The ROI on That Sheepskin

Colleges are a bit like funeral homes. Talking about getting your money’s worth strikes some as a little crass.

But overcharging people is crass, too. College demands an increasingly big chunk of change, and the returns aren’t necessarily there. Writing recently in The Wall Street Journal, Jack Hough lined up a number of experts to dispute a claim by President Obama that college is a great investment. Hough pointed out that “tuition and fees have increased 184% in 20 years after accounting for inflation, but wages for college grads have risen just 9%, according to Labor Department data.” Moreover, sites such as PayScale indicate that some students end up with a flat-out negative return on tuition investment.

“Mr. Obama’s investment tip is well-intentioned,” Hough wrote, “but in college as on Wall Street, returns aren’t guaranteed.”

Peter Drucker thought about education all his life. He also, as we’ve pointed out a number of times, thought a lot about paying for it. One of his most extensive considerations of the topic was in Landmarks of Tomorrow, first published in 1957, at a time when tuition was already on the rise.

“The educator usually distrusts economic discussion of education,” Drucker noted. “He points out with reason that individual excellence, knowledge and responsibility, rather than goods and services, are the ‘products’ of education.”

But Drucker countered that this was not an excuse to stop thinking in terms of return on investment. “We cannot afford education that does not make the individual a bigger, a better, a more dedicated or a more excellent—that means, a more productive—person,” he wrote. “Whatever does not add to the capacity for sustained growth of personality or contribution is impractical—and may indeed be deleterious. That this or that subject adds to a man’s ability to get a job, or to do well on his first job, is not irrelevant.”

Also, while Drucker believed in the value of student loans, calling it “equitable to expect the graduate to repay, in dollars over the years, the cost of his education,” he, too, may have blanched at the debt burden borne by recent college graduates scraping by at or near minimum wage. As he asserted, “A free society will not finance education by indentured labor.”

What do think: Has a college education ceased to provide a reasonable return on investment? Why?