College seems to get more expensive every day. No, it does get more expensive.

The fees that young people are facing to secure a basic bachelor’s degree continue increasingly to become a challenge.

As this occurs, we are naturally forced to consider the value of education, but it’s difficult to attach monetary worth to it.

Basically, there are two methods to valuing education.

The Boring Way

The first lies in the cost/benefit analysis that I learned how to do in my college Labor Economics class.

Each person has a certain level of preference between long-term returns and short-term returns. This can be quantified by something called a discount rate, which essentially converts the value of something that exists in the future (in this case, monetary returns on education) into a “present value”. Depending on your personal discount rate, this present value will vary.

Now, with college, we hope that whatever premium we earn in our career will be greater than the cost of the education, by a considerable amount. Not only do we consider the monetary cost of college, but also the opportunity cost of the wages we surrender and the general strain and effort assumed by attending college.

In a lot of ways, this is not much different than any other investment, except you’re investing in human capital… yourself no less.

Is investing in yourself more or less risky than other types of investments? Looking at college as financial return on investment assumes that you make the “most” out of college’s revenue generating attributes. What does this mean?

Well all that we have to look at is the average data of those who have gone before us from an impossibly diverse sample of students at an impossible diverse sample of colleges. Did all of them take full advantage? Certainly not.

We like to think that we will take full advantage of the resources available at college, but not all of us will be smart enough or charming enough to make network connections that will shoe you into a great career, and not all the schools we get into (or can afford) carry as much weight as others in the marketplace.

College is just as much a networking opportunity as an educational one. Those who get the “most” out of education come out of college with a strong network of connections who serve as leads, stepping stones, and/or resources to support the next stages of career development.

For a fairly pessimistic view on this method, see Peter Thiel here:

The Better Way

The second method is in the assumption of the intrinsic value of education, and how it improves your quality of life. This assumption is so strong in the United States, that kids are required by law to stay in school until they are (roughly) 18 in order to learn the basic fundamentals of life and the world.

It’s odd though, that we decided that high school was the “required” amount of education to ensure a sufficient degree of knowledge and skill. Why should we calculate any further education as a financial investment? Is that because free education is harder to come by at this level?

Education is no doubt a life-long process, but it is clear that there are many different types that are useful for different reasons.

When considering whether a bachelor’s or master’s or PhD is worth the money, think about the benefits that are transferable throughout life.

In college, are you learning facts and names of smart people or are you learning how to think? Are you learning the things that an institution has decided that you should know or are you obtaining the tools that help you formulate and develop ideas?

Some people can get a great education on their own, but this is a tough and arduous path for anyone. A great part of education comes from the intense intellectual engagement with other people who share interests in certain topics.

This also prepares you for the tasks that you will encounter in the workplace, as a spouse, a parent or as a friend. Education’s foremost goal is to prepare you for life.

Now many institutions and programs are not geared this way. Vocational and technical schools are highly specialized to give you skills you need to do something specific.

The majority of undergraduate programs are focused around improving your money-making potential. They have found over the years that many potential students only use method 1 in calculating the returns to education. This creates a for-profit mentality upon educators that compromises the intrinsic worth of education (method 2).


So what are we left with? Quality schools that return more than a calculable return on investment. Namely, these schools offer transferable skills that prepare you to adapt to shifting labor environments.

Many types of schools fall into this category, and the ones that might not may offer advanced or honors programs that do.

The problem is that these schools tend to be the more expensive options. Mark Cuban is a strong advocate for the Liberal Arts, and I have to say that I agree.

Liberal Arts education has been around for as long as formal education of any type, in fact it is founded in classical and timeless principles such as the Socratic Method.

In this age of information that we are increasingly diving into each day as a globalized and automated world, adaptable skills are more and more valuable. Being able to think for yourself, present and discuss your own ideas within the context of a bigger picture, and write convincingly and thoughtfully will serve you in any situation.

. People who have been trained and primed to work in a single career are finding it difficult to adapt to new jobs when they lose their old one. New companies are jumping up every day and changing the way the world operates.

In order to be on top of change, we need to be able to change ourselves.

When valuing the return to education, make sure to think about it within the context of the time we live in. What kind of education will serve you the best? Maybe if you can tailor your college degree to suit both your needs and the needs of the world, it might just be worth it.