What Is a College Education Really Worth These Days?
Rising college tuition rates have many questioning the real value of a college education today, as well as how that value has changed. The cost of a college education, whether at a public or private institution, a community college, or a for-profit college, is not what it used to be. After the GI Bill in 1944, there was a radical shift in accessibility to higher education. A college degree was no longer reserved for the wealthy. But in 1970, another turning point came when public investment in higher education dropped off, and students and families started borrowing to pay for the college education they now saw as a “ticket to the middle class.”
Since then, Americans have started borrowing more money than ever for higher education. Student loan debt in the U.S. is now bigger than credit card debt. Since the recession, tuition and fees have skyrocketed. In Arizona, parents and students have seen a 77% increase in costs in the last five years. In Georgia, it’s 75%, and in Washington state, 70%. Overall, tuition expenses have grown 1,225% in the last 36 years, compared with a 634% increase in medical costs and a 279% increase in the consumer price index. The higher cost can’t be disputed. To the question of whether college is still “worth it” today, there is certainly no consensus.
Unfortunately, along with the rising costs, students have a terrible job market to reckon with. And alarming rates of student debt are no help. The Project on Student Debt says that 15% of borrowers default within three years of entering repayment, and at for-profit colleges the rate is 22%. The problem is students are having trouble finding high-paying jobs to pay back that debt. Recent data shows 25- to 34-year-olds face higher unemployment rates than the general population.
It’s no wonder that young people are coming up with plenty of sound reasons not to got to college. The ones who do go often don’t graduate. According to the Department of Education, more than half of middle-class students who start college fail to earn bachelor’s degrees. About one-third of those surveyed left school due to financial considerations. According to a Gallup poll in 2010, 77% of parents said it was “somewhat likely” or “very likely” they would be able to pay for college for their oldest child. In 2014, the number dropped to 69%. But while they are struggling to afford it, polls often suggest that Americans still see a college education as an essential.
A 2012 study from the Pew Research Center showed that 57% of Americans said colleges fail to provide students with a good value for the money spent, and 75% said college is too expensive for most Americans to afford. At the same time, 94% of parents expected their child to go to college, and 86% of college graduates said they believed their schooling had been a good investment. This suggests that although Americans acknowledge that college has become too expensive, many are still willing to pay for it, even if it means taking out large loans.
A more recent Pew Research study pointed out that it is much more costly not to go to college. According to the study, compared to those with only a high school diploma, college graduates aged 25 to 32 working full time earn approximately $17,500 more annually than their peers who have only a high school diploma. Thus, when comparing college grads to non-college grads, the choice may appear simple. However, the real value of college depends on what it’s being compared to.
For some, the cultural and educational experience of college trumps the high price. Others are choosing to self-educate, or enter a trade or the tech startup world in lieu of a degree. Many point out that not every degree choice will be financially useful. If one is talking about overall financial investment, it depends on what factors you consider, over what length of time, and compared to what alternative. When we examine higher education as an investment historically, the picture doesn’t look good, which is one explanation for the poor perceptions of some Americans.
Student debt has grown to the point of preventing many young people from starting families, buying houses, and starting their own businesses. This represents a radical historical shift when we compare today’s young people to those of even one generation ago. The cost of college per student has increased at nearly five times the rate of inflation since 1983, and graduate salaries have not grown with it. From this angle, the value of college, while higher than that of a high school diploma, is nowhere near its previous value.
Federal Reserve Bank of New York economists Jaison Abel and Richard Deitz published a paper titled “Do the Benefits of College Still Outweigh the Costs?” claiming that despite its rising cost and decreasing payoff, a college education today “easily surpass[es] the threshold for a sound investment.” The rate of return for a bachelor’s degree has hovered between 14% and 15% since 2000.
“Despite the recent struggles of college graduates,” they added, “investing in a college degree may be more important than ever before, because those who fail to do so are falling further and further behind.” The decision to attend college is ultimately a personal one, and unfortunately, today’s prospective students are looking at huge expenses no matter what path they choose.