Is a college education worth it?
Education is the one thing that every Indian saves for in their lifetime. For everyone, it seems to hold the key to prosperity. So, whether it is a lower income household that wants to make sure their kids break out of the poverty trap, or the middle class that dreams of a good job for their child or even the upwardly mobile set that wants to send their kids overseas, education is the salvation. However, college education costs so much that either the parents give up their lives to save up for it, or young adults take on a loan that they end up paying for a long time.
Whether you are considering it for yourself or for your kids, you would agree that a college education is quite expensive nowadays. But the question you need to consider is whether the degrees are worth the heartache. I just know that given it’s one of the biggest goals in most financial plans, it might be worth thinking about, a little more.
What do degrees cost? The numbers
According to research conducted by the good folks at BigDecisions, a four-year undergraduate course in the US, like engineering is likely to cost about US$50,000 per annum or INR 30 lakhs a year, in just course fees and stay. That makes it US$200,000 or INR 1.2 crores at today’s prices. While there is a wide range depending on college, lifestyle chosen etc, these figures give you an idea of how expensive degrees can be.
In the case of post-graduate courses, you have to also consider the ‘opportunity cost’ of not working for a couple of years while in middle management. While Indians may believe they don’t have to deal with opportunity cost, give the tendency of jumping into an MBA straight after an undergraduate degree. I think the MBA will be wasted on someone without a few years’ work experience, you’re only really collecting a qualification rather than a real education.
What’s the likely pay-off?
Again, let’s start with the numbers from BigDecisions. let’s assume the student who paid US$200,000 for the engineering degree in the example earlier, got a starting salary of say US$90,000 per annum in the US and saved, approximately US$20,000 per year, it will take 10 years just to recover the cost of education.
My view is that in this era, 10 years is a long time… chances are that the degree would have become obsolete! So you really need to also add in the cost of ongoing professional development. Alternatively, you will need to keep doing additional new courses to up-skill yourself.
Anyhow, the degree is only good to get you in the door. If you have a good degree from a good college, you are likely to be picked up at campus placements and therefore, off to a good career start. Even here, the degree, and good scores will only get you an audience with the interview panel, you will need personality to get through the placement interviews.
My personal life experience is one without a degree…well actually I did my degree by correspondence so I do have the degree, just not the experience of having attended a good college. But with a bit of chutzpah, as they call it, I was able to get a break in the industry I wanted.
Do they really matter?
At this point, most of my friends chime in to say that the real pay-off of an Ivy League education is the alumni network. You really can’t put a price to this and I agree!So let me get back to a framework that I use… see if it suits you; if not, find another one.
I see the purpose of a college education to acquire knowledge/skills, and also a signal to potential employers. It is possible to acquire the knowledge/skills through online or part-time courses also. Unfortunately, online courses vary in quality and therefore, seem to be rated a little low in signaling your capabilities to your potential employers or employers
Similarly, you can acquire networks through social or professional circles rather than just college alumni although this may take longer.
So there is a trade-off between getting the knowledge and network quickly and systematically, versus acquiring them on your own over time. Apart from time, the issue with the latter approach is the ‘signaling value’ to employers. You may have to prove yourself more before employers believe you have the skills.