You gotta spend money to make money
Act 2: An investment in knowledge pays the best interest : Benjamin Franklin
Most ambitious students in this country work really hard. And when I say that, I don’t mean students in other countries don’t. However, there is a path that most students aspiring to become doctors, engineers, lawyers, and other high-profile jobs follow. They volunteer for research projects through high school, compete for leadership positions in various societies, study hard through school while sometimes doing jobs, take up extra classes (classes like KUMON) to get ahead of the crowd, study really hard to crack the SATs, write really impressive essays for the college admissions, make a list of colleges to apply to. There is usually a dream list and a safe list. There are various factors to account for while making the list and the most crucial factor is (unless your parents have saved up enough that this no longer matters): TUITION FEE WITH OR WITHOUT FINANCIAL AID.
While writing this, I was looking into the fees for the top ten schools and this is what I found:
Sources: https://www.usnews.com/best-colleges/rankings/national-universities
https://www.collegefactual.com
This table lists the tuition and fees for one year, the average net tuition cost for students receiving financial aid, room and board fees for one year, and the annual net cost for an average student (which was calculated as the total net cost including tuition cost, living expenses and financial aid averaged over all the students, even those not receiving financial aid). If you look at the average net annual cost, Princeton University is the cheapest and best value for money, while Northwestern University is the most expensive. If you consider the net cost for students receiving financial aid, Princeton University is again the cheapest and Duke University is the most expensive. The table also lists the Return Of Investment (ROI) which I calculated as percentage of profit using the average salary and average annual net cost.
According to these sources, the average total cost of a degree to study in the top 10 schools ranges between $156,000 to $210,000 for a 4 year program. The average cost of a degree for international students is of course way more than that. The average starting salary for alumni was between 60 — 82K with the Chicago schools (University of Chicago and Northwestern University) having the lowest starting salary to M.I.T. having the highest starting salary. The ROI is highest for M.I.T. (109%) and Princeton (80%) and lowest for University of Chicago (15%) and Northwestern University (16%).
They say there is no such thing as a free lunch. So the next time, your kids go shopping for colleges, remember to do the maths to get the correct price tag. This is the business model advertised for undergraduate studies and it applies to all the students who graduate and start working.
However, there is an alternative business model: Online learning business model. In this model, the amount you invest would be far less as compared to the tuition fees and in fact some of these courses are offered by the same universities in the top 10 list. However, there is very little information as to how the people with degrees from online learning do on the job front. If it turns out that you can land similar jobs with similar starting salaries, then the ROI for the online learning business model is huge. Coursera offers access to a variety of courses at $400 per year. There are various specialization tracks such as machine learning that you can access for an additional $50 per month. Even if you spent $5000 on online learning, if you end up with a job with a starting salary of $60,000, the ROI would be 1100%. But, that is a huge IF. I am not sure if a 4.0 GPA with online learning with Stanford University courses carries the same weight as a 4.0 GPA from Stanford University. Because, in this society, pedigree matters, brand name matters, the type of model matters be it puppy shopping, purse shopping or car shopping. If you have a Labrador puppy, you get noticed. If you are carrying a Louis Vuitton purse as opposed to a Calvin Klein purse, you get noticed more. If you are driving an Audi R8 vs. Toyota Corolla, you get noticed more. Similarly, if you have a degree certificate from Stanford University as opposed to Coursera (even if it is the same courses), you get noticed more.
Additionally, the downside of online learning is that college education isn’t only about the courses, its about real life experiences, its about growing as an individual, its about learning people negotiations, networking, teamwork, being part of a community, its about introspection, its about being an all-rounded individual. So, in essence, when you are spending $40–50K per year on college education, what are you actually paying for? It’s not just the courses, because you can get the same education at $5K through online learning without having to pay for room and board. You are paying for life coaches, you are paying for the experience (similar to going on a 4 year cruise) and you are paying to sustain the business model of universities built up by the government, by the board members of the university, by the people who have turned education into business. Unfortunately, there is no objective way to include that in the ROI assessment.
Now, what makes one university better than the other? It depends on the programs they have built, the amount of federal money the university can bring in either via research grants, financial aid or scholarships, the type of research they conduct. And the research dollars is dependent on their graduate programs.
Now, there is a section of students who will move on to graduate degrees after undergraduate studies where they earn a stipend. For those students, the ROI is negative because the stipend they earn is far less than the amount they would have spent for their degrees. And in addition, they end up spending 5–8 years working towards their graduate degrees and the starting salaries are not that much higher than what these students would have made had they started working immediately after undergrad. So truly, their ROI is low, really really low. Now, the governments may say, you didn’t actually invest anything during your graduate studies, in fact you were paid a stipend, so you cannot count this towards the total investment. But what about the time invested? Time is money after all! Some people say a lot of Ph.Ds are frustrated. Do you wonder why? Because they feel cheated, cheated by the system, cheated by the government, cheated by the people. Why is there no business model advertised for these graduate programs? Because, there isn’t really one, not for the students anyway. A lot of people end up in these programs, not for business, but for the passion of learning, for the passion of growing and enhancing their skills only to learn at the end that the entire thing is actually a large business and that is when they realize that their ROI is negative. The business model of the graduate programs caters towards the larger university model. The better the research, the stronger their ties to the government, the more the federal grants the faculties can bring in, the better the standing of the university and the higher the cost for undergraduate admissions. So who are the people who stand to gain in this model: the university administration and top officials and the university board members. Who are the puppet masters of this model: the government because they control where the federal money goes and who comes up and who goes down on that list. And who stand to lose in this model: the graduate students, who are merely the soldiers doing the work without any effective gain.
My parents spent about $100–120K for my undergrad education in London, U.K. I was never a fan of spending that much money for a degree but as an international student, there was no financial aid I could apply for. Our university had 70% international students and most of them had no financial aid, so the university really had a highly lucrative business model. Thereafter, I spent close to 10 years in graduate studies in this country with a slightly higher than minimum wage stipend. I ask both the governments and the Presidents of both countries: where is my ROI?
