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Higher Education as an Investment

Sigma Investment Counselors

September 17, 2015

By now we are all generally aware that the cost of a four year college degree continues to increase and student loans are a growing problem.  There may also be some greater recognition that an undergraduate college degree is not an automatic ticket to an above average income.

College represents a significant investment of time and money that, in some instances, may not have been fully understood.  Just as many individuals purchased homes that they could not afford, with borrowed money that they could not pay back, some high school graduates have pursued a college education without understanding the long term implications of a sizeable student loan.

It might be helpful to look at a college degree as an investment that will require several years to reach pay back, with uncertainty as to the extent of the return on investment.  Consider the issues involved in building a steel mill.  Like a college degree, careful planning is essential, there is a considerable investment, the elapse of a number of years and uncertainty as to the price and demand for the finished product.

While this analogy is not perfect, college costs may be more affordable if the student has a clear understanding of the costs and objectives.  It is probably not productive to leap into a college commitment without a clear understanding of the type of education being sought and the market value of the degree earned.

There is no rule that says you have to start college as soon as you have graduated from high school.  If you are still considering education alternatives, why not take a break from formal studies and give yourself a chance to better understand your long term goals?  A college education will be much cheaper if you are focused when you start and earn a degree in four years instead of floundering between majors and taking five or six years to finish. 

Instead of going straight to college, take a few years to get some life experience.  Join the Peace Corp, enlist in the military, take an entry level job or participate in a compensated community service project, for example.  Any of these pursuits should provide a better understanding of your long term goals and be substantially self financing.

Alternatively, perhaps one or two years at a community college might be considerably more affordable and provide an opportunity to better assess your long term goals.

None of the foregoing should be construed as a criticism of financially less rewarding vocations.  Life is not about how much money you make, but it is about matching your goals and your resources.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA®

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