Most academics and politicians say yes and call for more funding and student aid to educate more students. They point to big income gaps between groups of Americans with various levels of education. But with record student loan debt and insufficient jobs in a lackluster economy, it’s difficult to justify the expense in all situations. More and more Americans are asking this question than ever before and for good reason, but the answer is not simple.
So why go to college in the first place? A college education consists of a combination of general education and career preparation. The general education part should help you understand the world in which you live and enable you to make more out of life regardless of your income. The career preparation part should give you the skills you need to enter a chosen field. General education is very important and is not done equally well at all schools. The general left-leaning bias inherent in many courses in arts and sciences is a real problem, but I’ll deal with that on another day. For now, let’s think about the career preparation part as the financial investment.
You can’t evaluate career preparation without considering majors. To put it bluntly, different majors prepare students for different jobs with different market prospects. Majors in areas such as science, business, and engineering offer relatively strong prospects—on average—while majors in the liberal arts are less likely to lead to more lucrative careers. I’m not suggesting that you major only in certain fields, but that you understand the likely outcomes after graduation. My point here is that you can’t consider the value of a college degree without considering the area of study. You’re not comparing apples to apples.
Is the degree worth the cost in time and money? Many recent studies attempt to calculate the average return on degrees from various colleges and universities. The April 5, 2014 issue of The Economist examines costs and job placement statistics, and reports that a degree from the University of Virginia leads the pack with an estimated annual return on investment of 17.6%. Shaw University is the lowest on the list, with an estimated annual loss of 10.9%. Read the story at www.economist.com/news/united-states/21600131-too-many-degrees-are-waste-money-return-higher-education-would-be-much-better.
While it is true that some colleges are—on average—a better “investment” than others, there are two major flaws to studies like this. First, the amount a student actually pays to attend a given school can vary greatly, depending on scholarships, grants, and the like. Second, students who are better prepared for college academically and are better connected are more likely to earn more after school regardless of where they go. In other words, many Ivy League students come from connected families and are destined for a good job after graduation regardless of what they learn in school. Because there are more of these students at some schools than others, it can lead one to conclude that those schools represent a better “investment.” Again, you’re not really comparing apples to apples.
So what do we conclude? Some of my academic colleagues might shoot me, but I’ll say it anyway. Given economic reality, college isn’t for everyone. A good education can be a real asset in both your personal and career lives, but a mediocre one can leave you with false expectations and a lot of debt. College is really an individualized decision. What’s best for you is not best for someone else.
I didn’t answer a burning question, however. Why was a college degree a stronger investment in the past than it is today? The answer has a lot to do with government efforts to increase the number of college graduates, including increases in student aid. Subsidies always raise prices, and this has certainly been the case for tuition. In an era of technology that should improve the efficiency of course delivery, costs have skyrocketed, making it more difficult for students to justify the expense. I’ll get into this on another day.