Can the Value of a College Degree Really Be Measured So Easily?
/Questioning the Value of Higher Education
You can do anything, as long as you get a good education.
How often in our lives have we heard – or even said – those words? The “school is important” notion was drilled into our heads at such a young age and repeated so often throughout our youth that most of us just accepted it as one of those undeniable truths.
We grew up listening to stories about people who rose from a life of poverty to become successful and influential – all because they made great sacrifices to get an education. Even though the actual words may not have been spoken, these stories all implanted the same messages in our minds: A good education is priceless. Stay in school, no matter the cost.
Now that the people of this nation have accumulated over 900 billion dollars in student loan debt[1] and realized that even an advanced degree is no guarantee of a job in today’s competitive world, we’re starting to rethink this philosophy. Maybe we do need to assign a value to a college degree, after all. But, that brings about another problem. How do we put a valuation on something that was previously considered to be priceless?
Measuring the ROI
Many analysts are trying to use a return-on-investment approach to measure the economic value of a college degree.[2] To calculate this ROI, they’re taking the amount of money it costs to obtain a degree from a particular university and subtracting it from the expected lifetime (or 30-year) earnings of a graduate from that institution. This amount is then compared to the expected earnings of a typical high school graduate with no college degree over the same time period.
As an example, according to data provided by Payscale.com, it costs $189,300 to obtain a degree from MIT and the 30-year net return for graduates is $1,796,000. Well, that doesn’t sound too shabby at all, but if you look at some other schools on the list, you might come across a few shockers. For instance, Shaw University of North Carolina has a $98,730 total cost to graduate and the 30-year net return for graduates is only $8,583.[3]
Is this measurement important? Extremely – especially if you’re trying to determine how much debt you’re willing to incur to attend a certain school. Is it the only thing you should consider? In my opinion, there are lots of other factors that should be taken into account. However, many of these are tough, if not virtually impossible, to measure.
More Than Just the Numbers
Traditionally, universities have offered experiences that aren’t easily achievable via other outlets, such as the opportunity to be exposed to new ideas and cultures without having to completely step out of our own comfort zones. As the entire world continues to become more connected through the Internet and other means, this physical exposure to new cultures is going to be more important than ever before. If we truly want to make the world a better place (we do still want to do that, right?), we need to better understand all the people who live in it.
can you put a monetary value on your favorite book?
Along the same lines, college gives us a chance to make a smoother transition between the small worlds we do know to the big world we don’t. Granted, the difficulty of this transition can vary tremendously from one person to the next but for many, one of the biggest lessons learned during those four years of college is that we really didn’t understand the way the world works quite as much as we thought we did. We also learn that’s okay – that we don’t have to know it all. Different isn't a synonym for wrong.
It’s hard to give concrete examples of this and the other ways education changes us, because it is so different for each individual. Sometimes, I try to relate it to buying a book. How do you calculate the ROI of reading a book? If the book costs $20 and teaches you how to do XYZ so you don’t have to pay someone else $500 to do XYZ for you, then you could say that the book had a net ROI of $480. But, what if it’s just a novel you enjoyed reading or one that inspired you to think about life in a different way?
Since you didn’t receive a direct monetary gain from reading the novel, does that mean it’s worthless – or that it actually has a negative ROI when you factor in the price of the book? Of course not. A college degree is like a collection of both types of books. Some of the pieces in that collection have values that are easily measurable and some just don’t.
Overall Value Is Subjective
It may have sounded like I was leading up to a conclusion of stating I believe education still should be considered priceless, but that’s not quite the case. I do think it’s important to analyze the quantifiable benefits and to use that information to help determine your own education goals. But, I also think it’s a big mistake to treat the pursuit of a college degree as a business investment that’s only measured by cold, hard numbers. There really is a difference between value and cost – and the former can only be determined by you.
References
[1] “Quarterly Report on Household Debt and Credit.” Federal Reserve Bank of New York Research and Statistics Group. August 2012. Retrieved September 20, 2012 from http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q22012.pdf.
[2] Di Meglio, Francesca. “College: Big Investment, Paltry Return.” Bloomberg Businessweek. June 28, 2010. Retrieved September 19, 2012 from http://www.businessweek.com/stories/2010-06-28/college-big-investment-paltry-returnbusinessweek-business-news-stock-market-and-financial-advice.
[3] “What’s Your College Degree Worth?” Bloomberg Businessweek. Retrieved September 19, 2012 from http://www.businessweek.com/interactive_reports/bs_collegeROI_0621.html.
