Is College Worth It? Increasingly, the Answer is No

Is college worth it? Throughout history the answer has been a resounding ‘yes!’ A college degree has the gateway to success for every generation, a piece of paper that has largely ensured relative financial comfort. Increasingly, however, some are finding that, at best, the value of a college education is diminishing, and at worst, it’s a financial weight around their neck.

The cost of college has been rising inexorably for decades, a problem made worse by stagnating wages.

“In the last 20 years, tuition has increased in real dollars, after taking inflation into account, more than 100 percent at public four-year institutions and more than 60 percent at private four-year institutions and public two-year institutions while family income in real dollars has increased less than 20 percent over the same time period,” Lucie Lapovsky writes in Forbes.

Those numbers are astounding, and yet focusing on tuition actually masks the severity of the problem.

Colleges have increasingly turned to fees to supplement tuition revenue while also appearing to remain competitive to price-conscious parents. Jon Marcus, reporting for the Atlantic, found that student fees at four-year colleges averaged $1,719 in 2012-2013 school year, which was double what they were in 1999-2000. Those fees covered everything from academic-building fees, to life-safety fees, to cultural-enrichment fees, to bicycle path-maintenance fees, to the most contentious fee of all—the athletic fees (Ohio University found that the average student was paying $130 in fees for each game they actually attended!).

And that still leaves tremendous expenses like books, housing, food, and everything else that a human requires to survive to actually receive the education they’re paying for. Little wonder then that higher-education enrollment has declined from 20.6 million students in 2011 to 19 million in 2016.

In short, many young adults are making a financially reasonable decision. As economist and professor Richard Vedder writes in the Wall Street Journal:

American families have taken on more than $1.3 trillion in student-loan debt—more than what they borrow with credit cards or to buy cars.

Less well known is that the earnings advantage associated with a bachelor’s degree compared with a high school diploma is no longer growing like it once did. Census data show that the average annual earnings differential between high school and four-year college graduates rose sharply, to $32,900 in 2000 (expressed in 2015 dollars) from $19,776 in 1975—only to fall to $29,867 by 2015. In the late 20th century rising higher-education costs were offset by the increasing financial benefits associated with a bachelor’s degree. Since 2000 those benefits have declined, while costs have continued to rise.

The tremendous investment is also becoming increasingly risky. Research from the New York Federal Reserve Bank finds that around 45 percent of college graduates are “underemployed,” which they define as college graduates working in occupations that don’t require a college degree. With the soaring costs of a college education, the risk of being stuck in a low-paying dead end job can be almost too much to bear.

An improving economy that fosters innovation and high-paying jobs is an obvious answer, though it is easier said than done. But in pursuing that goal our policymakers must not overlook the cost side of the equation. The “risk” of college goes down as the cost of the investment goes down as well.

Although this too is a complex policy challenge, at the very least they should begin to push for better-targeted subsidies. For instance, another New York Federal Reserve study found that around 55 and 65 cents of every Pell Grant and subsidized loan, respectively, was passed on to students in the form of higher tuition.

“[W]hile one would expect a student aid expansion to benefit its recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect,” the researchers conclude.

That’s not to say that targeted assistance has no place in higher education. Quite the opposite. Only by focusing where aid is needed can we begin to make college more accessible and affordable for everyone and reverse the trend of higher education becoming and increasingly dangerous investment. If we want college to continue to be worth it, we must begin by truly valuing it, which is far different than throwing money at it.