Is It Really Worth $200,000 to Graduate from a Private University?

I recently learned that it would cost me $200,000 to graduate from my Alma mater. It made me wonder if the cost was worth it.

I recently went to look up a year of tuition at my Alma matter.  I was shocked to see that yearly tuition had risen to nearly $50,000 per year.  THAT'S RIGHT, $50,000 PER YEAR!  So a four year education from this private university would cost an individual almost $200,000.

$200,000 is a lot of money.  At a 10% compounding interest rate it would grow to $1.6 million in 21 years.  Even today, someone could seed a decent business with the money. 

I remember my college days and most undergraduates spent more time thinking about getting naked and drinking beer than they did about serious academic studying.  Hey, I'm not criticizing, just pointing out my perception.  I get my alumni bulletin and I can see that more money is spent on upgrading gyms, campus centers, athletic fields, etc. than on educational initiatives.  It's because most students aren't there to learn, they are there to have fun.  They're 18, free of the home, and ready to meet others.  Society and parents allow it because of the belief that students are being educated and that their private school diploma will open doors and increase their future incomes.  But is that true?  Is a private college/university education economically worth it?

I searched the web and found an excellent analysis done by the Robertson Education Empowerment Foundation (http://www.aboutreef.org/is-college-worth-it.html), a non-profit started by Michael Robertson, the founder of MP3.  They write:

"These numbers indicate that a college education is an extremely poor economic investment for private universities and while better for public institutions still poses a meager return when compared to typical investments. To put this another way, most financial planners expect a 7-8% annual return. If you proposed to them a 40 year investment with expected yields of 2-4% on average they would most surely recommend against it. Making matters worse the numbers used for this calculation use average salaries for men. Since average women salaries are less college is even a poorer investment for females."

Now, there is no doubt that there is some societal value in a university education.  Graduates are supposedly more knowledgeable about the world, better citizens, and broader thinkers.  But do you need to shell out $200,000 to achieve this?  Wouldn't taking $20,000 and traveling the world for six months accomplish the same, if not more? 

I'll also concede that if you get into a  top-tier private university the price might be worth it.  Those schools have extensive alumni networks that can help you in the future.  You may also be an outstanding prodigy who really needs to go to a top university to gain access to the best academics and experts in your field - think physics, music, math, literature, etc. 

Since I graduated I've taken a pretty normal path.  I make a pretty good salary but I'm not sure that I couldn't have achieved the same things by going to a state school and saving a ton of money.  Money that I could have used to start a business, buy a second home, etc. 

What about you?  Do you think your private college education was worth it?  Is it worth it?  I'm curious to know what others think. 

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • Anonymous

    June 30, 2007

    I don't think it is worth it at all. It is one of the biggest rip offs of our times. It was that even when you were in school. At these prices, plus living expenses, it is rediculous. But, we go on paying these prices. Did you know that prices at colleges and universities go up twice the inflation rate at a miniumum each year.

  • Anonymous

    July 01, 2007

    I agree that it is not worth it. But, while it may not be worth it from any rational perspective, perception differs from reality. Everybody wants the best for their children and for themselves (there is a certain cache from saying that your child goes to a Harvard, Yale or even an Emory that cannot be matched by saying that your child goes to UMass or UofGeorgia). Costs are constantly rising greater than inflation but the supply and demand equations are still out of balance (the numbers of qualified kids applying to these programs completely outstrips supply).

    I will write shortly about the process of trying to get my daughter into preschool in Manhattan and the costs of these schools - and it makes the entire private college education thing looks rational and financially worthwhile.

  • Anonymous

    July 12, 2007

    Not worth it IMHO. I know people from State schools that do just as well as the graduates from private schools, if not better. In the South and West, State schools are perceived as good if not better than private schools. Of course, they're getting expensive also.

    I think middle class enrollment from these schools will start to drop as more and more people do the analysis.

  • Anonymous

    July 12, 2007

    For your undergraduate degree, it is important to go to one of the better state school and get good grades. For professional schools, it is worth shelling out the big bucks but only if you can get into a Harvard, Yale, Stanford, Columbia or Chicago. Otherwise, that too, is a waste of money.

  • Anonymous

    July 12, 2007

    @RobMinton Where are your statistics to back up your assertion. The only data I see is that the return for private school education is very low. Lower than most of the rates shown on this site.

    I know many, many people who went to fancy, expensive liberal arts schools to get degrees in English, Psychology, Child Development, etc. and their lucky to be making $45,000 a year. I think they could be doing just as well if they had gone to a less expensive state school, or even a two year college.

  • Anonymous

    July 16, 2007

    Interesting discussion. I'd have to agree that the cost of private education has become prohibitive to most families. The private schools are going to have to justify their increases and its value in the future or face more questions like the ones posed in this article.

  • Terry

    May 19, 2009

    My son got into very prestigious liberal arts colleges and Dartmouth. He is going to U Mass honors program because we don't have the $ and he doesn't want well over $100,000 worth of debt. I know lots of families who put leans on their homes and max out their credit to put a prestigious bumper sticker on their car. I think it is all propaganda by the private colleges. If they can get parents to pay almost a 1/4 mil to educate their child good for them, after all it is a money making business.

  • daniel

    February 05, 2010

    Yes, the price is rediculous, but in todays age, financial aid is incredible at private schools for students who wouldnt be able to afford it otherwise. I applied to 6 different schools and only SMU was a private school. I ended up going to SMU because thats what cost me the LEAST. Not UT, A&M, or any other school could have given me the scholarships and grants I have now. I agree the sticker price on a private university is rediculous, but that's where the endowments are also. Just a thought.

  • Anonymous

    December 12, 2010

    It's RIDICULOUS, not rediculous!

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