Which Is Better 4 Years Working At Walmart or 4 Years of College?

I decided to have some fun with numbers here. I recently watched a Tiktok where this young doctor explained how she ended up with $600,000 of student loan debt.  She broke it down with 100% of college costs and living expenses for 8 years being covered by student loans.  After running the numbers I realized that my son who works at Walmart and just bought a home is in a much better financial position today than she will be in a decade from now as a doctor. Her late 20s, and all of her 30s will be a major financial struggle.  I questioned how this would pan out for someone earning just a bachelors degree.

This is a comparison of two people Steve and Jessica.  They both graduate from High School in May and have 2 very different plans.

Steve is going to work at Walmart as a full time grocery pickup attendant.  He will earn $17/hour or $34,000 per year.  He is going to live at home with his parents for 4 years and then move out into his own place.  During this 4 years he will put 50% of his income into his Roth 401K and save another 25% for the down payment on his future home. His parents encourage this decision because, honestly, Steve isn’t an all star student and staying at home for 4 years is much more convenient than them having to try to finance any large college expenses. Steve takes out the trash, mows the yard, and picks up after himself.

Jessica is going to move across the state and go to her dream school, University of Michigan.  She, like most college students is not planning to work while going to school.  Her parents have too many assets for her to qualify for financial aid, but they will not fund her college, but she is able to come live at home during summer break.  She also has neglected to apply for scholarships because I mean who besides athletes actually gets them? (her thinking not mine!).  She decides to take out student loans for her entire college.

Steve decides to never seek a promotion and to never work overtime.  He works the same job for his entire career.  He receives a 2% each year.  Once he moves out of his parents house he drops his 401K to 6% just to get the match.

Jessica attends college and her first 2 years with room and board and a basic meal plan cost $32,000 each.  Her 3rd and 4th year cost $34,000 each.  Her student loans are all at 6% interest. Jessica beats the odds and is able to graduate on time in 4 years (only 33% of students accomplish this!)

Jessica enters the workforce and finds a job right away.  She earns the median starting salary for people with a bachelors degree in Michigan, which is $50,000 per year.  Her total Student Loan debt is $152,000. uh oh!  Jessica will get raises that outpace Steve, she will get an average 4% raise per year.  Jessica repays her student loans on a 20 year amortization with $1,100 a month payments.  She is scraping to get by, but manages to also contribute 6% of her income to her retirement account to also get a full 6% match from her employer.

(Scroll to the bottom for spreadsheets!)

Retirement Accounts:

Remember how Steve front loaded his retirement accounts while living at home for 4 years?  How’s that working out for him?  I put all returns at an averaged annualized 8% gain for both Steve and Jessica.

• At age 25 he has a total account value of $151,000,  Jessica’s is at $30,000.
• At age 30 Steve is at $254,000, while Jessica’s hits $93,000.
• At age 35 Steve is at $408,000 while Jessica is at $195,000
• At age 42 Steve is at $759,000 while Jessica is at $446,000. This is surprising because Steve is earning under $55,000 a year, while Jessica is earning double at $109,000 per year.
• At 55 Steve is at $2.2 Million while Jessica is at $1.6 million.
• At 65 Steve is at $5 million while Jessica is at $3.8 million.  Steve has contributed a total of $223,540 with $161,881 in matching funds over his career.   Jessica has contributed $346,239 with $346,239 matching and despite her and her employer contributing much more over her career, Jessica can’t make up for the 4 years of heavy savings Steve did early on.

She will never catch up unless she invests a larger percentage of her income. What’s really interesting is that Steve could stop saving for retirement all together at age 32, and would still have more money than Jessica at age 65. ($3.9M Vs. $3.8M) If Steve never saved a dime beyond his first 4 years of front loading his savings, he would hit $1 Million at age 52 and $2.8 Million at age 65.   

Lesson: Get that first $100,000 invested as fast as possible!

Home Buying:

• Working for 2 solid years is a major requirement for buying a home.
• Having a cash down payment is another requirement.
• One more requirement is meeting a 33% total debt to income ratio

In addition to the 50% Steve saved in his 401K Steve also saved 25% of his pay for 4 years while living at home to go towards a home purchase.  That amounted to $35,000. Having no expenses allowed him to save the majority of his income.  At age 22 he can put down $35,000 for a 20% down payment on a $175,000 home. The $140,000 mortgage payment at 6% on a 30 year is $839 a month and he can afford $1,100 a month.  Splendid, he’s a home owner at 22!

Jessica is in a different boat. She doesn’t have the 2 years of work experience needed until age 24, but even then with $54,000 of earnings and $1,100 in student loan debt payments, she could only afford a $400 a month mortgage payment. She has to wait 7 years longer than Steve to buy a home of the same price range, and by then she is earning $65,000 a year.

As an additional note, what if the difference in when they bought a home greatly affected affordability?  Just look at the last 5 years.  The same house that was $175,000 in 2018 on a 4% interest rate costs $300,000 in 2023 with a 7.5% interest rate. That’s a monthly payment on a 30 year mortgage of $668 and $1,678 if both put down 20% down payments of $35,000 and $60,000 respectively.  That’s $1,000 more per month for the same house!

Would Jessica even at age 29 be able to have a down payment saved up?  She is earning $65,000 a year and still has $112,000 in student loans.  The likelihood she has saved up $60,000, or even an apples to apples comparison of $35,000 is slim to none.  It is more likely she will only put down the minimum 3.5%, which would limit her to a smaller total purchase price.

Lesson: Student loans greatly inhibit the ability to buy a home!

Kids:

Steve only works 40 hours a week and has ZERO job stress.  He is able to stay physically fit and is a home owner in his early 20s.  He has a high net worth for his age and location and is therefore highly desirable by Women. It is not unreasonable for him to start a family in his early to mid 20s. Steve and his wife will be young energetic parents.

Jessica is saddled in student loan debt and can’t buy a home until she is in her early 30s.  She wants a man that out earns her, but people with college degrees tend to out earn those without and Women make up 57% of college graduates. Jessica also doesn’t want to stay at home with babies, she has a career to forge! Jessica starts family formation in her late 30s. She is an older mom and likely will have only 1 child. She doesn’t have the energy she had in her 20s and early 30s and is tired all the time.

Lesson: With an albatross of 6 figures of student loan debt, buying a college degree greatly delays home and family formation, as the ROI for college if it exists at all is 15+ years out. This is very dangerous for Women, the primary customers of colleges, as they have a biological clock that expires around age 42 for having children.  

Income:

To be honest I think I was very conservative with wage increases for Steve at 2% per year and very liberal with Jessica with wage increases of 4% per year. It is far more likely that Jessica’s income would have peaked at around $75,000 to $80,000. In this example she is earning $100,000 at age 40 and $220,000 at age 60. Walmart does a base raise for employees of 2% per year. The assumption is that Jessica earned a useful degree in a STEM field.  If she went to college for photography or Women’s Studies her earnings will probably plateau below the average starting salary for college graduates.

Lesson: Raises might not compound as quickly as expected, and many careers plateau. 

College ROI Isn’t There For Most:

I’ve been saying this for over a decade now, The ROI on college is negative for most people.  Even without debt applied, the deadweight loss of starting your career 4 years later AND paying a total of $100K to $150K for a degree for a job that earns $50K is insanity. When you stack up the added force of living at home for 4 years with no expenses and front loading retirement savings, someone who purchases a college degree can not keep up with someone working a good entry level job.

My parents went to college in the early 80s.  It certainly wasn’t easy, especially when my older sister came along. I am not taking away from their struggle or that of anyone who attended college in that time frame.  I want to use this point in history as a pivot point for the ROI of college.  When my parents went to college there was a clear positive ROI for graduating with a Bachelor’s degree. In 1981 if you wanted to increase your earning power, graduating from college was an affordable, realistic option for anyone willing to trade 4 years of their time and put in the effort.

I believe my dad had a full ride scholarship, but if he did not, In State tuition and fees, at Ohio State University in 1981 were $494.  Room and board was $740.  In 1981 the total cost of this 4 year degree was $4,936. Inflation adjusted this is $17,403 for the full cost of an in state Bachelor’s degree in today’s dollars.  The Average starting salary for a college graduate in 1981 was $17,118, making the total cost of the degree 29% of the average starting pay.

Today an in state school costs $125,000 for a degree that will get a job earning $50,000 a year.  This makes the degree 250% of the average starting pay.  The math simply doesn’t math. A child is far better off working while living at home and getting $100,000 invested over 4 years.

Lesson: College costs have outpaced inflation and wages to such a degree that college is NOT a reasonable option to get ahead financially for most people.  

How To Make College More Affordable:

1. Attend a community college for the first 2 years and work while in school.  Earnings from a part time job can cover the cost of attending community college, especially if living at home.  My local community college costs a total of $5,200 a year.  The sticker price per year at state school was $32,000.  2 years at community college reduces the total cost of a 4 year degree by $53,600.

2. Work: A student who works part time (full time hours in the summer) who earns $10,000 a year can cash flow the first 2 years of community college and pay $10,000 per year for the final 2 years, greatly reducing the total debt burden.

3.Apply for Scholarships and Financial Aid: The average FAFSA grant is $4,600 per year (and this includes the community college years!  The average scholarship award is $6,041 per year.  Apply for every scholarship.  The average student doesn’t apply for any scholarships, while those who do typically only apply to a small handful.  Apply to dozens of scholarships.

4. Rent a room in a 4 bedroom apartment vs. single dorm.  Rather than paying the full price for room and board, renting a room can cut the retail price in half.

Totals:

• Sticker Price: $125,000
• Community College: – $53,000
• FAFSA: – $18,000
• Scholarships: – $24,000
• Room + Board savings 2 yrs: -$10,000
• Remaining Cost to Student: $20,000
• Student pay with summer earnings: $20,000
• Loans needed: $0.

5. Or Just Work At Walmart:  I know, I already said to work at Walmart, but Walmart also has over 70 free college programs.  You can earn a real bachelors degree with Walmart paying every cent of it.  BOOM! That saves every dime of the sticker price. Rather than $132,000 total cost $0 total cost.

Even if we can make the total cost of college $0, it still disregards the opportunity cost of 4 years of lost earnings.  This is the real kicker.  The 4 years of earnings paired with no expenses due to living at home AND investing the majority of it,  makes the real difference.

Data Comparison

Here is the data of each of their earnings, debt, and retirement accounts.

Conclusion:

Working at Walmart can indeed be a better option than going to a 4 year college.  Walmart has free college courses, a great 401K match, and an affordable healthcare plan.  This option also only works if the young adult actually saves their money.  It has to be a requirement that to live at home without having to pay rent or bills, then 50% of income must go into retirement accounts and at least 10% towards saving for a home purchase.

The push to send our kids to college is a cruel setup. Pushing them to go to college, encouraging them to go to college, and allowing them to go to college is often too big of a financial mistake for them to recover from.  The College Industrial Complex is designed to bankrupt our children as well as to brainwash them.  Having our kids waste the most energetic 4 years of their adult life earning no money and building up a 6 figure bottomless pit of debt is not a good path.  Add in that the majority of degrees have no market value whatsoever, and we have a perfect recipe for 2 to 3 decades of financial struggle.  We need to opt out.

Please check out the book The Case Against Education It’s a great read.