College - an investment or consumption good, and why the difference could matter

People go to college to learn, form networks, build credentials, and thereby invest in themselves. But, a series of studies by Stacy Dale and Alan Krueger found that going to highly selective colleges (versus a low ranked college) does not matter for most students in terms of their job/wage outcomes. On the other hand, it does matter for minority students and students who come from less educated families. How could this be possible and what is the difference between the two groups? One potential explanation could be social capital. The former group has significant existing social capital via their family and so does fine no matter which college they attend. Their college decisions appear to be more like the purchase of a high brand consumption good. Meanwhile, better colleges provide the latter group an opportunity to build their credentials and social capital necessary to succeed. For them, college is more of an investment.

Does it make sense to have only one model of higher education to deliver these vastly different purposes?

One potential cost of this one-size-fits-all model is demonstrated in this recent study. The authors spend 1 year immersed in a large, public flagship school in the Midwest. They find that some students come to college to essentially party and have a good time (college as consumption), secure in their existing social capital. Another group of students, who do not possess the same social capital, sometimes get caught up in the consumption side of the college experience and under-invest in themselves?

Another implication of college as consumption can perhaps be seen in the rapidly rising cost of a college education. There are surely numerous drivers of college tuition inflation (see Baumol's cost disease), but here is what I have in mind: if a significant portion of students value college as a branded consumption good, it is likely that the price elasticity of demand is quite low, contributing to the rapidly rising cost of college. On the margins, this is changing the cost-benefit analysis for students for whom college is predominantly an investment good. For example, if I simply need a credential to signal to the job market, should I have to spend 4 years and upwards of $200K?

Just as students sit along the investment/consumption demand spectrum for college, it makes sense to think we should have post-secondary options that sit along the spectrum: cheaper options for course content and credentialing; expensive options similar to higher ed options today; and hybrid models in between.