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.”

College payoff is less for blacks, Hispanics

College-educated blacks and Latinos fared significantly worse in the recession than less-educated minorities, concludes a Federal Reserve Bank of St. Louis report.

Earning a college degree raises earnings for blacks and Latinos, but it also may add to debts. “Higher education alone cannot level the playing field,” the report concluded. “College degrees alone do not provide short-term wealth protection, nor do they guarantee long-term wealth accumulation.”

race-wealth-income“Better-educated African American and Latinos were more likely to own homes, and those homes tended to be their primary source of wealth, so when the housing market collapsed, their residences transformed from piggy banks into anchors,” writes Joseph Williams on TakePart.

Minority and low-income students “don’t attend the best possible colleges they could (based on grades, etc.),” which lowers earnings, S. Michael Gaddis, a Penn State sociology professor, told TakePart.

Black and Latino graduates earn significantly less than whites and Asian-Americans.

In a study Gaddis conducted in March, job applications with “white” names resulted in more job offers for higher pay than those with “black” names. Fictional jobseekers who claimed to be graduates of elite colleges did better than those from less-elite colleges, but race mattered. “Education apparently has its limits because even a Harvard degree cannot make DaQuan as enticing as Charlie to employers,” Gaddis wrote.

Does money matter?

“Increased school spending is linked to improved outcomes for students, and for low-income students in particular, argue Kirabo Jackson, Rucker Johnson and Claudia Persico in Boosting Educational Attainment and Adult Earnings

Previous research has shown no link between school spending and learning.

This study correlated spending increases with “large improvements in educational attainment, wages, and family income, and reductions in the annual incidence of adult poverty for children from low-income families.”  However, “how the money is spent matters,” the authors write in Education Next.

Ric Hanushek questions the analysis. School spending has increased significantly, he writes.

If a ten percent increase yields the results calculated by Jackson, Johnson, and Persico, shouldn’t we have found all gaps gone (and even reversed) by now due to the actual funding increases?  And, even with small effects on the non-poor, shouldn’t we have seen fairly dramatic improvements in overall educational and labor market outcomes? In reality, in the face of dramatic past increases in school funding, the gaps in attainment, high school graduation, and family poverty have remained significant, largely resisting any major improvement.

How money is spent matters a great deal more than the number of dollars available, Hanushek concludes.

The authors responded to the critique and Hanushek responded to the response.

Sanders: “Free” and federalized higher ed


Vermont Sen. Bernie Sanders is seeking the Democratic presidential nomination.

State colleges and universities should be tuition free, says Bernie Sanders. “In exchange for billions of new taxpayer dollars, the federal government would enforce a specific vision of what a high-quality college education means,” writes Kevin Carey, education policy director at the New America Foundation. It’s “a terrible idea.”

States would have to promise that, within five years, “not less than 75 percent of instruction at public institutions of higher education in the State is provided by tenured or tenure-track faculty.” In addition, any funds left over after eliminating tuition could be used only for purposes such as “expanding academic course offerings to students,” “increasing the number and percentage of full-time instructional faculty,” providing faculty members with “supports” such as “professional development opportunities, office space, and shared governance in the institution.”

States would be prohibited from using the money for merit-based financial aid, “nonacademic facilities, such as student centers or stadiums,” or “the salaries or benefits of school administrators.”

This is a professor’s dream, writes Carey. There’s “tenure for everyone, nice offices all around, and the administrators and coaches can go pound sand.”

It will lead to “lengthy regulatory guidance” and lots of lawsuits, he predicts. Meanwhile, new models that might be more affordable, flexible and effective would be shut out.

Responding to middle-class anxiety, candidates are proposing “free college, debt-free college, or some combination of the two,” writes Carey. Federal money “will come with serious conditions based on some vision of what constitutes a high-quality college education.”

It’s time to break up the higher education “cartel,” said Republican candidate Marco Rubio, who borrowed heavily to earn his college degrees.

Rubio pledged to create a new accreditation process that would allow low-cost providers — perhaps largely online – to compete with established schools. He has called for colleges to tell potential students how much salary they can expect to earn for a given degree before they commit themselves to a major.

Loan repayments should be based on postgraduate incomes, said Rubio.

‘Addicted’ to bachelor’s degrees

America must break its “addiction” to bachelor’s degrees and recognize other routes to the middle class, said Mark Schneider of the American Institutes for Research, as part of a lecture series on social mobility.  “The contemporary bachelor’s degree takes too long, it’s too expensive and it’s not for everyone,” he said.

Wage data show that one- and two-year degrees and certificates in technical fields lead to rewarding careers, reports Diverse.  Plumbers and technicians with a vocational certificate can earn more than $71,000 a year a decade after entering the workforce. That’s more than many bachelor’s degree holders earn, especially those in non-technical fields. “Where you learn how to fix things, you win,”  said Schneider.

His College Measures web site provides information about expected wages for different degrees or certificates.

We have to make people understand there are cheaper ways to get people into the labor market,” Schneider said, noting that surveys have shown students say high wages and middleclass careers are important goals.

On average, four-year graduates earn more than those with two-year degrees, but “much is hidden in the averages,” said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce.

“What we have is a big black box in American higher education, a big impenetrable black box. It cost about $450 billion per year. It has 20 million students in it,” Carnevale said. “We’re not sure what produces learning and earning. We drop money in it every year, pay almost no attention to what comes out at the other end, and at some point that becomes intolerable because we don’t have another $450 billion.”

Both agreed the U.S. can’t afford to keep putting money into higher education without considering the outcomes.

 

Beyond college rankings

Which colleges and universities add the most “value” to a graduate’s paycheck? Brookings’ value-added rankings analyzes the difference between students’ predicted and actual mid-career earnings.

Cal Tech, MIT and Stanford do well, but so do Rose-Hulman Institute of Technology in Indiana, Colgate in New York and Carleton College in Minnesota.

Two-year colleges with high-value added scores include the New Hampshire Technical Institute, Lee College near Houston, and Pearl River Community College in Mississippi.

U.S. News rankings imply that Harvard graduates do well because they went to Harvard, notes Liz Shaughnessy. But these schools “primarily admit rich, smart students . . . who may have done well at any college or university.”

In contrast, Brookings Institution focuses on the value-added boost that these schools actually provide their graduates when controlling for such factors as student’s wealth, their academic profiles and their majors. Depending on government and private sources, the think tank analyzes the difference between actual alumni outcomes (like salaries) and the outcomes one would expect given a student’s characteristics and the type of institution.

Cal Tech alum with 10 years of work experience, for instance, earned 49 percent higher salaries than would have been predicted, with the average grad earning $126,200. Grads from Colgate, a liberal arts college in upstate New York, were earning slightly more at $126,600, which is 46 percent more than would have been predicted.

Colleges rank higher if they encourage high completion rates, offer generous financial aid and produce more graduates in engineering, health care, computer science and business.

The ranking also looks at graduates’ ability to repay their student loans and the salary trends of alumni’s occupations.

College pays for ‘marginal students’

Enrolling in a four-year college brings large benefits to marginal students, concludes David Leonhardt in the New York Times. Students who barely qualify for a four-year university — say, a C+ average and an 840 SAT — go much farther than those who just miss the cut-off, according to two new studies. Lower-income students and men see the largest gains.

In a Georgia study, about half of those who just made it into a state university earned a bachelor’s degree in six years. That compared to a 17 percent graduation rate for those who just missed, many of whom started at a community college.

“I fell in love with learning,” said Carlos Escanilla, a graduate of Florida International University.  Photo: Brian Smith/New York Times

Carlos Escanilla “fell in love with learning” at Florida International University. Photo: Brian Smith/New York Times

Florida students who just cleared the cut-off earned 22 percent more by their late 20s than those who just missed.

“It’s genuinely destructive to give people the message that we’re overinvesting in college, that we’re in a college-debt bubble, that you’ll end up as an unemployed ethnomusicologist with $200,000 in debt working at Starbucks,” David Autor, an MIT economist, told Leonhardt.

The story’s anecdote features Carlos Escanilla, a C+ slacker with a 900 SAT (out of 1600) who squeaked into university. He earned bachelor’s and master’s degrees and now a psychotherapist.

There are late bloomers. But how many?

College pays — in different ways

It’s hard to estimate the labor market returns of college, concludes a new Aspen Institute report.

A Harvard graduate who becomes a teacher may earn less than a community college-trained engineer or nurse. A bachelor’s in history may have little market value — till it’s used to earn an MBA.

An associate of arts degree has no stand-alone market value, but it can be a low-cost step to a four-year degree that raises earnings.

Career-tech students — especially adult workers — improve their earnings even if they don’t finish their community college programs.

The Onion reports on Maryland senior Kevin Grant, who doesn’t realize that rejection by his first-choice college means his future is over.

“It sucks, but the good news is I did get accepted to Rutgers and Maryland, which are both really solid schools,” said Grant, somehow managing a smile even though his inability to attend his top-choice university has obliterated any possibility he will ever get into a good graduate school, embark on a satisfying career, or make enough money to support himself, let alone a family. “Tufts was probably a long shot, anyway, but I’m still glad I applied.”

“I’m sure I’ll be happy wherever I end up,” added the student destined for a life of limited opportunities, unending frustration, and bitterness.

It’s satire.

College pays — but not much for some majors

Recent college graduates who majored in psychology, social work or the arts earn a median income of $31,000, according to From Hard Times to Better Times, a new report from Georgetown’s Center on Education and the Workforce. The median salary of workers with only a high school diploma –including experienced workers — is $32,000.

New humanities and liberal arts graduates earn a median of $32,000. Education majors start at $33,000, on average.

On the flip side, new engineering graduates average $57,000 a year.

Of course, college graduates are likely to move up the salary scale as they gain experience, leaving most less-educated workers behind.

Unemployment rates are declining for college graduates — except for communications and journalism majors, the report finds. College graduates have maintained their earnings advantage over high school-only workers, who are earning less. However, “a full recovery in the employment of college graduates, especially at the Bachelor’s degree level, may be as far off as 2017 and a full recovery in earnings may take longer,” the report concludes.

Certificate holders out-earn 4-year grads

People who’ve earned long-term vocational certificates and associate degrees start at higher wages than four-year graduates, a Tennessee study shows. After five years, the bachelor’s degree holders have caught up with two-year graduates, but don’t quite earn as much as the certificate holders.