Wondering if College is a Good Investment? You’re Asking the Wrong Question.
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It’s a question that gets asked with alarming regularity these days, but it’s a somewhat fair question. Is it worth spending significant sums of money and going into debt to go to college? It’s been brought up yet again by Megan McArdle of The Daily Beast, so let’s see if we can’t solve it, once and for all.
You’d think this would be a tougher question to answer, given how frequently it comes up. It’s really not. Just take a quick look at the chart above. It speaks pretty well for itself.
Still pondering the question? Unless you enjoy low chances of actually being employed and don’t mind perpetually being among the most vulnerable people in our society, the value of an education isn’t really one that’s up for debate.
I hope you’re still reading, however, because while this might be the definitive answer to a commonly asked question, it’s not the end of the story. That’s because there are other, better questions one should be asking. Let’s take a quick run through some of them.
Is an investment in any college degree worthwhile?
A fairly common misconception among Americans is that getting a college education is a good investment–full-stop, end of story. I mean, did you SEE that chart up above? Of course you should get a bachelors degree or beyond!
Unfortunately, these charts don’t tell the full story. College degrees come in a lot of different flavors, and it doesn’t take a whole lot of critical thinking to know that a PhD in Russian pastoral literature is not, in fact, just as valuable as a plain, old bachelors degree in chemical engineering. That PhD is probably not even as valuable as a certificate in HVAC installation and maintenance.
That’s not a story that we’ve become adept at telling to prospective students, but it certainly factors into much of the narrative of why we’re now questioning whether or not spending money on college is a worthy investment. Chances are pretty good that you know someone who has a degree in theater, psychology, or some other humanities-based field that has struggled mightily throughout the recession. Or maybe you know someone who went back to school—inspired by CSI: Las Vegas—to become a criminal forensic scientist, only to find that a surprisingly large percentage of the 26 million viewer audience had the same inspiration, totally over-saturating that job market. And because pretty much everyone knows someone like that, it gives us pause when considering the college question.
The story that should have been told, but largely hasn’t, is that what you major in matters just as much as what degree you hold. The Georgetown Center on Education and the Workforce released a fairly exhaustive study on the subject in their January 2012 report, Hard Times: College Majors, Unemployment and Earnings: Not All College Degrees Are Created Equal.
In the past, we used to just say “everyone should go to college”, which makes for a nice bumper sticker. Our higher education policies match that concept—you will get the same Pell Grant, Work-Study, and subsidized student loan offers regardless of whether or not you’re studying to be an astrophysicist or a piano instructor. The current system incentivizes the “just study anything” approach, which leads to poor decision-making. “You’re subsidizing people to become priests and poets and so forth,” says Nobel Prize winning economist, James Heckman.
It’s more than that, however. It’s subsidizing a continuing skills gap, where the talents of the workforce don’t match employer needs. Worse, since tuition keeps rising well beyond what financial aid can cover, it’s effectively paying a lot of students to take on debt they have little chance of paying off. When a system incentivizes both supply- and demand-side suffering—all while adding unsustainably to the mountainous federal debt—that’s the very definition of a deleterious policy.
We simply must be more nuanced. We have to present better data and information to students and families about their career options so they can make better decisions about what they should study, and our policies and programs surrounding student access and affordability have to evolve to match the message. It’s clear that we have to make some significant adjustments to how we think about student financial aid, either by giving more money to people to choose to study in high-demand occupations, or by offering less to people who don’t.
Can the investment in education be made better?
The answer to this question is a resounding “YES!” I’ve discussed this topic a bit in recent months (here, here, and here), so I won’t go too far down this road. The bottom line is that finding ways for colleges to reduce financial waste is easier than taking candy from a candy-hating baby. Institutions don’t leverage their purchasing power, they don’t leverage technology to reduce costs, and they have bureaucracies that make the federal government’s look simple.
Nor do these inefficiencies stay away from the classroom. At many larger institutions, it’s common to have 15 sections of the exact same class. At a time when we can have millions of people watching the same video at the same time, this is insanity. Richard Vedder, an Ohio University economics professor who heads the Center for College Affordability and Productivity, explains why: “We’ve been slow to adopt new technology because we don’t want to. We like getting up in front of 25 people. It’s more fun, but it’s also damnably expensive.” Reduce just a few of these sources of immense financial waste and you can begin to literally reverse the trend of rising tuitions.
Unfortunately, colleges have no incentive to do any of this. You saw the chart up above.
So did they.
They know people have to go to college. The demand for their product isn’t going away. And it’s tough to find a viable political candidate seeking to end student aid, meaning the money isn’t going to stop flowing to them.
Why should they change? Because it’s the right thing to do? Please—when has that argument ever worked when it came to money and power?
The truth is that they’re not going to change until someone forces change upon them. And the truth is that unless someone does, we’re only going to continue to have people question whether or not going to college is a good investment. That leads to fewer college graduates, higher unemployment, and a growing skills gap.
That affects the bottom line in a direct, tangible way that we cannot afford. Business leaders have to take up the cause and prompt higher education and elected officials to make the changes we need to make college a better investment.