The Liquidity of Education: Is Education Actually An Asset?

​An asset is anything of value that can be used to meet an obligation.  According to “Rich Dad, Poor Dad” author Robert Kiyosaki, who happened to coauthored a couple of books with Donald Trump and was an early supporter of the President, an asset is basically an investment that offers a net return that can readily be used to meet obligations.  The conventional definition of an asset includes valuables like houses, cars, and heirlooms; whereas, Mr. Kiyosaki’s definition excludes these valuables, because people need a place to live, cars require continual upkeep, and heirlooms are not things people sell.  When Mr. Kiyosaki first declared a house is not a asset, it was actually quite controversially due to the fact Realtors use the asset paradigm as their main sales pitch.  Whether a house is just a valuable that tends to appreciate in value or an asset depends on what definition is used, but the debate invites further discussion on what other “assets,” such as education, do not actually qualify as assets. 

​An education is often declared a valuable, an asset, and an investment.  Indeed, one of the most important selling points for all educational institution is the ability of students to use their education to earn more money.  Not only does a college degree allegedly offer an individual greater access to more job opportunities, thus providing greater job security, a bachelor’s degree recipient is statistically expected to earn nearly one million dollars more over a lifetime than someone with just a high school degree.  Historically speaking, there is no doubt that education has helped people earn more money.  Statistics are, however, based on past performance.  Although past performance is a good indicator of future performance, there is no guarantee that graduates will earn more or find greater job security.  After all, these things depend far more on the ability of individuals to actually find well-paying jobs than their academic status.  In other words, personal circumstances and one’s economic environment determine whether or not individuals can capitalize on their educations.
 
With that in mind, the so-called Millennial generation is probably the most educated generation thus far.  If education is truly an asset, this means Millennials should have the capacity to earn and amass more wealth than their forebears.  Thanks to the Great Recession, however, Millennials born in the 1980s have amassed 34% less wealth than what they should have.  The Great Recession was particularly detrimental to this demographic, because Millennials struggled to find the work and pay they needed to amass wealth during their prime earning years.  Lacking the job histories needed to ascend the income ladder, Millennials are unlikely to access the higher-paying jobs they need to catch up.  Their inability to purchase assets at lower prices and capitalize on rapid asset appreciation has also prevented Millennials from amassing wealth.  Not only have Millennials lacked viable financial opportunities from jobs to investments and been disqualified by their inability to advance their careers, they face massive debt, much of which is in the form of student loans.
 
Next to housing debt, student loan debt is the largest source of household debt.  Americans collectively hold about $1.4 trillions in student loan debt.  Unlike a mortgage, which yields a tangible piece of property that generally grows in value and can be sold, student loan debt is purely a liability that taxes the incomes of workers, month after month, year after year.  With a student debt crisis looming, the rising cost of an education and the capacity to use an education to improve one’s economic standing suggest education might be more of a liability than an asset for a large number of people, namely Millenials.  Unfortunately, those who suffer from geographic inequality, i.e. those who lack the mobility to access opportunities outside of their region, generational inequality, and vocational inequality cannot necessarily use their education to further their financial standing.  To these individuals, education is not much of an asset, even if their educations afford them a number of valuable and unique skill sets.
 
If a house is considered an asset, it is probably one of the least “liquid” assets a person can own.  A house cannot be quickly or easily liquidated into cash.  Financial instruments like reverse mortgages and home equality loans may provide home owners will easy access to loan dollars, but a loan is nothing more than a liability that can be spent.  That not withstanding, an education is far less liquid than a house, if it can be considered an asset or even a valuable.  The liquidity of an education depends on the ability of the educated to use that education to earn money.  Education is an asset when employers and contractors are willing and able to capitalize on the education of individuals.  In relative terms, a high school education was once far more valuable than it is today, even though employers barely tap the skill sets a high school education provides.  A basic college education will not be as valuable as it is today, unless employers actively attempt to capitalize on the skill sets of the educated.