Is the cost of education an expense or investment: A Brief Analysis


Considering a student studies for around 20 years and calculating an average cost of Rs. 100,000 per year as the cost of education, a student spends almost 20 lacs in his education. Well, this is just an average cost, in some cases, only a 2-year post-graduation costs more than 25 lacs. A student spends his parent’s hard-earned money in education expecting to get a decent job after completion of education. If he gets a good job, then the money spent can be called an investment otherwise it becomes an expense. In this post let us analyze whether the cost of education in India is an expense or an investment.

For someone who wants to start a business, he requires a minimum capital investment with a bit of risk to gain profit after a certain period. Education now has become the same which requires the expenditure of capital and a bit of risk. Why risk? Because the competition among students has increased so much and chances of employment in good companies have reduced. The lack of good opportunities is forcing students to go abroad. For example: even after studying in a top university like Anna University, thousands of students from there apply for Anna University Transcript, medium of instruction certificate, and other documents so that they can study abroad.

Is seriously there a lack of opportunity after graduating from India?

The recent report says 160 students from IITs got a salary package worth over Rs. 1 crore in the first phase of campus placement. The semester fees of these students are approx. Rs. 150,000. If we calculate the return on investment (ROI), then it is a whopping 1000% ROI. And flipping the side, private universities charge around Rs. 1,000,000 for their engineering courses and the average package they provide is 3 lac in bulk-hiring of some premium IT companies. So ROI here is less than even 50%. And another report says 57% of graduates are unemployable, and most of them don’t ever get a job. So for them, ROI is zero. So seeing the variation, we find ROI ranges from 0 to 1000 percent.

The worst part is less than 50% of students get back what they have spent in education. And the rest of the opportunities are taken by students from top universities. It is the same as the top 10% of India’s richest people control 50% of India’s economy. Even when we can see 1000% ROI, it is for a fraction of students only.

Now, if a student wants to study abroad, the cost of education will be multiplied many fold. But there are chances that the ROI will also be high. Considering the example above, a student from Anna University wants to go abroad for further studies. He contacted Worldwide Transcripts for his medium of instruction certificate and Anna university transcript. He applied for a Master’s degree in the US, got a job there and is working on a decent package now. And if a student studies abroad then the chances of placement are much, much higher than that in India. And therefore ROI on education abroad is justifiable.

So is the cost of education an expense or investment?

If a person spends 20 lacs on any business, there is a great probability that it will turn out to be profitable at some point in time. But the same cannot be said for education. Especially in India where a student first completes a diploma, then a degree then masters, and ultimately go for a starting small business. Let us leave aside IITs and IIMs and talk about the scenario of an average student. IT is the biggest industry that employs the largest number of students per year and the salary package that is being offered is less than even 1st-year college fees. Therefore the cost of education shouldn’t be considered an investment, at least in India.

If you have a clearly defined dream, if you are sure what your goals are, you know the path and how to achieve it, then you do not need to worry about the cost of education as an expense or investment. As long as you enjoy the process of learning and move towards fulfilling your dreams, you will be satisfied, happy and successful.

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