At SuperScholar, we encourage the love of learning and seeing education as more than a commodity. But if education is for you only a commodity — in other words, if it’s only a springboard to a high paying job that will allow you to live a life of comfort compared to your friends who only finished high school — you might want to think again.

Eric Fry, an investment counselor, has a fascinating article on this very issue at THE DAILY RECKONING (go here for the article). In it he compares two students, Ernie and Bill. Ernie takes the money that was saved for his college education and, instead of going to college, invests it in a mutual fund that tracks the stock market. Bill takes the same amount of money and puts it toward his college education.

Given the loans Bill must take out to finish college and then the time after college to pay them off, Bill doesn’t get to invest in the same mutual fund as Ernie until much later. Sure, Bill’s salary ends up more than Ernie’s, but if both are putting in 5% of their income each year in the fund, Ernie ends up with $1.3 milliion at retirement, Bill with $450,000 less.

Why is college less and less of a good investment? According to Fry, the problem is a “college bubble” created years ago by a government sponsored loan organization known as Sallie Mae (Student Loan Marketing Association, founded in 1972). By making it possible for students to get ever-increasing amounts of government backed loans, school have been able to charge more and more. As Fry puts it,

Were it not for Sallie Mae, aspiring college graduates could never have borrowed far more money than they could ever hope to repay; universities could never have begun to believe that they are worth what they charge; professors could never have obtained their coddled lifestyles and the cost of a college education could never have appreciated well beyond any connection to its true economic value.

Fry’s article contains some astounding statistics. Perhaps the most striking graph is the following, which shows just how far beyond ordinary inflation rates the cost of education has risen:

Education vs. Consumer Price Index vs. Cost of Homes

The article concludes with this piece of advice from a Manhattan acquaintance of Fry’s: “Hey it’s gonna cost me $250,000 to send my kid to an Ivy League school. I’d rather just use the money to buy him a business, and let him figure it out in the real world.”

There are schools that provide a solid education at much lower costs than those addressed by Fry in his article. Some of these take an entirely no frills approach (no school athletics, no fancy cafeteria fare, etc.). Look for coming articles here at SuperScholar on how to get the best bang for your buck when you go off to college.