According to a new report from the Pew Research Center, 57 percent of Americans say “the higher education system in the United States fails to provide students with good value for the money they and their families spend.”
(Digital Vision)
Does that mean that college isn’t worth it? Not exactly. In fact, given the crappy economy, a college degree is more valuable than ever, a point that Levitt makes in a recent Freakonomics Radio podcast. The most telling statistic as to the value of college: the unemployment rate among college graduates is less than half (4.5%) than people with only a high school diploma (9.7%). (See the BLS employment status table here.)
Still, it’s an interesting question, particularly given the explosive growth in the price of college tuition over the last 30 years. According to the College Board, a year of tuition at a public college for an in-state student costs an average of $7,605, while a year at a private college costs an average of $27,293. Meaning that (assuming you graduate in four years) a college diploma from a public school costs about $30,000, and about $109,000 from a private school. That’s a lot of coin, but consider this: the difference in yearly income for a person with a college degree and a person with just a high school diploma is $19,550, according to the 2010 Census. So keeping things simple, on average, a public school college degree pays for itself in less than two years, and a private school diploma in less than six. Which is probably why, according to the Pew study, the vast majority of college graduates (86%) say that college was a good investment for them.
The Pew report, conducted in partnership with the Chronicle of Higher Education, offers lots of useful insight into the current state of American higher education. Among some of the more interesting nuggets:
- Only 19% of college presidents say the U.S. system of higher education is the best in the world now, and just 7% say they believe it will be the best in the world 10 years from now.
- Adults who graduated from a four-year college believe that, on average, they are earning $20,000 more a year as a result of having gotten that degree. Adults who did not attend college believe that, on average, they are earning $20,000 a year less as a result.
- Only a quarter (24%) of college presidents say that, if given a choice, they would prefer that most faculty at their institution be tenured. About seven-in-ten say they would prefer that faculty be employed on annual or long-term contracts.
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This also fails to distinguish the “high school diploma” group between those who could have gone to college, but choose to pursue a career directly out of high school and those who couldn’t/wouldn’t go to college due to poor academics, laziness, or both.
Although it would be difficult to reliably test this, I suspect that smart college kids could probably do just as well foregoing college (particularly in humanities/social sciences) as they would with the degree. Obviously, for some fields (engineering, medicine, law) this just isn’t practical, but in many areas it probably is.
What about factoring in opportunity costs and the money spent on room & board?
One crucial issue that I think is overlooked in most assessments of the value of college is the inherent selection bias. Saying that a brilliant student who gets into an elite private school makes more than a slacker who doesn’t go to college isn’t very informative.
I recall a study that looked at college grads from around the time of the Vietnam war, when borderline students opted for college to avoid the draft, and the college benefit was much less pronounced. Given increased college costs its questionable that an intelligent student benefits much from 4-years of not working, crushing debt, and negligible skills increases.
The one exception might be social factors such as building networks of similarly intelligent people that can be valuable later in life.
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On the other hand, how many employers make a bachelor’s degree a requirement for many positions? No matter if you feel someone with 4 years of work experience is better prepared for the workforce, the fact is there are many places where someone without a college degree is not going to be hired, no matter their level of experience.
As another reader mentioned, a major determinant of whether a college degree is worth the cost is the graduate’s major. A recent report showed that average starting salary for Chemical Engineers is $64,800, while the starting salary for Social Workers is $31,800. Economists, btw, start at $48,800, which, at the margin, is probably break-even, taking account of the time value of money and the lost salary during college years.
Here’s the link to the study:
http://www.payscale.com/best-colleges/degrees.asp`
OK, I’m not an economist but I guessing (hoping?) you are. The statistics you cite are incomplete or irrelevant. First of all, it’s not surprising that college graduates have lower unemployment, as the difference between college graduates and high school graduates encompass a few more variables than just that they spent money on college.
Secondly, the cost of a college education is quite a bit more than the tuition. How about lost wages, living expenses and the like.
Lastly, to decide if something is worth the money, you need to consider what else you could have done with the money other than spend it on college. Is there a better investment for the money than tuition and associated expenses?
This article seems naive at best.
Readers have raised some valuable points about this post, including oppt’t costs and the type of degree or the type of school one attends.
Our colleague Cecilia Rouse at the Network on Transitions to Adulthood ran the numbers a few years back, including oppt’y costs and other factors, and found that a college degree pays itself off in about 10 years. But that was before the current rapid rise in tuition. She’s updating the work with fresh data, and will break it down by type of school (private, public, etc.)
A recent study, “Whats It Worth?” by the Center on Education and the Workforce at Georgetown broke down the starting salaries by degrees, which underscores the problem of looking at “college” as a general bucket.
Finally, a report by Demos finds that in certain cases, a two-year technical degree pays off as much as a four-year degree in that field, even seven years later.
The bottom line, college does pay, with some caveats. First, it pays only if you finish (currently about 50% of college freshman don’t finish). It also only if you are strategic about the kind of degree you’ll get and where you go to get it. If you’re going into education (one of the lowest paying fields along with psychology in the CEW study), it makes no sense to rack up big bills at a private school.
We in this country too often think a four-year college is the only option. There are many, many kids who have no interest in four more years of school, but they’ve heard only one message: go to college. Everyone needs some kind of education after high school, but there are viable alternatives. We just don’t hear about them as often, and kids are not shown that path. Too often, that path has a whiff of “loser” to it, when in fact, there are many middle-tier jobs that pay a very solid wage and do not require four-year degrees (think health care field or the trades). We need to talk about those pathways more often, rather than the “college for all” mantra.
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Wow, 10 year ROI? Most businesses would call that a non-starter.
A problem here is the view that college and work are separate phases of life. By my junior year, I was making enough as an intern (in computer engineering) to pay all my tuition and living expenses. In my last year of graduate school, with a well-paying internship and some consulting on the side, I made upwards of $50K.
The comparison needs to be between college graduates and people who had the skills & qualifications to go to college but chose not to.
How do people with similar grades & SATs who choose not to go to college do?