Testing Out: How to "Moneyball" Your Way to a Debt-Free College Degree

Editor's Note: This is a guest post from Jay Cross. This appears on The Art of Manliness webpage. Hyperlinks are available there.

THIS ARTICLE's FIRST PART WAS STARTED LAST WEEK or go to the NPO Website for the entire article.  Under Resources/Forms/links. 

The "Moneyball" Approach to Cutting College Costs

     Here's a useful analogy for how testing out fits into the overall picture of your college career.

     Think about Billy Beane, GM of Major League Baseball's Oakland Athletics (and the protagonist of Moneyball.) Back in 2002, Beane knew the A's could only spend a fraction of what richer teams like the Yankees had on hand.

So instead of trying to copy those clubs, Beane figured out a brand new way to build a baseball team.

     Oakland used cutting-edge statistical analysis to find "misfits" - players who were overweight, or threw the ball side-armed, or couldn't run quickly - and constructed its entire roster with them. The other teams laughed, but here's the best part: the A's wanted their bargain-priced "misfits" even more than the stars they couldn't afford.

These oddball players had undervalued talents that led to scoring runs and winning games. Most importantly, they were cheap.

     The Yankees - and all the teams attempting to emulate them - were asking, "How can we buy the biggest stars?"

The A's asked a totally different question: "How can we buy WINS (and runs, the building blocks of wins) for pennies on the dollar?" Beane didn't care who his individual players were as long as the team was winning.

     2002 was the perfect season to compare these approaches because the Yankees and A's each won 103 games. The breathtaking difference? New York spent $1.5 million per win. Oakland, using their unique approach, spent just $250,000.

Here is a cost-per-credit analysis I created using average tuition figures at public and private four-year universities, as well as the cost of earning a "test-out" degree:

     Sources: CollegeBoard and DIY Degree

Testing out is a "Moneyball" approach to higher education. "Cost per credit" is to college what "cost per win" is to baseball: the number you want to intelligently optimize. In college as in baseball, the way to win an unfair game is by taking a new approach to get the same results more efficiently.

Why You Should Look at College Like an Investment

If this post makes it sound like you're "Frankensteining" your education, cobbling various exams and credit sources together to form a degree...you're right. That's exactly what I'm advocating.

     This might seem strange at first, but I encourage you to look at it differently.

Why do we see college as this magical guarantee of financial success? It's because of these oft-cited studies on how much more graduates earn over their lifetimes than non-grads. We hear sweeping statements ("people with bachelor's degrees earn $1 million more!") and assume that it MUST be a great investment, no matter what it costs.

Actually, we don't just assume it - we're explicitly told that it's true:

"Over a lifetime, the gap in earning potential between a high-school diploma and a bachelor of arts is more than $800,000. In other words, whatever sacrifices you and your child make for [a] college education in the short term are more than repaid in the long term." 

     That's from CollegeBoard, the organization that makes the SATs. They're basically telling you to just pay whatever a degree costs.

It's horrible advice.

     You don't make huge financial decisions with simplistic rules like "whatever sacrifices you make are worth it in the long-term." How is that any different than telling you to shoot first and ask questions later? No - you make huge financial decisions is by running the numbers.

     Which brings us back to these studies on college graduate earnings. They aren't "wrong," but they are misleading.

     Here's why: earning a higher income doesn't automatically mean you're getting ahead. You can earn $20,000/year before college, get a $60,000/year job afterwards, and still be no better off. If you spend $100,000 for a degree (and take four years off of work to do it) you have incurred a huge financial and opportunity cost.

You took out a loan against your future earnings which must now be repaid over five, ten, maybe even fifteen or twenty years. Even then, once all the loans are repaid and you've earned back all the income you lost by not working, guess what? All you have done is break even!

     You're back at square one. Finally, after years of repaying loans and interest, you can start actually benefiting from the higher income you earned your degree for. Most college students don't realize that this is what they've agreed to until after they graduate. They just see college as a magical guarantee of financial success. Yet whether they realize it or not, their student loans often chain them to a life of indentured servitude.

The return on an investment is inversely proportional to the time and money invested. In plain English: the longer it takes you to graduate, and the more you pay, the less valuable your degree ultimately is.

Testing Out Actually Delivers What Colleges Falsely Promise

Fortunately, the reverse is also true. The less time it takes you to graduate, and the less you pay for your degree, the more valuable it is.

By testing out, you are doing what so many students never do. You're being strategic. You're treating your degree as an investment, rather than a collegiate shopping spree. You're being efficient by extracting the most value for the least cost.

Consequently, you actually will reap the rewards of higher postgraduate income. Since you didn't take years off or incur costly loans, all of that extra money goes straight into your pocket.

     If you are struggling to figure out how to afford college, I hope the test-out strategy is a breath of fresh air and a new lease on academic life. Please leave any questions in the comments. I'm happy to help anyone who needs it!

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Jay Cross runs DIY Degree and helps students learn more, spend less, and graduate faster. His college acceleration strategies have been covered by Fox Business, Huffington Post, Popular Mechanics, Brazen Careerist, The Personal MBA, and I Will Teach You To Be Rich.

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