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Is College Worth It?—Part I

November 11, 2008

I’m a sucker for stories like this. Authored by Megan Twohey for the Chicago Tribune, with contributions by Jo Napolitano and published in mid-October, the title says it all: “Is college worth it?” Allow me to review and comment.

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Kelly Stevens is suffering from buyer’s remorse.

The 29-year-old from Fargo, N.D., took out more than $60,000 in loans to pay for a bachelor’s degree in fashion marketing from the Illinois Institute of Art. She was convinced it would allow her to open her own store or work for a major fashion company—basically, to make more money.

TL: Great opening—buyer’s remorse, art student, hard-to-break-into field. We’re being set up. Based on the title and opening paragraph, we can see where this is going: it’s all about money—nothing else. And arguments based solely on the economic returns of college always result in higher education being a losing proposition. In my considered opinion, this is ~always~ be the result of this kind of argument. But let’s continue…

But nearly a year after graduating, [Kelley] is waiting tables at a comedy club. Every week, she gets rejected from half a dozen marketing jobs. She can no longer make payments on some of her loans. She can barely scrape by.

“I can’t open my own store in this economy,” Stevens said. “Marketing jobs are among those that have been hardest hit. Sometimes it feels like I should never have gotten that degree.”

TL: She’s only one year out of college and is complaining that she doesn’t have her dream job?! Please. But the key to this passage is loans. This is a possibly unnecessary additional element to Kelly’s situation.

Money is only one of the reasons to go to college, of course. But with college costs skyrocketing and the economy worsening, the question of whether higher education is a worthy financial investment is no longer a no-brainer.

TL: Correction—Unless you’re getting an MBA, MD, CPA, BSE, or JD, going to college for a simple BA or BS has not been a no-brainer since probably the 1970s. After the first wave of Boomers graduated from college and filled the job market, getting a college degree for mere financial advancement in the world has been no sure thing. It might become more probably again, but it hasn’t been a plus returns investment for probably 30 years. Yes, this is a working theory I’m developing here.

For decades, the earnings gap between college graduates and high school graduates grew and grew. Get a bachelor’s degree, and you were almost guaranteed to be a lot better off.

But the gap in earnings has started to shrink in recent years: U.S. Census data show college graduates earned 77 percent more in mean income than high school graduates in 2007, down from 96 percent seven years earlier. Meanwhile, more students are taking on debt. The debt levels are growing. And some graduates are unable to land jobs that allow them to pay back their loans.

TL: But this gap grew because of the devaluation of the lower end of our economy rather than an increase in valuation of any degree. Today a licensed “Joe the Plumber” is without question going to earn more than a humanities PhD—not that the PhD earner cares, because they know what they’re getting into. But every union laborer these days, even the lower end ones, earn as much or more than your standard BA/BS earning college graduate. If your goal in life is to enter the economic middle class, then don’t go to college. If that’s your only goal, don’t go. …But you know that this isn’t the only reason to go to college. As Yoda once said, “There is another.” You have to ask yourself this: Is being middle (or upper) class only an economic proposition? My answer: no.

Most experts insist that going to college is generally worth it. College graduates still earn substantially more than high school graduates on average: $59,365 annually compared with $33,609.

TL: Are these financial or cultural experts? And wouldn’t it be better to look at the median rather than the average (or mean)? And shouldn’t we compare that median to those who attend trade school rather than any type of college? Does this average include those going to junior colleges to for AA degrees meant to train?

But they caution that some college choices are no longer a wise investment. Students destined for low-paying careers, they say, simply cannot manage certain debt levels. Loans can surpass $100,000 depending on the school and the borrower.

“If you’re going to be a nursery school teacher your whole life, you should not be taking out a lot of loans,” said Sandy Baum, senior policy analyst for the College Board and an economics professor at Skidmore College. “That’s the problem. It’s an investment people make without knowing how they will pay it off.”

People in business jobs can manage $46,000, according to calculations the Tribune made with a formula created by Baum. So for Stevens, paying back nearly $65,000 in loans was almost certain to be a struggle. Now that she is stuck in a low-paying service job, it’s become impossible.

TL: But by picking on Kelly, we’re picking on a traditionally risky field. The relative abundance of the college educated has now made it so that many jobs that formerly did not require degrees now do (i.e. fashion marketing). At least some of those degree requirements are inflated. For instance, you don’t really need a bachelor’s degree to be an administrative assistant (not to pick on that career choice). But education is one of those fields where, of all the ones Sandy Baum could’ve picked, we might actually want over-qualified folk in. Education, moreover, is one of those fields that’s underpaid its professionals for years.

The problem here, getting back to loans and the cost of education, is that we’ve used the banking industry to create access to higher education. We’ve put the risk on the consumer rather than assuming more of it as a society through government. This is why government should be in the “business” of ensuring access through grants rather than loans. And a good government knows the value of certain “industries,” like education and social work and medicine, and therefore invests in their future. Back to the story…

Meanwhile, about one-third of college students drop out—dashing any return on their investment.

TL: But this is a vicious cycle—they’re often dropping out due to growing fears of increasing loan debt. Argh!

Does attending an elite college make a difference? The answer is unclear. While some researchers have found that graduates of top schools earn more on average than those from less prestigious institutions, others have found no difference.

TL: No offense, but those who attend elite institutions gain many fringe benefits (i.e. networking, degree name recognition, perception) that make those graduates outliers to this story. Going to Harvard will always be worth it, no matter what degree you pursue.

Debbie Quinn, director of guidance at West Aurora High School, said she doesn’t dissuade students from going to college because of the cost. But she encourages them to think about their career path and potential earnings.

TL: Does Ms. Quinn encourage them consider what they want from college that doesn’t involve earnings or economic considerations? Talking about one’s “future career” when you’re 18 is no different than playing the slots in Vegas. It’s too risky to ask students what they want to do with their life when college could be used to prepare one for anything—based again on non-economic reasons one attends college.

Recognizing that the cost of college could steer students away from important but low-paying professions, Congress passed legislation last year that will gradually cut interest rates on certain government loans, allow borrowers to make smaller loan payments if they are earning less, and forgive the loans of students who serve in public-service careers for 10 years.

TL: This is not smart government. When you know in advance that these professions pay little, why saddle the aspirant with ~any~ debt? Does giving these already responsible people even more “encouragement” to be responsible actually do anything for them? Reward their foresight with grants! As it is, this is bad government because you’re “teaching a lesson” to a population that doesn’t need it. By making loans “cheaper,” you’re just rewarding banks and the monied class.

Private colleges are increasing the assistance they offer, so fewer students are required to take out loans and those who do will take on less of a burden, said Ron Ehrenberg, director of Cornell University’s Higher Education Research Institute.

“The concern was that with high loan burdens, we were influencing the professional outcomes of students,” Ehrenberg said.

TL: Absolutely! Ron Ehrenberg and his Institute get it. But this should be done by government and not necessarily by an elite college whose graduates will get the better jobs in their respective fields.

Experts point out that the college experience is not just about financial rewards. There is also that business about learning a few things. Students are able to explore their interests. They often become inspired by subjects they never knew existed and are able to view the world through a broader lens.

“There’s value added when it comes to critical thinking and moral reasoning,” said Ernest Pascarella, a University of Iowa professor who has studied the effects of college.

TL: Finally, we’re getting to the other side of the “equation”—but only in the last quarter of the article.

The education also extends outside the classroom, through exposure to classmates from different backgrounds and participation in extracurricular activities.

TL: I’m not sold on the social benefits of college—and neither are political and social conservatives—at least according to this article (based on research done here). College did not give me better morals: it merely tested my willingness to retain received values, or the strength of my moral values.

And the rewards might just keep on coming, according to the College Board. During their working lives, college graduates are more likely to engage in organized volunteer work, vote, donate blood and live healthy lifestyles—though it’s possible that people in those categories also were more likely to attend college in the first place.

TL: I would hope that the smarter we get the more likely we are to understand the value of giving—at least to one’s self if not for other’s sakes.

Priscilla Adeniji, 22, a finance major at Chicago State University, says her choices at college appear to be paying off.

Scholarships have covered almost the entire cost of her education, making this the first year she’s had to take out a loan, for $5,000. She graduates in December, and the Big Four consulting firms already are dangling jobs with salaries starting at $55,000.

Adeniji said she also gained a lot from her classes and participation in a sorority and other activities.

“Career-wise, college has been very important for me,” she said. “But it’s also about knowledge. If I wasn’t in school, I wouldn’t be able to understand what’s going on with the economy and with other things that affect my life.”

TL: This is a nice anecdote but, again, an outlier example to the thrust of this article. Ms. Adeniji thankfully had scholarships. This is good. But apparently she had scholarships to enter industries that actually afford one the chance to pay back loans. This is bad planning by the powers that be. You don’t reward students, generously at least, if they’re going into fields where loans are easier to pay back (i.e. consulting). These are the areas where it’s okay to let students assume some risk. If needed, then give them scholarships that allow them to pay them back if they actually get a job in their field.

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Next up: Is College Worth It?—Part II

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One Comment
  1. This article presents an interesting economic ROI perspective on education; however,there is still an unspoken snobbery in our society that someone with a college degree is fundamentally “better” then someone without one. College is not for everyone and until we value a person's skills,abilities, and contribution, regardless of their educational level, we will have students going to college who really shouldn't be. http://www.satisfiedsole.com

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