The Investment Scientist

I was invited to a dinner by a client couple of mine. Their youngest daughter has been accepted to three universities and they are having a hard time picking the right one and they wanted my help. 

Universities A and B are both out-of-state Ivy League universities that cost more than $60k a year in tuition. University C is an in-state university that costs only $15k. I listened to their reasoning as to why it is so hard to make a decision. They really want to give the best to their daughter and besides, an Ivy League university would give them a lot of face (there you know they are a Chinese American family) since their peer families all brag about their children’s academic achievements and they feel pressured to keep up.

Before I said anything, I forewarned them that the choice of university is a very personal one for them and their child so they should take my words only as my observations and not as my professional advice.

First, since universities A and B are four times as expensive as university C, do they provide four times more value? By this I mean, would their child acquire four times as much knowledge or earn four times as much after graduation? (I will get to this point later.) If not, they would be paying the extra just for the bragging rights.

Second, what financial values do they want to impart on their children? That they should borrow money to pay for something they can’t afford just for vanity? Would such a value system not lead to financial ruin for their children down the road?