Is College Worth It?

College-board01College-board02The College Board hits back against critics who complain about the rising costs of higher education with a report that shows the economic benefits of college. Here are a couple of the charts that are being widely distributed.

What is missing from the analysis is the breakdown by private and public college. Does a $50,000 tuition education at Sarah Lawrence give you a better return than a state college?

I don't question these numbers much. I'm certain that college (though not many graduate programs) do lead to higher lifetime salaries. However, costs have gotten out of control. Why have tuition rates gone up so much? How does a six figure student loan burden affect a person's future? How are these costs affecting middle class families? Are middle class kids ending up at the University of Phoenix or the local community college, because they can't afford this nonsense?

UPDATE: More commentary from The Atlantic Wire and Megan McArdle.

27 thoughts on “Is College Worth It?

  1. Tuition rates have gone up, in part, because states have dropped their funding for public schools. CUNY is one of the lucky ones, where the state funds it a “whopping” 30%. Most others hover less than 20%. Evidently the drop in state education spending is proportional to rising cost of Medicaid. Healthcare costs now dominate state budgets, and public higher education is less prioritized.

  2. This might be ‘economic benefits of college’. Might also be ‘economic benefits of being the sort of smart and organized person who goes to college’. My guess is, it’s a mix of both.
    AND the benefits of college have a lot to do with the fact that State Farm won’t hire you to be an agent without it – if people require a costly credential, does that mean you could only have done the job if you actually had the credential?

  3. And CUNY is a great deal. But why is Sarah Lawrence $50,000? With room/board/books/etc.., it must come to $70,000 per year. How can any family afford that?

  4. There was a really interesting stat in the NYT the other day showing that although private 4 year institutions make up ~50% of the total number of 4 year schools, they serve something like 20% of students enrolled in such schools. Public colleges and universities account for the lion’s share of students, which makes the state government funding slack even more pernicious.
    So your answer about Sarah Lawrence seems to be not many. I suppose it also likely depends on the sort of aid offered and the percentage of the student body that actually pays full tuition.

  5. State gov’ts are also getting killed with pensions, especially since they’ve been forgetting to put money into the pension pot over the past decade. oops.
    Talked with another unemployed PhD over the weekend. Sometimes I think that this whole system is going down the toilet.
    I’ll have to look up that NYT stat. I need an Ode to CUNY post.

  6. Earnings is wildly misleading for the point they are trying to make. Let’s look at it net college and graduate tuition, net loan interest, and net taxes.
    Sure, I earn a lot more than most college graduates, but I keep a much smaller percentage of that by the time I eventually get my cut (even though angry rich man Paul Krugman thinks I keep way too much of it).

  7. Even more misleadingly, they leave out social class, intelligence and other personal characteristics. The correlation between income and education is at least partially spurious.

  8. Don’t assume the University of Phoenix is the low cost alternative. The recent hearings in Washington made it clear that lots of the for-profits, including/especially the mostly online ones, can be staggeringly expensive, on par with many private non-profit colleges and universities.
    The question of why tuitions are what they are is a huge one, and I’ve thought & written about it quite a bit. One place to start is that for many reasons, many of the people buying higher education aren’t very price-driven in their choices. In fact, they use higher price as a signal about quality, rather than other metrics or information. Which, I think, raises further interesting questions.

  9. “Is college worth it?”
    It depends on the college and the price.
    “One place to start is that for many reasons, many of the people buying higher education aren’t very price-driven in their choices. In fact, they use higher price as a signal about quality, rather than other metrics or information.”
    Indeed. I’ve found myself doing the same thing during my house hunt, too. Cheap houses make me nervous, even though I really do want a small mortgage.
    Student loans and home equity loans have contributed to price-insensitivity, I think. Also, those big numbers are just hard to grasp, until you are actually trying to do something like pay off a graduate degree in social work with a social worker’s salary.

  10. In fact, they use higher price as a signal about quality…
    Status games again. For a partial solution, let me propose mandating new names for the most prestigious schools. Fewer people will apply to “Harvard A & M”

  11. Instapundit has been blogging for a while about the “higher education bubble.” Yes. A lot of college graduates aren’t getting their money’s worth, especially women who spend time out of the workforce to raise children while still having to pay on their student loans.
    Part of the problem is that colleges are building fancy facilities (gyms, pools, tracks, computer labs, overly nice dorms) and pouring money into money-losing sports programs. Every college wants a “beautiful campus,” which means spending more money on landscaping and gardeners and better architecture. The #s of college administrators and other non-teaching positions has skyrocketed.
    People my age (late 20s) are dealing with the massive student loans by delaying marriage and children and home-buying, and sometimes by moving back in with their parents, a la the recent Times article on kidults. They rack up credit card debt (average adult has more than $10,000 on credit cards, the average couple has more than $20,000). Most of my friends who have kids are still making huge student loan payments at a time when they really need to be saving for their children’s education. Many are renting and Googling “homeschool preschool” instead of having a mortgage and tuition bills. Some mothers are continuing to work when they’d rather be at home with their babies.
    Amy P is right that the free availability of student loans and home equity loans has allowed prices to be pushed so high.
    A data point: I graduated (7 years ago) from a private college that was $20,000/year at the time, but only 2% of students paid full price according to the admissions dept.
    Still, kids compete for all of the discounts and scholarships they can get. Parents hit up the grandparents for tuition money. They get a HELOC. They drain retirement accounts and run up credit cards to send their kids to college.

  12. “People my age (late 20s) are dealing with the massive student loans by delaying marriage and children and home-buying…”
    There was an NYT article recently about a woman who got dumped by her fiancee when her student loans were larger than expected ($170k). That’s roughly the price of the median US house. Here’s a blog that covers the NYT piece.
    http://mjperry.blogspot.com/2010/09/170000-student-loan-debt-ends.html
    “A data point: I graduated (7 years ago) from a private college that was $20,000/year at the time, but only 2% of students paid full price according to the admissions dept.”
    I think I’d add those tuition breaks to my list of things that get people into trouble. The psychology of it becomes “I got a $10,000 scholarship!” rather than “I need to come up with $10,000 a year!” (It reminds me of one of my entrepeneurial relatives who stocks a clearance table in her store with items specifically purchased to go there, rather than marked down inventory. Sure the t-shirt is “marked down” to $9.99, but it wholesales at $5, making it one of the more profitable items in the store, aside from jewelry.)

  13. Those graphs are super-dumb (for the reasons MH mentions — college education is so well correlated with other factors (intelligence, IQ, parental education, birth family income, . . . that reporting the income v college education is meaningless without correction for other factors. They correct here for race, but nothing else). I’m now re-considering trusting the College Board when they say that the SAT’s have any predictive power at all or that the tests are properly normed.
    But, haven’t we had this conversation before? Megan McCardle asked it in a different way when she asserted the possibility that you don’t actually learn anything useful in college — it’s just a signaling mechanism. Her STEM readers pointed out that they’d actually learned some useful stuff in college.
    So, as Dave raises does going to college give you useful skills, say, to work at State Farm or Bank of America? (and, I don’t want to compare it to another training scheme — I want to compare the 21 year old who went to college v the one who did something else for a year that was life-enriching but not guided training — like travel, or volunteering somewhere, or playing tennis)

  14. “Megan McCardle asked it in a different way when she asserted the possibility that you don’t actually learn anything useful in college — it’s just a signaling mechanism. Her STEM readers pointed out that they’d actually learned some useful stuff in college.”
    My husband taught at an elite college for a while, and those kids had gone to very good high schools and came in writing beautifully. There were subjects taught there that they probably couldn’t have done as well in high school (like Arabic), but in their case, it was largely a (very expensive) opportunity to get their ticket punched. The situation is very different at non-elite universities, where the kids need to be told stuff like not to use cutesy fonts and lavender ink on their papers and not to take three 1st year languages at once. (I was a TA at a non-elite college and one of the students in my Russian class (a chem major!) was signed up for three 1st year languages she had never taken before–her advisor should have been immediately fired.)

  15. I’ve always wondered whether is college is worth it if you have to take out X amount of loans to do it. I think for kids graduating with little or no loans — of course. But if you can be a respiratory therapist in two years at a minimal costing community college and make $60,000 a year, then why bother with college.
    I think the college boards needs to address the debt to future salary ratio. It’s the more realistic scenario.

  16. Amy P., I think it’s sad that your experiences (and your husband’s) with college have been so negative. What a sad condition that students with good high school educations find no intellectual stimulation in collegiate halls! How terrible, also, that such money is wasted in the pursuit of a rubber stamp without the college being able to provide any sort of enhanced knowledge to advance intellectual understanding.
    As I look at my students every day in class and applaud their efforts to engage and understand material, my hope is that I do not fail them as you describe.

  17. You’re doing a great job, Julie! Your students will remember your classes long into the future, because you care. You should be cloned.
    I know that these numbers don’t control for a number of factors, but how many cases of smart, organized people who get into college, but don’t go are there? If we are going to compare apples to apples, then we have to look at smart, organized people who go to college v. smart, organized people who don’t go to college. The second group has to be very, very small. But let’s say we isolated the findings to just look at smart, organized people with supportive families and all that, I’m sure that the findings would still hold, because of the barriers to entry for higher paid jobs. Yes, a person who reads EKG machines can do quite well, but there are only a handful of those jobs around.
    I have a number of friends who didn’t go to college. They were smart, but not organized or supported when they were in their teens. Now, they are in a better place, but have hit road blocks at their current jobs. They can’t advance without a BA. A couple have gone back to college in their 40s in order to advance. Some are just frustrated.
    Whether or not kids are actually learning something useful in college is a separate question. I imagine that the experience vary widely depending on the school, program, major, and professor.

  18. Oh laura, that wasn’t a cry out for moral support (although I appreciate it). I’m a bit demoralized lately with the professor bashing I see, when most of my colleagues are working a great deal and genuinely gain pleasure from student intellectual advancement.
    The costs of private education are too high and embarrassing. The divergence in pay for faculty between private and public institutions is diverging, which means that private schools will be able to purchase the “best” talent (with admission that “best” here is a highly subjective term). With state budgets paying less for public education, that means that the tuitions will go up. At my campus, we have been told that we are expected to provide a “Neiman Marcus education for Kmart prices” (I kid you not) and that we need to gather as a community and suffer through the downturn.

  19. Julie G.,
    They weren’t depressing places, it was just rather obvious that the elite place wasn’t providing much value-added, since there was relatively little left to do for the students. The elite school provided an opportunity for good internships, an opportunity to meet important people, a good place to meet recruiters, strong extracurriculars (singing groups, drama societies, etc.) and a vibrant urban bar and shopping scene. A few years ago, it was also one of the schools where recruiters would swoop in to collect bright young minds to work in investment banking. That’s all worth something, but how much?
    There was a lot more value-added being provided at the non-elite school, but there were so many truly marginal students that it was hard to meet them where they were (like my husband’s student who skipped a whole bunch of classes and then handed in a mess of a paper entitled “My Philosophy”). I had it relatively easy teaching Russian, because Russian attracts stronger academic types, generally speaking.
    My husband’s current college is somewhere in the middle.

  20. At my campus, we have been told that we are expected to provide a “Neiman Marcus education for Kmart prices”
    We proletarianize the professoriate and pass the savings on to you.

  21. I’m demoralized, too, at the moment. I talked to so many people this weekend who are out of work. The guy who owns the bagel shop in town killed himself, because of financial problems. Our house cleaners’ daughter was strangled by her crazy boyfriend. Jonah’s school has hit a whole new low. It’s day 15 and some of his teachers have yet to start working with the kids. Other parents don’t seems to care. Or are too stressed out about their financial situation to care. I’m raising my kids in an environment where a handful of people will get premium educations and super high salary jobs, while the rest struggle to pay a mortgage.
    I should write a happy, inspiration post this morning, because that’s what people like to read, but I’m filled with anger.

  22. If we are going to compare apples to apples, then we have to look at smart, organized people who go to college v. smart, organized people who don’t go to college. The second group has to be very, very small.
    Really? I guess it’s hard to know exactly, but I’ve run into too many to assume it’s “very, very small.”

  23. One more anecdote–At the non-elite school, one of my husband’s professors told him that the non-elite college kids are smart, it’s just that they don’t know how to read (meaning to get information from texts). That was before the whole internet thing took off, too.
    “Really? I guess it’s hard to know exactly, but I’ve run into too many to assume it’s “very, very small.””
    I think it varies hugely according to generation. In the younger generation, way more people are at least trying college than in past years, so the bright, organized kid who doesn’t at least take a course or two at some point is much less common than in the past. It’s become a self-fulfilling prophecy that bright, organized kids at least try college. Another factor is that community college is the new high school (or elementary school, in some cases, as my dad has been discovering while teaching remedial CC math to 20 and 30-somethings).
    “Jonah’s school has hit a whole new low. It’s day 15 and some of his teachers have yet to start working with the kids.”
    Oh, dear.
    “I’m raising my kids in an environment where a handful of people will get premium educations and super high salary jobs, while the rest struggle to pay a mortgage.”
    That’s certainly true of people with newish mortgages, but eventually (notwithstanding all the attempts to rig the housing market), we will return to equilibrium. Here’s the famous Case Shiller chart, showing inflation-adjusted housing prices since 1890:
    http://www.ritholtz.com/blog/2010/07/updating-the-case-shiller-100-chart-forecast/
    It is physically impossible for housing to stay unaffordable long-term, particularly since as of last year, 1 in 9 US homes was vacant.
    http://www.usatoday.com/money/economy/housing/2009-02-12-vacancy12_N.htm
    If US incomes are low, house prices will fall to match incomes.

  24. lies, damned lies, and statistics..
    these College Board graphs are definitely statistics. As observed upthread, it’s pointless to compare earnings without including the debt load of a college degree. (Note that taxes are irrelevant – the 25% tax bracket starts at $34k, the 28% bracket ends at $171k. I very much doubt any college degree is going to make the difference between a 28% bracket and a 33% one..)
    A college degree is by no means a panacea, even in the sciences.
    In particular, see the Urban Institute study that is cited there, from which a quote:
    “The pool of science and engineering-qualified secondary and postsecondary graduates is several times larger than the number of annual job openings. ”
    Laura, if this inequality worries you as it does me, the answer is political – see Henry’s review as per your post of the 16th.

  25. I don’t think it’s very, very small at all. I’ve met so many smart, organized and responsible teachers at my kids’ day care who didn’t make it to college right after high school.

  26. ” If we are going to compare apples to apples, . . .”
    But, we have to compare apples to apples. It’s really not a good excuse to say that because it’s really hard to compare apples to apples, you’re going to compare apples to elephants (i.e. on the part of the college board). To do this analysis, one does not usually find the control group (or assign a control group), but one does do regression analysis trying to see the effect of different factors.
    The college board didn’t do that, because they’re not doing analysis, but sales. There’s a Feynman commentary about vegetable oil commercials that’s a good comparison. It’s something that pretends to look like data, but is really not. It’s like fat-free grapes and BPA-free stainless steel bottles.

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