For many families, it’s the biggest investment they’ll ever make. Yet despite its weightiness, the value of the investment itself can’t be tracked in the daily newspapers or on a yearly property tax bill from the local assessor’s office. Still, the decision of where — and whether — to send kids to college is arguably one of the most pivotal financial choices that any family can undertake together.
In part, that’s because the inflation-adjusted cost of a post-secondary degree has skyrocketed over the last three decades. Theories abound about why college costs have risen so much faster than overall consumer prices. No single explanation fits in all cases, but labor-intensive industries such as education tend to get less benefit from productivity-enhancing technologies.
As the joke goes, how do you get a string quartet to work cheaper? You ask them to play faster. For a more consequential analysis, see Cornell University economics professor Ronald Ehrenberg’s paper on the subject.
Given the importance of higher education — the nation’s unemployment rate for those with only a high school diploma is about double that for college grads — it’s imperative to invest wisely.
At PayScale.com, you’ll find rankings of nearly 1,500 U.S. colleges and universities derived from the annualized return on investment of their graduates, both with and without financial aid. Results are broken down by region, type, gender and major field of study. Notably, the wide range of ROIs generated (roughly low double-digits to near zero) reflect the same differential in returns that investors in traditional assets such as stocks and bonds might expect given varying skill levels.
Of course, post-secondary education is about more than financial investment. It’s also about developing personal and critical thinking skills that never become outdated. Plus, it’s often the best four years in anyone’s life, regardless of locale.
But as countless college grads might tell you, then comes the hard part.