full year-round. no breaks. So 24 months straight, two classes at a time. I see. Yeah. So this is a great question. So for the sake of simplicity, all of the ROI estimates that are reported in this paper are based on a full-time

enrollment and not working while you're enrolled. But, you know, there are many different paths to higher education and we definitely want to be cognizant of those other ones. So let's think about, you know, what would happen if you decided to enroll part-time and also work part-time, you know, while you're pursuing your degree so that you can have a little bit of extra earnings while you're pursuing it. I mean, that's what I'm doing, you know, when I'm pursuing my PhD. I'm also working part-time. And so what happens is that you definitely don't lose out on as much of the opportunity cost of not working because you are working some of the time. But if that working part of the time, it means that you have to extend out your graduate program. So instead of a two-year program,

becomes three or four years because you can't take as many classes at once. You have to extend it out for more years. You are going to be saving money by not spending time out of the labor force, but you're also going to have fewer years in your career to enjoy the benefits of the higher earnings associated with a degree. So if it takes you four years to get your MBA rather than two, then you have two fewer years to enjoy the higher earnings associated with that MBA, you know, hopefully that they will, hopefully that those higher ratings will materialize that you're

in a good program. But, you know, that is definitely something to consider that there's the opportunity cost of not working, but there's also the delay cost of delaying, getting that degree for several years, which can, and those costs can also add up. Preston, you have thought of everything. I just, every question, I think that maybe you haven't thought of it. You've thought of every single thing. Do most people quit their job to go back to their master's program or do most people tend to do the working through? I thought people worked through their master's program.

My dad did. I think he has an MBA. I can't really remember what his degree is. I just remember there was a time that I was going to college graduations left and right. Yeah, that's a good question. I don't have the statistical breakdown in front of me. You know, as I said, just for the sake of simplicity, we assume that, you know, full-time work. and not working while you're enrolled.

And if your educational pathway is going to be different than that, the ROI estimates, I think, are still going to be kind of useful, because most of ROI is going to be based on what you're earning. But you should be thinking about, you know, how is this going to deviate from that norm? Am I going to be gaining some by not spending as much time out of the labor force, but also am I going to be losing some by having fewer years available in order to enjoy the higher earnings

associated with my graduate degree? the timing of the degree make any difference in the sense that if I get the degree right after immediately following college and then go into the workforce, does that change things? Or is it better to wait and do it five, six years down the road after I've had some professional experience? That's a very good question. So what we did in this analysis is basically we looked up, what is the median age of graduation for each different graduate degree?

And it turns out that this really differs for different degree. So law and medical programs, it's pretty typical for students to go into those programs right out of college, or at least one or two years out of college. So, you know, they're probably going to be getting those degrees in their mid to late 20s. For MBA programs, it turns out that most of the median age of graduation for those is around 30. So people will be working out in the workforce for a few years and then they'll be going back to school in order to get their MBA. So everything is basically calculated based on the median age of graduation. So for an MBA program, median age of graduation is 30. You have from the age of 30 through the rest of your career to enjoy those higher earnings benefits.

For a medical degree, median age of graduation, I think, is around 26. So you have from age 26 until the end of your career to enjoy those higher earnings benefits. But also, that is something to think about, you know, when we're talking about, you know, what is actually going to be the value of graduate school, because it matters when you decide to pursue those degrees. And so if you decide to pursue your degree earlier on in your career, you're going to have more years to enjoy the higher earnings benefits associated with that degree. It also might be the case that if you're enrolling at the age of 23 or 24, you don't have as much experience. So the opportunity cost of not working for a couple of years is going to be lower because a 23-year-old is going to earn less than a 28-year-old most of the time. So it tends to be the case that, you know, from a purely financial perspective, pursuing the degree earlier is going to be better.

But that doesn't necessarily mean that you absolutely should pursue the degree earlier because it's important also to take some time in your career to figure out, well, what is it that I really want to do? And if you get the MBA at 23 and then you decide at 25, you know, I really hate business. I really don't like doing this. that's not a great situation for you to be in. So while I would say that, you know, from a very narrow financial perspective, yes, it is going to be better to get that degree earlier. You, that doesn't mean you should always pursue it earlier because it is important to be sure that this degree is what you want, that this degree is what is going to help you advance your career before you take the plunge and decide to enroll in graduate school. Your average age of graduation seems to correlate with the requirements of the advanced degree. to be able to work into that field as well.

Like law and dentistry, you can't just go start drilling on people's teeth until you have the advanced degree. I'm assuming you can't be a dentist as a bachelor degree. That's right. Yeah, that's right. So if you want to work in medicine or dentistry, you are going to have to get that advanced degree if you want to practice in those fields.

And that's actually, I think, one of the major reasons why these degrees are so lucrative, you know, why medical degrees and law degrees and dentistry degrees are going to pay off so well. It's because the requirements to practice in one of these fields are so, so strict. You have to have this advanced degree. So that's a really high barrier to entry in those professions. And that means if you have a really high barrier to entry, you're going to have a really constricted supply of doctors and lawyers.

And so the wages that those doctors and lawyers are going to get are going to be really, really, really high. And so that's great for the doctors and lawyers. you know, if we ask the question of, well, what does this mean for our society? What does this mean for the cost of health care or legal services? Maybe that's not such a great thing, you know? Maybe having this, these high walls around these professions are not necessarily a great thing for our society if it's going to increase the cost of medical and legal services. And I do note in my paper that, you know, these really high returns associated with law and medical degrees are a signal

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Get more with Northwest Registered Agent at Northwest Registeredagent.com slash money-free. One thing we talked about last time was a major factor in the ROI analysis is going to be the discount rate you use. And I think you said you used a 5% discount rate last time. Would you use the same one for this study? That's right, yes. So it's a 3% real discount rate and then assuming 2% inflation, which is probably an assumption that's not so great anymore if you see the recent CPI print had inflation at 8.5% this morning. So that's not great news. But basically a 3% real discount rate after adjusting for inflation.

Okay. For those who maybe don't understand the term discount rate, it's discounting future earnings as less valuable than they are today, because you could be investing those dollars in an alternative asset like the stock market or real estate. So you have to make an assumption there. And Preston has chosen a 5% discount rate, which is perfectly reasonable. You could say if I'm going to think, if you think you're going to invest those dollars in real estate and earn a 10 or 15%, the ROI for these degrees would be that much lower because your alternative investment and what you believe you could get would be that much higher in the alternatives with that. If my goal is financial independence at an early age,

age, 30s, 40s, 50s, what should I take away from this study? How does that change the game from an ROI standpoint for these graduate degrees? Does it eliminate most of them? So if your goal is financial security by the age of 30 or 40, I think the main takeaway is that your field of study really matters and that, you know, different careers are going to pay vastly different amounts. And it's no accident that that happens because, you know, some jobs, some fields are just going to be more in demand than others, which is, which is the reality of our economy, that a computer scientist is going to be more in demand than an artist. That doesn't mean that, you know, artists are useless or anything like that. I don't want to be construed as saying that,

but it does mean that there is, there are differences in demand for these various professions. And if your goal is financial security, that is something that you should absolutely be taking into account. So, you know, when you're, when you're deciding, you know, how to plot out your, your career journey in order to gain that financial security. First place you should probably start is, well, what is my undergraduate graduate education going to look like? Because, you know, that is going to make a huge difference to your future financial success as well. You know, choosing to major in computer science, engineering, economics, you know, at that, at the undergraduate level, business is a very good degree that tends to pay off, you know, or nursing. You know, that's going to,

that's going to do pretty well. And then looking at the graduate side, you know, what fields of study are going to pay off, you know, getting an advanced degree in computer science or engineering, you know, that's probably going to be good. That's probably going to help you become financially secure. Not always, you know, if you get the MBA, at least not from one of the top 20 schools, that's probably not going to help with financial security. But it really matters, you know, what you're going to choose as your field of study.

And I also want to bring up really quickly, since we're talking about this, you know, the student debt issue. You know, student debt at the graduate level is going to be way higher than it is at the undergraduate level. If you read op-eds in the New York Times or wherever about, you know, people talking about how they have over $100,000 of student debt, that is almost always somebody who went to graduate school. Because, you know, loans for undergraduate students are very strictly capped, at least by the federal government. But for graduate students, they're completely unlimited. And that means you're going to have, you know, more options to get to finance your graduate education, but you can also get yourself into much deeper debt. And so that's why, you know, especially at the graduate level, it turns out to be very important that you should be considering, is this graduate degree going to pay off and is it going to enable me to pay off my debt, you know, and it often is. I don't want to say, you know, student debt is always going to be a horrible decision because if you take on $150,000 to get a medical degree, you're probably going to be okay. But, you know, if you take on $150,000 to get a degree in, you know, in the arts, that's that's much less likely that that is going to be a sound financial decision.

Yeah. And let me kind of rephrase kind of the goal that I'm trying to convey here, right? Financial stability is one thing, but let's say it's a race to $1.5 million in net worth at the earliest possible age, right? And I'm trying to back in mathematically to that, right? Just in whatever format, stocks, real estate, whatever, cash, right? and and I'm looking at these degrees. One of the things I'm thinking,

and actually this is creating a new question in my mind as I'm thinking this through, if I am going to get a law degree, if I want to become, it would be worth $1.5 million, it's better to earn $100,000 each year for 15 years than to earn nothing for five years and then $250,000 or $300,000 per year in the final years backing into that

because I'm going to have a big tax burden, right? Like, I'm going to be a much higher tax bracket with that advanced degree in those prime earning years than I would if I kind of spread that out over that journey without that degree, for example. Was that at all factored into your analysis, the kind of the relative tax brackets and the amount of actual net worth that one could theoretically accumulate if they went through these programs at different intervals? That is a great question. And so, you know, all of the earnings that we took into account in this analysis are going to be pre-tax just for the sake of simplicity.

But, you know, you do bring up a great point that it's important for students to consider that, you know, what is my tax bracket going to look like later on in life? And I think it is, you know, kind of strange that, you know, from a tax perspective, if you make $2 million of the course of your life, you're going to be taxed much more if those $2 million are concentrated in some very high earning years at the end of your life. rather than spread out over over over many years, which is kind of a strange quirk of the the income tax system that a that I think it's just it's probably going to be inherent to any income tax system. But you're absolutely right that that is something that students should be considering. Yeah. So I'm going to if I'm going to get a medical degree, I'm going to be paying no tax for eight

to 10 years. And I'm going to be paying a tremendous amount of tax for that. And so that break-even point from a true net worth. contribution is going to get kicked out just a few years from what I would see in your study, which is a layer of complexity that doesn't sound very reasonable to add in. But just something for some potential graduate folks considering this degree to think about as something going on in the background that is going to be impacting the ROI after tax of some of these degrees.

Absolutely. That's something very important, very important to consider. Unfortunately, we didn't incorporate that layer into the analysis. but yes, if you're listening, that is something you should absolutely be thinking about. Awesome. So I think the ideal listener for this episode is somebody who has not yet gone to college. It doesn't really do me much good to look at your degrees and your research would be like, oh, look at that.

I really messed up. I go into college. Like, oh, well, I shouldn't have done this. If I could go back in the way back machine, you know, this would, I shouldn't have got to college. That would have been a better choice. But, you know, going forward, I like Scott's question. And I like that you brought up college debt and student loan debt.

And that made me think about an episode that we recorded a thousand years ago. It released on episode 199 with Debt Ascent. And his blog is called Debt Ascent because they were in $520,000 worth of student loan debt because his wife is a dentist. And she had the majority of it. He's an engineer. She's a dentist. And the majority of their student loan debt was her dental school. and dental school is not cheap at all.

And I just think it's really interesting. Now they're making a combined $400,000 plus per year, and they were able to pay off that debt and have an additional $500,000 in net worth. Your top advanced degree is the dental degree from the University of Colorado. The ROI on that is $10,800,000. Wow.

Which makes that $500,000. thousand dollars in student loan debt seem rather paltry. Yes. Dental school is a bargain. So everybody, go be a dentist. Sometimes when I'm sitting at the dentist, I'm like, who the hell would want to be a dentist? There's just like, no one wants to be there all day. And it's just like, it doesn't seem that fun.

But now I understand why people want to. Yeah, no, every time I'm at the dentist, I think this. Because it's not just people with nice teeth that you get to work on. You have to work on people who are like, I haven't been to the dentist and 47 years. And they're like, okay. That's not, you know, can you be discriminatory as a dentist? You just say, I only want people who brush every day and plus.

I don't, I don't think those are the folks that are going to get the return of $10 million on their dental degree. Yeah. One other question I had here, and a similar to medical degrees, was I know a number of veterinarians. And I've heard from these veterinarians that veterinary school is one of the, you know, the worst ROIs in the entire ecosystem of these types of degrees because the programs are as intensive as a dental or medical degree in many cases and require similar amounts of student loan

debt, but the income potential is very low. Did you do any work with the veterinarian degrees in these studies? Yes, so we didn't break that out specifically, but I can look up veterinary medicine in our table here, which you can look up if you go to ROI.3op.org, you'll be able to see that there's a page there where you can look up the ROI of basically any degree in the country. So let's see. The financial value of a veterinary degree, the top one is from Ohio State University, which has an ROI of almost $2.5 million, you know, Tuskegee University, Texas A&M University, University of Florida, Oklahoma State Universities, these all have veterinary programs with ROI above of 1.5 billion. But if I scroll down towards the end of this, there are also some veterinary

science, veterinary medicine programs that do not have great R2Y. There are none that are outright negative, but there are some that are, you know, in the $300,000, $400,000 range, which is something that you might more associate with a bachelor's degree rather than this supposedly very lucrative professional degree. So I think my answer would be if you're considering being a veterinarian is a career that there's a lot of variation depending on which school you go to. And if you're curious to learn more, we have all the calculations there where you can look them up and find the best school that will suit your needs. Awesome.

I've been operating under the bias that that's one of the worst ROI degrees. And now we can actually look at the data and see that's not, that's not correct. So thank you. Yeah, what was that website again? ROI, what? ROI.3op.org. So r-o-i-f-R-E-O-P-P-R-E-P-R-E-P.org. And so that will take you to a page where you can look at the R-O-I associated with colleges,

graduate schools, or community colleges if you scroll down. And if you look at where it says, we calculated return-on investment for 14,000 graduate degrees, find yours. That'll take you to a searchable table where you can put in any field of study or any university, and you can see our estimates of R.O.I. associated with each of those degrees. So I want to ask a question here, a little tongue in cheek. But if this, you've now produced the most comprehensive analysis on R.O.

For undergraduate and advanced degrees, probably in the world at this point. And what else do you have to do to get a Ph.D.? Like, how hard is it a PhD if you're still in your program? And are you using this as your PhD thesis? You know, I wish I could. It's surprising, but, you know, analysis like this, if there's no fancy econometric technique in there, that it's hard to get published in journals,

so they don't always accept that as a PhD dissertation. But, you know, that's why I think it's important. I think this segues into a nice point where it's much more important to think about what you want your career to be than what you want your school to be. You know, school should be a means to an end, a means to a happy life. And I think a happy life begins with a very fulfilling career. And, you know, I found that, you know, doing this research on higher education,

helping people make better decisions about college and graduate school is a very, very fulfilling use of my time. And I think that the PhD that I'm doing has helped me along the role to that, but it's definitely not the be all or end all of my life. and if I'm, you know, very happy in the career that I've been able to choose. And regardless of whether I can put this into my dissertation or not, I'm happy that it's out there. I don't know what the other PhD candidates are putting out, but this seems useful to me. This should be required reading for anybody who is going into college. Yes. Both of these studies.

And I also just want to bring up the point that, you know, when I started my PhD program, I kind of fell back on the same assumption that I think a lot of people do that higher degrees, more education is always going to lead to higher earnings. And then I did the calculations from my PhD program. And it turned out to be negative, not outrageously negative, but it turned out to be negative. And I think the reason for that is that it's drawing mostly economists, people who have other opportunities that might be fairly lucrative if they didn't go into the PhD. But, yes, it turned out to be not necessarily a great financial investment.

I have a life philosophy of not having regrets, so I don't regret doing it. But I think that if I'd had this information three years ago when I started my PhD program, I might have made a different decision. And so I hope that, you know, this research will also influence other people's decisions later on. I think it's also important to point out that the degree will vary by individual, right? There's going to be variance variation within these degrees. And I will be surprised if your PhD is in economics, right? That's right.

Yeah. I'll be surprised if with the work that you're doing and the passion and the thoroughness with which you do it, that having a doctoral in economics will actually serve you, Preston, very well over the course of your career, because this is stuff that can impact policy in people's lives at the highest level. And having that credential behind you will make it even that much more impressive or more. valuable to folks as I'm sure you update this and maintain the database over time. Preston, I'm sure you're going to drag up the average for your entire PhD program. It's probably going to be profitable by the time you're done.

You're starting to use the mean instead of the median and you'll have it up in no time. Yeah. Well, actually, that's a great point. Are some of these degrees inflated by, you know, like Harvard MBA, is that inflated by the guy who goes out and starts? you know, Facebook. I know he was a dropout, but like one of the, like how, how much are some of these degrees inflated by outliers that are impacting the data to some degree? Yeah. So fortunately, the data that the education department makes available that we used

to do this study, that is based on the median of graduate earnings, not the mean. So fortunately, it's not going to be, the earnings estimates are not going to be dragged up by one crazy outlier. I remember somebody told a story about their geography program at the, I think it was North Carolina State or University of North Carolina, one of them. And the earnings for the geography program were the highest of any major because they were using means. And Michael Jordan had been a geography major. So that's why it's important to use media instead of means, but also why it's important to consider the individual, you know, not necessarily the program. And well, you know, median earnings for each program can be an

important guide to what you think you might earn later on. It is still important to remember that you're still an individual and the median is not necessarily the destiny for your career. That's an awesome story. I love that, Michael Jordan, geology major. Awesome. Well, is there anything else that we should be asking you or any other thoughts that we should explore here for this study? Yeah, so one other thing I wanted to mention about our study is after we produced the estimates for undergraduate ROI, a lot of people wrote to me and said, well, why the heck are biology degrees so low? It turned out that, you know, biology, which is supposedly a hard science, you know, 35% of degrees were negative, and that seemed kind of surprising. And the reason there is that

people will usually use a biology degree as a stepping stone towards a medical degree. And so once you put the ROI of a biology undergraduate degree and a medical graduate degree together, It turns out the ROI for that is close to $1 million. So that's a pretty good investment overall. But if you get the biology degree and then you don't go on to a lucrative graduate degree, the chance that educational pathway is going to pay off is a lot lower. And so to kind of address this question that many people had, we also produce estimates for the kind of lifetime learning ROI of very popular combinations

of bachelor's degrees and graduate degrees. Biology and medicine is one example. But, you know, you also have combinations like, say, political science and law. You know, political science is a degree that does not always pay off at the undergraduate level. But if you combine it with a law degree, then it's going to pay off about $750,000 over your career on average. So it turns out to be much better. So that's, you know, that's a table that you can, if you look at the full paper and scroll down a bit, you can see that table where we have lifetime learning ROI estimates for popular combinations.

of bachelor's student graduate degrees. And if you as a student or you have a child who is considering an advanced degree at some point, that can be useful. That, you know, an undergraduate degree that might not necessarily pay off in its own might be actually kind of lucrative when it's combined with the right graduate degree. So that brings the $10 million question here. What is the best combination for an aspiring dentist? For an aspiring dentist. So I think it's going to be that biology degree again. So the data we use to calculate, you know, what are the most popular accommodations of undergrad and grad degrees. Unfortunately, did not distinguish between medical degrees and dentistry degrees. It kind of lumped them all into

one category. I don't know why. They clearly didn't consult doctors of dentists when they are doing that data, but that's the data we have. That's the data we use. So that $900,000 average, which is the average for biology plus medical graduate degree, that's going to be our estimate for both medical and dentistry degrees. Awesome. Well, I'm glad we asked about another question there. We would have missed that really important linkage between undergraduate and graduate and the combination.

That's impactful there. So thank you for saving us there, Preston. Of course. Are there other areas that we should be exploring here as well beyond that? Yeah. Well, I think I would reiterate that, you know, field of study is really important when we're talking about a master's degrees and, you know, and, you know, advanced degrees. And that, you know, some fields of study are going to pay off much greater than others. But I also kind of want to link back this whole analysis to what we're seeing going on in the news right now.

So there's a big story, you know, about how college enrollment is dropping. Fewer people are going to college. I think that's kind of because of the hot labor market right now. You know, getting a job looks like a better proposition. not necessarily than going to school for four years. But the one place where we're seeing that trend being reversing itself is at the graduate degree level, that enrollments in master's degree programs have kind of shot through the roof in the last two years.

And that is kind of a bit concerning from the standpoint of this research, because the research shows that 40% of master's degrees do not pay off on average. And so if we're seeing this big increase in people going to graduate school for a master's degree, that a lot of people may be disappointed, you know, especially if they're taking on debt to get a master's degree and then not necessarily getting the earnings benefits associated with that. But you can see rationality with that decision, right? Because COVID happens. I'm laid off.

The economy is not doing great. I don't have any counterfactual earnings in those first six months or a year of COVID, right? the decision there, you know, seems more, you know, it's a logical decision to then enroll in grad school. No one, you know, I don't think could have predicted, hey, everything's going to bounce back right, like, so hard in 2021 and early 2020 here from an economy standpoint, an availability of jobs, right? So you can, I think you're right to be, to be concerned about that, and whether a lot of those degrees will, in fact, pay off. But it doesn't mean that a lot of these folks made a bad decision at the time, right? And that's a perfectly logical thing.

Yeah, that's a great point. And, you know, I think it, you know, it gets back to the issue of, you know, what are the various, what are the various opportunity costs? What are the various options available to you? And, you know, if you get laid off from your job, you know, school, you know, graduate school or college can seem like a pathway to increase your financial security. I just worry about when people assume that that degree is going to guarantee you financial security for life. because the evidence shows that that's not necessarily going to happen all the time. And when the default assumption becomes, you know, if I'm experiencing tough economic times, the definite answer must be to get another degree. I think people will often be disappointed with that decision. Now, let's go back to the undergraduate degree. You said enrollment's beginning to drop a little bit. Is that a volume and a rate component?

Like just less high school seniors right now? So enrollments dropping, or is it less lower percentage of high school seniors are enrolling in college? It's both. So enrollments are dropping in both kind of absolute and relative terms. So we have a lower percentage of high school seniors enrolling in college. And we also have a college enrollments dropping in absolute terms, you know, that there are just fewer numbers of students on campus. And we also see adult learners, people who do not necessarily graduate from college just a couple months ago. to graduate from my school a couple months ago,

but people who might want to go back to college for another degree later on in their lives, though their enrollments are also dropping. But that's all confined to the undergraduate level. Again, at the graduate level, those trends are reversing themselves. So I'm about to make a bet, you know, assuming that my wife and I start a family

in the next year or two, and it's going to be a very expensive bet, if I'm wrong on this, but I believe that college education is going to be much less expensive in real dollars, maybe not inflation adjusted, maybe not when you, you know, nominal dollars after inflation, in 15, 20 years when any future children I have will go to college. And I believe that for a number of reasons. Partially, I think the research like yours will

prove out majors that are not economical, and demand will shrink for those, as will cost. I think that college education is being really inflated by the availability, the cost of college education is being inflated by the availability of debt, which can, you know, now anyone can go to a degree from college with a lifetime loan, essentially, on that. And I think that that is going to change, either that will get forgiven, or it will become less available over the next couple of decades. Either way, that will lead to a reduction in future accessibility of college debt, in my opinion, for many students downstream. And that combination, less debt. And that combination, and less and more understanding of the ROI of these degrees, I think will lead to lower costs

for college in general. And so this is a 20-year outlook. I can't possibly know if I'll be right or not, but I'm choosing not to, I will almost certainly choose not to put money into a 529 plan or similar college dedicated savings program and instead build wealth in a general sense to give optionality if future children do, in fact, decide to go to college for that. Do you have any long-term predictions for this industry or thoughts like that? Or would you challenge mine? Sure. Well, let's start with the short-term predictions and then build out from there to the long-term predictions.

So 2021 was the first year, basically, in three decades, that college tuition actually dropped in real terms. So before, for the last three decades since basically the late 1980s, college tuition has risen above the rate of inflation year after year after year after year after year. And if you have children in high school, I'm sure this is not going to be news to you. But in 2021, that trend reversed itself and tuition actually dropped in real terms. Part of that was higher inflation, but part of that was also that, you know, colleges were actually cutting their their tuitions. And I think a big reason for that is what you'll live.

alluded to, you know, that demand for higher education was dropping and colleges realized, wait a minute, we can't just keep raising tuition year after year. If students are not going to be, if students are not going to our schools anymore, we're going to need to cut tuition in order to lure them back. So how does this, you know, extrapolate out to the longer term? I think that a big factor right now in today's reduction in tuition is the very strong labor market that might not, that might not continue forever. I certainly hope that it does. You know, strong labor markets make all sorts of wonderful things happen in the economy. So I hope that we continue to have a strong labor market. But that's not that. That might not be the case forever. If we have another recession, we might

see that trend reverse itself and college enrollment start to rise again. But as to, what is this going to look like 15 or 20 years from now? I think that the knowledge, as you alluded to, definitely is settling in among students that, you know, college is not always a golden ticket, that it depends just as much as what kind of degree am I getting as opposed to, you know, am I getting a degree and that different degrees are going to be worth vastly different amounts in terms of, in terms of their financial value. I think that that realization is going to have drive students to be a little bit more discerning, a little bit more considering about whether they decide to pursue a college education. I certainly hope so. And that might exert a moderating

influence on tuition prices if there's no longer this belief that college is always going to be a golden ticket. I certainly hope that's going to be the case. That's the optimistic case, which I think you also laid out. But I may be proven wrong, so we'll see. Do you have any thoughts on the federal student loan debt and how that may be impacting prices as well? Yes. So I do worry that if there is a large-scale cancellation of student loan debt, colleges might take that as a signal to start raising their prices again. And so the reason is that if the government can cancel student loan debt, I don't think it can credibly say that we're only going to cancel student loan debt once, because we are still issuing almost $100 billion in new federal student

loans every single year. And if we continue with business as usual, even if we cancel debt, student debt is going to be back up to $1.6 trillion in the matter of a decade, just a little more than a decade. And so what kind of expectations is this going to create for students and colleges? If the government can cancel student debt, then colleges can kind of credibly whisper into students' ears, you know, it's okay if you take out some more debt because, you know, the government's probably going to forgive it later on. And so I do worry about the kind of moral hazard effect that this creates. If we have a cancellation of debt, but we don't necessarily have any kind of restrictions on new lending if we just continue with the student loan program business as usual.

Colleges might take that as a signal that it's okay to raise prices because taxpayers are eventually going to pay for it. Yeah, well, that's where I'm thinking, and now we're getting the realm of politics, so I don't want to go too far down this road. But you wonder if you cancel student loan debt, if there's a forced cancellation of future issuing of student loan debt or heavy restrictions that are placed on it. And so that's what I think is going to happen over the next couple, the next decade or two. is either there will be a cancellation event or there will be,

and then corresponding restrictions on future issuing a student loan debt, that will make it much harder to get loans for unprofitable degrees in particular, or there will just be more restrictions on getting student loan debt for unprofitable degrees without that cancellation event. So I just think one of those two combinations is, to me, seems inevitable to some degree. I don't know if you agree, but that's kind of how I'm, that's influencing my thinking on. on saving for potential future college.

Yes. So I think there is kind of bipartisan recognition in Congress that the student loans program does need to be reined in somewhat. That we are funding a lot of degrees of questionable value. And we're not sure if, you know, whether taxpayers should actually be, you know, writing a blank check for these degrees. And so I think that they're, both parties have proposed

in recent years, you know, comprehensive overhauls of the Higher Education Act, that's the main federal law that governs federal support for higher education. Comprehensive overhauls that do include some restrictions on new lending, which is mainly going to take the form of, you know, if you're operating a program that has a loan repayment rate that's too low, if students are not earning enough to pay back their debts, then the government's going to turn off the spigot of that program. You say, you know, these outcomes are clearly not on par with what we expect from a federally funded program, so we're just we're going to turn off the spigot.

You can't get any more money from the federal government. Those bills have so far gone nowhere because I think that the Republican and Democratic parties are very far apart on other aspects of higher education policy that have made it very difficult for a compromise on, you know, accountability for federally funded programs to actually get over the finish line. So I certainly hope that there are going to be, you know, there's going to be some accountability, some restrictions on new lending for programs of, you know, questionable value. But the politics of it might just make that impossible.

You're phenomenal. This was a great discussion. And we thought of everything, as Dave mentioned earlier. So that was really, it's been a really fun discussion. And I've learned a tremendous amount here today. Mindy and Dave, do you have anything else to ask here? No, this is great. Thank you so much, Preston.

As usual, you know, very enlightening conversation. Thank you. I appreciate the opportunity to come on and just nerd out with you all. I'm sorry, interrupted, Mindy. Go ahead. No, I was going to say, I appreciate you coming back on again. What's your next topic of research? So our next topic of research is looking, basically looking into how this this R.O. data can be used to affect public policy. So, you know, as I mentioned, you know, there is bipartisan interest in kind of an accountability system for institutions of higher education that are receiving federal funding. And I think that, you know, ROI can be a good metric to judge programs on whether they're providing value to students. And for the government to say, you know,

if we're going to be funding these programs, what kind of R.R. Why should we be expecting? You know, how much leeway we do we want to give them. So that's kind of the next avenue of research is using the data we've created as part of this R.R.R. project to say, what are the lessons for public policy? Awesome. I'm excited. I hope that your research has some impact, because It is absurd that some of these programs continue to be funded. Yeah. Or that it's absurd that students can continue to take out massive student loans on some of these programs, which are absurd to begin with.

I certainly agree. Preston, this was so much fun. I love talking to you all the time. When you do a real estate one, let us know because Dave can prick your brain on real estate. Any topic he's got you covered. All right. Yeah. Like he's out of mind.

Thank you again for inviting me back on. Oh, thank you so much for doing the research because this is fascinating, but I don't want to do the work. I just want to talk to you. Okay, Preston. We'll talk to you soon. Talk to you soon. Take care. Okay, that was the impressive Preston Cooper.

I love him so much. Like Dave said in the intro, I hope he doesn't think that we're fawning over him too much and get uncomfortable. But wow, he's so impressive. His big brain. It's taking all of that information. He thought of everything. Was I fanboying too hard? I think we all were.

So hopefully he comes back. Of course he'll come back. I love him. He will come back. He reached out to me. He's like, hey, I finished my research. I'm like, great. When can we get you on?

I'm super excited to have him on the show because I think it's really, really important to have this information. Now, he is also getting a higher level degree. And he said, my degree turns out to have a negative RRI. Maybe I would have made a different decision. Maybe not. It would have been nice to have this information, but I didn't at the time. So I made the best choice with the information that I have.

Anybody who is listening now who has people in their life who are thinking about going to college need to listen to episode 251 if they have not yet gone through their undergrad program. And they need to listen to this episode and encourage their college age family to listen to this as well. Because it's so important. Sometimes the school that you choose is important more than what you're studying. and sometimes what you're studying is really important. And if you don't know what to study, maybe going to college isn't the right choice at this time. Yeah.

I think it's a really extremely valuable work. I think he is, you know, in my opinion, a thought leader in this space for sure at this point with his exhaustive data set. He's able to translate the story that these numbers are telling and the exceptions and logically kind of think through all of these different paths and has a genuine enthusiasm for understanding the truth of what's going on in. in terms of college ROI and is creating a really valuable product for individuals. And I hope, you know, that he has a chance to have his voice heard at the policy level. This is the kind of person that we need influencing those policy decisions. He has really thoughtful ideas on how to make things better for society with his research. So really impressive guy.

And I can't wait to follow. I can't wait to see what comes next in his career and what other pieces of thought leadership he'll produce over time. Absolutely. I just think it's super helpful to think about what, like, if you're listening to the show and planning your financial future and thinking about maybe investing in real estate or investing in the stock market, I really like the part where we were talking about, you know, when you make money and if you should go to school quickly, because if you think about the time value of money, you're investing for a long term. It really does matter, like, when you go to your graduate program, when you earn that money. Scott, you asked a great question about taxes. And I think while Preston has provided a really valuable data set for people, it's not just so cut and dry where you can say this will be good for me or not good for me. If you're planning to invest and to be an active, you know, to be an active investor, you can

come up with creative ways to make your graduate degree or college supplement your investing career and supplement your investing ambitions. it doesn't have to be one way or another. Love it. Well, Mindy, Dave, should we get out of here? Yes, we should. We threw out a lot of links today. They can all be found at biggerpockets.com

slash money show 293 from episode 293 of the Bigger Pockets Money Show. That first guy is Dave Meyer. And if you like this episode, you will love his new podcast on the market. Available wherever you get your podcast. The other guy is Scott Trent. You already know him. And I am Indy Jensen saying chop, chop, chop. while we pop.