Price is what you pay; value is what you get.

Warren Buffett

Warren Buffett learned it from Ben Graham and said it about stocks, but it holds for college: price is what you pay, value is what you get. In my experience, most families fixate on price, the tuition, the room and board, the sticker shock of four years. Far fewer ask whether the degree will return more than it costs, including the wages a student gives up while paying for it.

The consensus says yes: lower unemployment, higher pay, better prospects. But the lifetime-earnings version of that case leaves out two things any serious financial analysis includes. The first is the time value of money. A dollar earned forty years from now is not worth a dollar today. The second is taxes. Graduates earn more and keep a smaller share of each additional dollar.

Put both back in, take out four years of attendance costs, and the picture inverts. The raw lifetime wage advantage in my model, about 1.07 million dollars, collapses once you discount it to today’s dollars and subtract taxes. For the median graduate paying the full cost of attendance, that advantage becomes a deficit of roughly 82,000 dollars. At the median net cost after aid, the deficit narrows to about 17,500 dollars. Not a smaller gain. A loss.

That does not mean no degree is worth it. It means the answer depends on your skills, your school, your field, and your price. Some degrees are exceptional investments. Many are not.

This is drawn from Chapter 3 of the book. Read the full math in the book, or run your own numbers in the model.

Companion Pieces

• Compared to What?
• College Is a Bet, and No One Shows You Your Odds
• How the numbers are calculated in this breakdown.
• Is College Worth It? The argument in full