Question

Trying to think through the following:

Between 1980 and 2012, tuition increased by 270-300% in real dollars. Does this mean college is now a worse investment than it was in 1980?

It would seem that if the return to education increased by the same amount, it would be the same investment, and if it didn't track - if the return to education didn't also increase by 270-300% in real dollars, it would mean that college is now a worse investment. Is it that simple?

Answer 1

As per law of demand, other things being equal if demand for good or service is more as compared to its supply, then price of that good or service increases and vice- versa also holds true. This can be applied to the enormous rise in tuition from 1980 to 2012. This can be called as a case of supply and artificially inflated demand. The students today can easily get educational loans. As a result the chance of attending college have provided colleges with a glut of applications. On the other hand supply of these educational institutions have not increased to the same extent as it requires huge infrastructural facilities like building, transport, classroom and other facilities. Also, the fees charged by these institutions have also increased manifold due to rising prices in 2012 as compared to 1980.

No, It will not be right to say that If return to the education is also to the same extent as compared to the investment then college is worst investment. The value of college degree cannot be quantified. Skills acquired during college education like working with teams, general skills, social skills, good working habits, learning and independence cannot be quantified in terms of Return on Investment (ROI).

A college degree gives you an edge in market and lowers the chances of unemployment. But there are other factors also. Earning a MBA, computer science or other prestigious degree from reputed college will increase your chances of securing high paid job. Also, with your personal hard work and good performance, you can increase your income.This means your return on investments has unlimited potential.