John Edward teaches economics at Bentley and UMass Lowell. He’s a frequent contributor of columns on economic issues. Here is his latest:
Parents considering spending a quarter of a million dollars must wonder. Graduates saddled with debt must think about it. UMass Lowell just launched an advertising campaign based on the question — Is College Worth It?
Economists, of course, have the answer. The answer is – it depends.
Some data points make a compelling case for investing in a college degree:
• Last month the official unemployment rate was 6.7 percent. For those with a Bachelor’s degree or greater the unemployment rate was 3.3 percent.
• According to the Bureau of Labor Statistics (BLS), the median annual income in 2012 was $42,380. For those with a Bachelor’s degree or greater it was $55,430.
• The average lifetime earnings for a college graduate is almost a million dollars more than someone with only a high school diploma.
However, average earnings, median income, and employment do not tell the full story:
• The BLS says roughly half of graduates of 4-year colleges are “underemployed” which means they are working in jobs that do not require a Bachelor’s degree.
• They also estimate that about 5 million graduates are working in jobs that do not even require a high school diploma.
• A Federal Reserve study reports that 1 out of 5 recent college graduates work in jobs earning less than $25,000.
• Earnings vary considerably by discipline and profession. For example, if you graduate with a degree in engineering or economics you will make, on average, twice as much as a social worker (speaking as an economist, there is something wrong with that).
We must also consider the expense of getting a college degree:
• At Bentley University the official price tag for one year of tuition, fees, and “typical expenses” is $56,930 for a resident student. At UMass Lowell it is $23,340 for in-state students — $12,097 without room and board.
• The annual tuition I paid in 1977 to attend UMass Dartmouth, after adjusting for inflation, would be $1,300 today (without room and board).
• According to the College Board, even after taking into account increases in financial aid and inflation, the cost of the average 4-year private non-profit college has increased by 30 percent over the last two decades.
• For the class of 2012, 71 percent graduated with student debt, with an average outstanding debt of $29,400. Within three years, 15 percent of college graduates default on their loans.
• While college students are running up debt they also pay an opportunity cost – four years when they might have been able to work in customer service or a trade and get a good head start on their lifetime earnings.
Not everyone pursues a college degree with a focus on earnings. However, many do.
For too many prospective college students the financial hurdles are too high. Some never attend, despite their potential, due to the high price tag. Many try to balance school and making money to pay for school, and fail to achieve their potential.
At the same time, too many students pay to go to college with bleak prospects and poor results. Some attend under the mistaken belief that a degree guarantees a well-paying job. Some are not ready academically or lack maturity. Sadly, some pay tuition but do not take their money’s worth, for example by failing to attend classes.
We need to do a better job of providing career paths. We need to do a better job giving young people guidance to find a career path that works for them.
• If Massachusetts is to truly earn the designation as a Commonwealth, we need to reinvest in higher education – no Massachusetts resident who has done well in K-12 schooling should be denied the opportunity to attend a state university because they are low-income (this includes the children of illegal immigrants).
• The Massachusetts K-12 system needs to do well by its students and make sure they, for example, know what two-tenths of a pound means.
• We need to integrate the traditional K-12 schools with technical high schools.
• K-12 systems have to do a better job of offering guidance to students – making them aware of opportunities other than college that may suit their circumstances, for example, trade school.
• Nationally, we should emulate Germany’s “dual system” which combines high school academics with on-the-job training – giving high school graduates marketable skills and a youth unemployment rate less than half of the U.S. rate.
• Community colleges need to serve a dual role – by providing remedial education they serve as a gateway to 4-year programs, but they should also be a destination for advanced training programs that prepare students for the jobs in demand.
• Colleges must lower administrative costs (which have risen sharply in the last 20 years), end exorbitant pay to top administrators (which alienates students and alumni), and tame grade inflation (which lowers the value of a degree).
• The business community needs to take more responsibility by working with schools to help train the workers they will need – the internship programs that have become so prevalent, and in some cases a prerequisite to employment, should be expanded to paid apprenticeships.
• For those who choose to serve in the military or perform public service, financial assistance for college should be readily available — expanding the G.I. Bill.
So is college worth it – maybe. It depends.
So is college the answer to inequality – probably not. More on that next time.