Trade careers (think plumbing, coding, electrical engineering) can come with good salaries, mobility, flexibility, security, and lower student debt. Karen Carr Brady, CFP®, takes a closer look at why Grownups may benefit from technical education and trade jobs.
Over the past few decades, trade schools have gotten a bad rap, with many Grownups believing a four-year degree is the only path to career success. But is this a myth? What if trade jobs were a smart (even really smart) financial decision?
Let’s consider the landscape. For one, higher education has a PR problem: The student loan crisis is being dubbed the next mortgage bubble. A lawsuit against the country’s largest student loan servicer, Navient, is underway, and increasingly troubling reports are emerging about loans designed to fail and the predatory practices of for-profit universities.
Underlying this PR problem is that myth we mentioned earlier: Despite the turmoil, it stills feels like a four-year degree is the only way to get ahead. The Wall Street Journal reported “some 70 percent of employers told surveyors … that they screen entry-level applicants’ resumes for bachelor’s degrees.”
Despite education requirements, employers also reported high turnover of employees who feel overqualified for entry-level gigs. There’s an inherent mismatch between the role’s requirements and the actual skills needed to do the jobs, which leaves a lot of recent grads thinking, “Did I really go to college for this?”
So how do we tackle the myth—and what alternatives to college are out there?
Should You Go to Trade School?
One alternative to a traditional four-year degree is MissionU, a one-year technical training program that is completely tuition free. Once graduates from the program land a job with a salary of $50,000 or more, 15 percent of that salary is paid back to the program for three years. Those payments help pay for the next class of MissionU students.
The school’s founder, Adam Braun, explains, “We believe that institutions should invest in their students, rather than vice versa, and that ultimately we should only be successful if our students are successful.” MissionU offers a “skill- and career-focused curriculum” that was built with insights from partners like Warby Parker, Spotify, and Lyft, in mind.
Let’s take a closer look at the numbers. MissionU targets job placements where grads will earn an average annual salary of $70,000. This means that $10,500 (15 percent) will be paid back to the program annually for three years. This grad is left with a salary of $59,500. If she lives in Massachusetts, she would take home approximately $3,680 each month. (You can crunch the numbers here.)
How does this stack up against traditional higher ed? The average graduate of the class of 2016 has slightly more than $37,000 in student loan debt and will earn an average entry level salary of $50,556, according to the National Association of Colleges and Employers. Assuming this new grad is on a standard 10-year repayment plan for his student loans and the interest rate is 3.76 percent (the current direct unsubsidized rate for the 2016-17 academic year), he will pay $370 per month. After taxes and his student loan payment, he is left with $2,840 each month.
With a financial arrangement like MissionU, not only will graduates pay significantly less for their education over a shorter repayment period (seven years, to be exact), but they can also enjoy higher take-home pay during that time. The MissionU program is also only one year, which means grads get out in the workforce sooner and earn more over their lifetimes. Lastly, MissionU has much more downside protection than traditional student loans: If you don’t earn more than $50,000 within seven years of graduation, your obligation to MissionU is forgiven.
Are Technical Education and Trade School Careers Right for You?
Not all technical training programs come with the innovative financial arrangement of MissionU, but benefits still exist: These trade programs typically require a shorter time in school, cost less overall, provide career training over general education, and offer mobility and flexibility.
Technical education and trade school careers allow you to find one area you’re passionate about and dive in head first. You could attend a coding bootcamp at Anyone Can Learn to Code or try classes at home with Code Academy. Research plumbing and electrical apprenticeships in your area. Find a local school that offers training for cosmetology, estheticians, and electrolysis. Take a data science immersive course at General Assembly.
When considering a program:
- Ask about upfront costs and financing opportunities
- Research graduation rates, job placement rates, and the average salary of new grads
- Request to speak with recent grads about their experiences with the program
- Weigh the cost and time spent within the training program with salary expectations.
Can We Change our Perspectives?
A bachelor’s degree didn’t become the gold standard overnight. It will certainly take time for employers, students, and even high school guidance counselors to shift their thinking about higher education and advocate nontraditional options.
If you’ve found an area you’re passionate about, seek the best training possible for a career in that subject, whether that’s with a four-year university or a one-year technical training program. Look beyond each program and consider loans, career prospects, and flexibility. Do your research and determine what’s best for you!
Karen Carr Brady is the founder of Simplie, a financial planning company that offers virtual appointments with CERTIFIED FINANCIAL PLANNER™ professionals. Karen is a former member of the Society of Grownups planning team and is now based in New York City. When she’s not writing about personal finance or meeting with clients, you can find her roaming around NYC looking for the best place to eat.
Any third-party resources or websites referenced above are not under Society of Grownups control. Society of Grownups cannot guarantee and are not responsible for the accuracy of the resources, websites, or any products or services available through such resources or websites.
While Society of Grownups hopes the information is useful, it’s only intended to provide general education. It’s not legal, tax, or investment advice, and may not apply or be useful to your specific financial situation. If you need recommendations geared to your personal financial situation, schedule time with a financial planner.