Four Years of Wages Versus Four Years of Debt, the Apprenticeship Math

There are two ways to spend the four years after high school, and one of them comes with a paycheck. Think about how strange it is that this needs saying. We built an entire national culture around the one that comes with a bill.

I am not here to run down college. A degree is the right door for a great many people, and I will name the cases where it clearly wins. I am here to put two columns of numbers side by side, because for generations we have talked about the second column as if the first one did not exist. Every guidance counselor knows the college column by heart. Far fewer can recite the apprenticeship column, which is understandable, since the apprenticeship column has no glossy viewbook and no a cappella group. So let's do the arithmetic, slowly, with the work shown.

One warning before we start, and I mean it. Everything with a dollar sign in the worked example below is a labelled hypothetical. The figures are round numbers I chose so the arithmetic is easy to follow. They are not government statistics, and I am not going to pretend they are. After the example I will tell you which official sources to use to replace my round numbers with real ones.

Define the terms

A registered apprenticeship is a program recognised by the U.S. Department of Labor or a state apprenticeship agency, under the National Apprenticeship Act of 1937. It has four features that distinguish it from a job or a class: the apprentice is paid from day one; the apprentice learns on the job from an experienced worker; the apprentice also takes related technical instruction, classroom learning tied to the trade; and the pay rises in steps as skills grow, ending in a nationally recognised credential. A typical program in a skilled trade runs several years. A common benchmark is about 2,000 hours of on-the-job work a year and roughly 144 hours of classroom instruction a year, but programs differ, and the trade sets the length.

A degree path, for this post, means a four-year bachelor's degree at a public institution paid for in part with federal student loans. A Direct Unsubsidized Loan for an undergraduate is a federal loan whose interest starts accruing the day it is paid out, including while the student is in school. The interest rate is fixed for the life of each loan, and the rate for new loans is reset each year under a formula in federal law. Annual and total borrowing limits apply to undergraduates, and a dependent undergraduate's lifetime cap on these loans has long been in the low thirty-thousand-dollar range, with parents able to borrow separately.

The worked example (a hypothetical)

Meet two eighteen-year-olds, Ava and Ben. They are not real people, and the numbers are not real statistics. They are a way to show the machinery.

Column one: Ben, the apprentice

Ben joins a four-year apprenticeship in an electrical trade. Suppose, hypothetically, that a fully trained journeyworker in his area earns $30 an hour. A typical apprenticeship pays a percentage of the journeyworker's wage, rising each year. Suppose Ben's schedule is:

• Year 1: 50 percent, which is $15 an hour
• Year 2: 60 percent, which is $18 an hour
• Year 3: 70 percent, which is $21 an hour
• Year 4: 80 percent, which is $24 an hour

At 2,000 working hours a year, his earnings by year are:

• Year 1: $15 × 2,000 = $30,000
• Year 2: $18 × 2,000 = $36,000
• Year 3: $21 × 2,000 = $42,000
• Year 4: $24 × 2,000 = $48,000

Total earned over four years: $30,000 + $36,000 + $42,000 + $48,000 = $156,000. Student debt: $0. At the end of year four he is a credentialed journeyworker, and in this hypothetical his wage jumps to the full $30 an hour, which at 2,000 hours is $60,000 a year.

Column two: Ava, the degree student

Ava enrols in a four-year public university. Suppose, hypothetically, that the cost she must cover each year, tuition, fees, housing, food and books after grants, is $10,000, and that she borrows all of it in unsubsidized federal loans at a fixed 6.5 percent. (I am using a round number, and a family should check the actual rate and limits at the federal student aid site.) To keep this simple, she earns nothing during the four years. In reality many students work part time and some earn real money in summers, and I will give them credit in a minute.

The interest accrues from the day each loan is paid. Using simple interest, and not counting capitalisation, which would make it slightly worse:

• Loan taken at the start of year 1 accrues 4 years of interest: $10,000 × 0.065 × 4 = $2,600
• Year 2 loan, 3 years: $10,000 × 0.065 × 3 = $1,950
• Year 3 loan, 2 years: $10,000 × 0.065 × 2 = $1,300
• Year 4 loan, 1 year: $10,000 × 0.065 × 1 = $650

Interest accrued by graduation: $2,600 + $1,950 + $1,300 + $650 = $6,500. The balance on graduation day is $40,000 in principal plus $6,500 in interest, or $46,500.

Spread over a standard ten-year repayment at 6.5 percent, the monthly payment on $46,500 works out to about $528. Multiply by 120 months: about $63,360, paid back on $40,000 borrowed. Say it plainly: in this hypothetical, Ava will pay about $63,000 over ten years for the privilege of the first four.

Suppose she graduates into a job paying a hypothetical $55,000 a year. Her monthly loan payment, about $528, is about $6,336 a year, which is roughly 11.5 percent of her pay before taxes.

The two columns side by side

Now the gap. Ben is $156,000 ahead in earnings and $46,500 ahead in debt, a swing of $202,500, if you add the two (and I show that sum only to illustrate the size of the swing, because the figures are hypothetical). In year five he earns more than Ava and keeps all of it.

This is a hypothetical, and I want to say what I did to make it fair and what I did that was unfair.

What I did to favor Ava. I gave her the same first-year pay as a modest professional job, and I assumed she finishes in four years, which is not true for a large share of students.

What I did to favor Ben. I assumed the apprenticeship was available, that he completed it, that hours were steady, and that his pay steps were generous. In real life the trades have layoffs, slow seasons and injuries, and not every apprentice who starts finishes. I also assumed Ava had no income for four years, which is not realistic for a student who works summers and weekends.

I invite you to rerun it with real numbers. The Bureau of Labor Statistics publishes median annual pay for electricians, plumbers and dozens of other trades in its Occupational Outlook Handbook, along with what the typical entry route is and how fast the field is expected to grow. The Department of Labor's apprenticeship rules explain the structure of a registered program, and the National Center for Education Statistics publishes the average published price of tuition and fees for public and private colleges. Federal Student Aid publishes the current loan interest rates and limits. Put those four sources together, and you can build the same table for your own family.

Where the degree still wins

Honesty requires this section, and I do not think it weakens the argument. It sharpens it.

1. Some careers require a degree, and there is no apprenticeship route. Engineers, nurses, teachers, physicians, lawyers, pharmacists and accountants all need degrees and licences that run through colleges. For these, the question is not "degree or apprenticeship" but "how do I pay for the degree without drowning."
2. Some degrees pay a lot, and the premium can be large. In the fields where employers pay for a credential, a degree can return many times its cost over a career. A student headed for one of them should go and not feel guilty.
3. A degree is portable. It opens doors across industries and across a career's changes. A trade is a deep skill, but it is a specific one, and a worker who wants to move into management or a different field may find the credential helps.
4. The physical demands of a trade are real. A job that is rewarding at twenty-two may be hard at fifty-five. Many tradespeople move into estimating, supervision, inspection, teaching or running their own business, and that is a good path, but it should be planned for.
5. Some people want the college experience for its own sake. The ideas, the books, the friendships, the years of intellectual exploration. A free society should not look down on that, and a family that can afford it without ruinous debt can choose it gladly.

The honest summary is not "college bad, trades good." It is: the question should be asked, and the numbers should be run, before a family signs anything. Too many families skip the first step.

Why the system tilts the other way

If the numbers are this interesting, why does everybody talk about college? Three reasons, and I say them with affection for the people involved.

The incentives. Guidance counselors are measured in part by college-going rates. High schools advertise their college acceptances on the wall. Colleges, which recruit heavily, employ admissions offices with budgets. Apprenticeship sponsors, by contrast, are small employers and union training committees with no advertising department. The side with the megaphone wins the conversation, and the other side is busy up a ladder.

The money. Federal student loans exist for colleges. There is no equivalent federal program that pays a young person's living expenses during an apprenticeship, because the employer pays the wages. A system that subsidises one path with cheap credit and leaves the other to the market will tend to produce more of the first. That is not a conspiracy; it is a price signal. I take up the price signal of student credit in Grad PLUS Was a Blank Check for Graduate School, and Here Is the Proof.

The status. For a generation, "going to college" has been the mark of a successful child, and "going into the trades" has been treated as a consolation prize. That attitude is a mistake and an insult to the people who build, wire and repair a civilization. The country runs on electricians, plumbers and welders. Try holding a town meeting without light or running water.

What the other countries do

Other advanced economies treat the trades as a first-rank route. Germany and Switzerland run large, employer-based apprenticeship systems that start in the teens and carry social prestige. I tell that story, including what does and does not transfer to America, in German and Swiss Apprenticeships Compared With the American Path. The lesson is not that we should copy a foreign system wholesale. The lesson is that a rich country can treat a skilled trade as an honourable first choice.

The Founding angle

The Founders had a high regard for the useful arts and for work. Benjamin Franklin began as a printer's apprentice, which is part of the public record of his life, and the apprenticeship was the standard way a young man learned a craft in colonial America. The idea that a young person learns by working beside a master is older than the republic, and it is a conservative one: it trusts families, employers and local institutions over distant planners, and it rewards effort and responsibility.

That is why the question belongs in a conservative's thinking. It is a matter of liberty, in the sense that a young person should know all of the doors, and of fiscal responsibility, in the sense that the government should not push every family through the most expensive one. For the story of how education policy was meant to serve that kind of practical learning, see Lincoln, Justin Morrill and the Land Grant That Built the State University.

What the coverage leaves out

Read a typical article about "the cost of college" and you will find a lot of pity for borrowers and very little curiosity about alternatives. The framing is that a degree is the default and the question is how to make it affordable. The question of whether a teenager should be on that path at all is the one nobody asks. A better article would run the two columns side by side, as I have done, and let the reader decide.

I would also notice what the arithmetic says about "student debt relief." If a policy forgives a balance, it does nothing for Ben, who never borrowed, and it asks Ben, as a taxpayer, to help pay Ava's. A conservative can say that gently but plainly: the person who chose the debt-free path should not be taxed to subsidise the one who took on debt, particularly when the second may out-earn him in the long run. The court fight over that question is in Biden v. Nebraska and the Limits of a Secretary's Power to Cancel Debt.

A fair warning about the apprenticeship column

Apprenticeships are not easy to enter. Slots in many trades are limited, aptitude tests and interviews are competitive, and not every employer sponsors. A teenager who wants one should start early, as a later post in this series, How a Teenager Finds a Registered Apprenticeship, Step by Step, explains. The numbers in my table do not matter if a young person cannot find an opening, and the most useful thing a parent can do is help the teenager look.

The case in brief

1. A registered apprenticeship pays from day one, teaches on the job, adds classroom instruction, raises pay in steps and ends in a recognised credential, under rules that trace to the National Apprenticeship Act of 1937.
2. In a labelled hypothetical, a four-year apprentice earns $156,000 with no debt, while a degree student borrows $40,000, owes $46,500 at graduation, and repays about $63,000 over ten years at 6.5 percent.
3. The hypothetical flatters neither side perfectly, and a family should rerun it with Bureau of Labor Statistics pay data, National Center for Education Statistics prices and current federal loan terms.
4. A degree still wins for careers that require one, for high-paying fields, for portability, and for people who value the education itself.
5. The system tilts toward college because of counselors' incentives, federal loan subsidies and social status, not because the numbers say so.

What you can do: this week, look up the median pay for one trade in the Bureau of Labor Statistics Occupational Outlook Handbook and the published price of one college, and write both numbers on the same page.