As Ms Styles’s story shows, there is no simple
answer to the question “Is college worth it?” Some degrees pay for themselves;
others don’t. American schoolkids pondering whether to take on huge student
loans are constantly told that college is the gateway to the middle class. The
truth is more nuanced, as Barack Obama hinted when he said in January that
“folks can make a lot more” by learning a trade “than they might with an art
history degree”. An angry art history professor forced him to apologise, but he
was right.
College graduates aged 25 to 32 who are working
full time earn about $17,500 more annually than their peers who have only a high
school diploma, according to the Pew Research Centre, a think-tank. But not all
degrees are equally useful. And given how much they cost—a residential four-year
degree can set you back as much as $60,000 a year—many students end up worse off
than if they had started working at 18.
PayScale, a research firm, has gathered data on
the graduates of more than 900 universities and colleges, asking them what they
studied and how much they now earn. The company then factors in the cost of a
degree, after financial aid (discounts for the clever or impecunious that
greatly reduce the sticker price at many universities). From this, PayScale
estimates the financial returns of many different types of degree (see
chart).
Hard subjects pay off
Unsurprisingly, engineering is a good bet
wherever you study it. An engineering graduate from the University of
California, Berkeley can expect to be nearly $1.1m better off after 20 years
than someone who never went to college. Even the least lucrative engineering
courses generated a 20-year return of almost $500,000.
Arts and humanities courses are much more
varied. All doubtless nourish the soul, but not all fatten the wallet. An arts
degree from a rigorous school such as Columbia or the University of California,
San Diego pays off handsomely. But an arts graduate from Murray State University
in Kentucky can expect to make $147,000 less over 20 years than a high school
graduate, after paying for his education. 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.
Colleges that score badly will no doubt grumble
that PayScale’s rankings are based on relatively small numbers of graduates from
each institution. Some schools are unfairly affected by the local job
market—Murray State might look better if Kentucky’s economy were thriving.
Universities that set out to serve everyone will struggle to compete with
selective institutions. And poor colleges will look worse than rich ones that
offer lots of financial aid, since reducing the cost of a degree raises its
return.
All these caveats are true. But overall, the
PayScale study surely overstates the financial value of a college education. It
does not compare graduates’ earnings to what they would have earned, had they
skipped college. (That number is unknowable.) It compares their 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.
What is not in doubt is that the cost of
university per student has risen by almost five times the rate of inflation
since 1983, and graduate salaries have been flat for much of the past decade.
Student debt has grown so large that it stops many young people from buying
houses, starting businesses or having children. Those who borrowed for a
bachelor’s degree granted in 2012 owe an average of $29,400. The Project on
Student Debt, a non-profit, says that 15% of borrowers default within three
years of entering repayment. At for-profit colleges the rate is 22%. Glenn
Reynolds, a law professor and author of “The Higher Education Bubble”, writes of
graduates who “may wind up living in their parents’ basements until they are old
enough to collect Social Security.”
That is an exaggeration: students enrolling
this year who service their debts will see them forgiven after 20 years. But the
burden is still heavy for many. It does not help that nearly a third of those
who take out such loans eventually drop out of college; they must still repay
their debts. A third transfer to different schools. Many four-year degrees drag
on longer, and so cost more. Overall, the six-year graduation rate for four-year
institutions is only 59%.
The lousy national job market does not help,
either. A report by McKinsey, a consultancy, found that 42% of recent graduates
are in jobs that require less than a four-year college education. Some 41% of
graduates from the nation’s top colleges could not find jobs in their chosen
field; and half of all graduates said they would choose a different major or
school.
Chegg, a company that provides online help to
students, collaborated the study. Dan Rosensweig, its boss, says that only half
of graduates feel prepared for a job in their field, and only 39% of managers
feel that students are ready for the workforce. Students often cannot write
clearly or organise their time sensibly. Four million jobs are unfilled because
jobseekers lack the skills employers need.
Grading the graders
For all their flaws, studies like PayScale’s
help would-be students (and their parents) make more informed choices. As
Americans start to realise how much a bad choice can hurt them, they will demand
more transparency. Some colleges are providing it, prodded by the federal
government. For example, the University of Texas recently launched a website
showing how much its graduates earn and owe after five years.
“Opportunity”, said Mr Obama on April 2nd,
“means making college more affordable.” In time, transparency and technology
will force many colleges to cut costs and raise quality. online education will
accelerate the trend. In 2012, 6.7m students were taking at least one online
course. Such courses allow students to listen to fine lecturers without having
to pay for luxurious dormitories or armies of college bureaucrats. They will not
replace traditional colleges—face-to-face classes are still valuable—but they
will force them to adapt. Those that offer poor value for money will have to
shape up, or disappear.
