By Dr Asit K Barma, Professor, IFIM Business School
The consumer price index (CPI) of education in India was 152.5 in June 2019. This means it had increased by about 52.5 per cent for the education sector since 2012. Commonfund Institute in the US introduced a measure called the Higher Education Price Index (HEPI) to indicate the inflation rate applicable to the Higher Education sector in the United States. Considered to be a more effective indicator of change in cost incurred in Universities in the US, HEPI is used to estimate the future budget required to maintain the purchasing power. Whatever measures be used, India has thereby witnessed a steep rise in the cost of higher education over the last decade. A report by InsideIIM (2019) compares various B Schools in terms of the students’ average payback period calculated based on the average CTC data from the placements reports. IIM Ahmedabad, Bangalore and Calcutta have a payback period of 537 days, 488 days, and 472 days, respectively. For XLRI Jamshedpur and ISB, the same stand at 587 and 892 days, respectively.
The new age that sees a new generation of consumers (gen Z, a resurgent rural economy), new technologies (AI, Machine Learning, Cloud, higher computing power and internet bandwidth), and new business rules, like the sharing economy and reverse-urbanization, has changed the nature of work today. The traditional curriculum and pedagogy do not provide you with the right arsenal to fight on this new turf. This gets further complicated with disruptive phenomena like COVID 19. Several studies show how the quality of graduates from higher educational institutes has waned overtimes. All these have resulted in graduates struggling to find a job of their choice. Back in the eighties and before that, expense on education was an integral part of life itself, and measuring a return on the same was unthinkable. But today, education is regarded as an investment with a lot of time, resources, emotional energy, and money being spent on it, with the aspiration of a better career. India is second only to China today in terms of the number of students studying abroad. As per a 2019 report released by the Indian Ministry of External Affairs, 753,000 Indian students were studying abroad. No wonder, RoI in higher education today merits due diligence.
COVID 19 pandemic has changed the paradigm of academic delivery. We woke up to the realities of the virtual or blended mode of learning. Many are questioning the relevance of traditional long term campus-based education. Many institutes are offering individualized learning through a bespoke curriculum and self-paced learning. For example, you may wish to complete several short-duration certifications, and later on transfer the earned credits to shorten your graduation cycle. This brings a significant impact on the RoI.
Now, let us look at the dimensions of RoI in a higher education institute. The dimensions are captured in two categories, investment and outcome, as it is done in a typical RoI calculation. The dimensions and items are as follows:
1. Cost of Education: The cost of education includes the tuition fees charged by the institute, cost of course materials and accessories, hostel fees, boarding and other expenses.
2. Cost of Debt: Once you start earning, your repayment of debts begins. You need to therefore factor the interest rates, repayment terms and the lending institution to balance your debt repayment with the desired living standard.
3. Duration and format of the Course: Your cost of education depends on the total duration of the course. Is there any online component that may not warrant you to stay at the hostel?
4. Opportunity Cost: In case you are leaving your job for higher education, the lost income during your study needs to be factored.
1. CTC, type of career, role and location: Does the institute offer placement services? What is the average CTC? Which is your domain of choice? The likely location of work is also important to factor cost of living into your consideration.
2. Lifetime earning potential: Getting your dream job on your graduation alone is not enough. Do the skills you build in the institute make you bulletproof for years to come, riding the disruptive waves of change? Does the institute help you become future-ready?
3. Recognition of the institute: Must ensure the institute has the required recognitions from AICTE and such statutory bodies. International accreditation like AACSB, EQUIS, AMBA becomes very important today to ensure the quality of academic input as well as getting more accepted abroad. The institute brand is extremely important. Can you shout from the rooftop being a student from this institute?
4. Alumni Network: Look at the alumni network of the institute. Do you take pride in being there?
So what’s the conclusion? To me, RoI is just a number, and the interpretation can go wrong without considering the above dimensions.