College payoff is shrinking

What Is College Worth? asks John Cassidy in The New Yorker.  Despite increasing costs, the number of young people going to college keeps going up, he writes.

Some 70 percent of high school graduates enroll in college and half of Americans between 25 and 34 have a college degree.Product Details

“College has been life changing for most people and a tremendous financial investment for many of them,” writes Peter Cappelli, a professor of management at Wharton, in his new book, Will College Pay Off? Yet, for some, “it has been financially crippling.”

The “college wage premium” has stopped growing, writes Cassidy.

In 2001, according to theEconomic Policy Institute, a liberal think tank in Washington, workers with undergraduate degrees (but not graduate degrees) earned, on average, $30.05 an hour; last year, they earned $29.55 an hour.

Other sources show even more dramatic falls. “Between 2001 and 2013, the average wage of workers with a bachelor’s degree declined 10.3 percent, and the average wage of those with an associate’s degree declined 11.1 percent,” the New York Fed reported in its study.

New graduates with bachelor’s degrees have been hit hard by falling wages and rising unemployment. Non-graduates are doing even worse, but that’s little comfort.

“The big news about the payoff from college should be the incredible variation in it across colleges,” Cappelli writes. “The payoff from many college programs—as much as one in four—is actually negative. Incredibly, the schools seem to add nothing to the market value of the students.”

Is college worth it for everyone?

Is college worth it for everyone? The college premium is increasing, but only for those who earn a degree. And not every degree is a ticket on the gravy train.

‘College premium’ is inflated

The “college premium” has been exaggerated by high-profile studies, write Andrew G. Biggs and Abigail Haddad in The Atlantic. So has the payoff for majoring in a STEM field.

Smarter people are more likely to earn a college degree and to major in engineering, science and math, they write.

Only 58 percent of new college students who began in 2004 had graduated six years later, according to federal data. “Dropout rates are even higher at less selective colleges, whose students are presumably most on the margin between attending college following high school and entering the workforce.”

Calculating returns to education only for those who attend college and graduate is like measuring stock returns for Google while ignoring those for General Motors.

High school students who go on to college are quite different from those go directly to the workforce, they write.

(The collegebound) took a more rigorous high school curriculum, scored better on tests of reading and math, came from higher-income families, were in better physical and mental health, and were less likely to have been arrested. These are all correlated with higher earnings regardless of whether a person attends college . . .

Controlling for “both the risk of not graduating from college and differing personal characteristics” cuts the “earnings boost attributable to college attendance” in half, write Biggs and Haddad.

Graduates in technical fields earn significantly more than graduates in “softer” majors, studies have shown. “High school graduates aiming for high-earning majors such as engineering enter college with higher average SAT scores, according to the National Center for Education Statistics, while those aiming for lower-paying majors have lower average SAT scores,” write Biggs and Haddad. “High-paying jobs also entail longer work hours.”

The college penalty

What school will make you poorest? asks Jordan Weissmann on Slate. Every year, Payscale surveys college graduates to assess their earnings relative to their college costs. At almost two-dozen colleges, the average graduate’s “earning power won’t increase enough to justify the cost of tuition,” writes Weissmann. “To be blunt, these schools make students poorer.”

“Payscale doesn’t compare the alums of low-ranked colleges to demographically similar high school grads,” notes Weissmann. So colleges that enroll less-capable students will do worse at raising their earnings.

The Atlantic looks at colleges and majors that are the “biggest waste of money.” For example, “the self-reported earnings of art majors from Murray State are so low that after two decades, a typical high school grad will have out-earned them by nearly $200,000.”

Here are the degrees with the lowest 20-year net return, according to Payscale. Bold names are for in-state students. There are a lot of education degrees on the list.

Unless you’re attending a rigorous, high-prestige university, an arts degree is a risky bet, points out The Economist.  “Of the 153 arts degrees in the study, 46 generated a return on investment worse than plonking the money in 20-year treasury bills. Of those, 18 offered returns worse than zero.”

The Payscale study overstates the financial value of a college education, warns The Economist. It compares graduates’ “earnings to those of people who did not go to college—many of whom did not go because they were not clever enough to get in. Thus, some of the premium that graduates earn simply reflects the fact that they are, on average, more intelligent than non-graduates.”

Cost is #1 college worry

Stanford is the number one dream college for students and parents with Harvard in second, according to the Princeton Review’s annual  conducts our annual College Hopes and Worries survey. Respondents are readers “Best Colleges” guidebook readers and users of the Princeton Review website.

 The number one worry is college costs.

Half of students and parents say the biggest benefit of earning a college diploma will be a better job and higher income, while the rest are split between “education” and “exposure to new ideas.”

Pew: Not going to college is costly

The cost of not going to college is rising, according to a Pew Research Center analysis. Four-year college graduates ages 25 to 32 who are working full time earn about $45,500, while high school-only young adults average $28,000. The $17,500 gap is a record. College graduates aren’t earning much more than they did in 1986, but wages are sliding for workers with only a high school diploma.

For-profit college students like their schools’ teaching and guidance, but not the high costs, a survey finds.

Shopping for a college

Seven out of 10 high school graduates choose college, observes Smart Shoppers, a report by College Summit and Bellwether Education Partners.  Despite warnings of a degree glut, the college wage premium continues to rise.  College-educated workers earned 80 percent more than high school-only workers in 2012.

Schools must do a better job identifying students — especially disadvantaged students — who aren’t reaching their potential, Smart Shoppers argue. “Schools, colleges, nonprofits, and businesses need to do a better job of educating students about their options on which college they should attend, which degrees they should pursue, and how they should pay for it.”

About a quarter of the gap in college attendance between affluent and working-class students can’t be explained by academic performance, a new study concludes.  The Sutton Trust, a British think tank, looked at college-going in the U.S., Britain and Australia.

$188K in college debt — and she can’t write

At 25, Katie Brotherton is working two jobs, but living in a parent’s basement, dependent on Mom (or Dad) for food, gas and health insurance. She owes $188,307.22 for two college degrees at private universities, she writes on (She doesn’t specify her major or her occupation.) Sadly, Brotherton didn’t learn to write or think clearly — and she certainly didn’t learn to do the math.

My pursuit in excellent education is rooted in a value system that promotes progressive thought for the betterment of the individual as well as society. Education is a core tenet and vested interest of the functioning democratic society. Upon that basic assumption and principle, I am overwhelmingly incensed by the silent epidemic of crippling student debt.

. . . this particularly sensitive conversation is being ignored by our mainstream consciousness. Perhaps I should be ashamed for buying such an unaffordable education and internalize my debts as personal failures. Perhaps my mistakes warrant pained silence. But silence breeds apathy, and in regard to the welfare of the American economy, I want to humanize the numbers and give voice to this reprehensible problem.

Due to reckless neglect, student debt will be the financial ruin of my generation, and there is an incredible need for a public discourse addressing this reality and its grave consequences.

I want answers and clarity as to why this happened. How did I arrive at this position in life so financially handicapped and disenfranchised? I followed societal expectations, earned an education and am employed. I will gladly repay my debts within the comfortable reason of affordability.

. . . I am owed answers simply because I have the right to pursue happiness. And since I am not alone in this debilitating epidemic, my peers deserve their voice as well.

Overborrowing and underthinking will get a gal in trouble, writes Bryan Preston on PJ Tatler.

Millennials are “the screwed generation,” some argue. They were told to “invest in yourself” and take on “good debt” to win a guaranteed college premium, writes Megan McCardle on The Daily Beast. As tuition goes up and up, the college premium is eroding for humanities and social sciences majors. For marginal students, college is a bad bet.

 The price of a McDonald’s hamburger has risen from 85 cents in 1995 to about a dollar today. The average price of all goods and services has risen about 50 percent. But the price of a college education has nearly doubled in that time. Is the education that today’s students are getting twice as good? Are new workers twice as smart? Have they become somehow massively more expensive to educate?

College costs rose faster than inflation by 1 percent a year till the mid-1980s, says Ohio University economist Richard Vedder.

“Now I see them rising 3 to 4 percent a year over inflation. What has happened? The federal government has started dropping money out of airplanes.” Aid has increased, subsidized loans have become available, and “the universities have gotten the money.”

“Even with these high prices, you’re still finding a high return for individuals who are bright and motivated,” says Nobel Prize-winning economist James Heckman. On the other hand, “if you’re not college ready, then the answer is no, it’s not worth it.”

And don’t go to a non-elite private college unless the financial-aid deal brings the cost down to the state university level.

Correction: As a commenter notes, Brotherton earned one of her degrees at Miami of Ohio, which is a public university.

College pays — for good students

College is a good investment for good students, but not for everyone, an economist advises. About one third  of high school graduates have the academic skills, intelligence and motivation to succeed at a four-year college.  The rest are more likely to succeed in job training at a community college or  career college.

Also on Community College Spotlight:  As tuition rises, colleges and universities hire more administrators.

‘More college’ is no cure-all

‘More college’ won’t solve unemployment, editorializes the New York Times. While people with bachelor’s degree are more likely to be working, recent graduates aren’t doing very well.

Also on Community College Spotlight:  89 percent of recent college graduates say their two-year or four-year degree was worth the time and money, according to a survey.