Governments have long touted college as a golden staircase to
social mobility and economic growth, but with rising tuition fees and stagnant
graduate earnings, the disillusionment with higher education is growing like a
dark cloud on the horizon.
It is graduation season again, but is college still a boon for
social mobility and economic growth? At one time, the answer to that question
appeared to be obvious. Over the past several decades, increasing numbers of
young adults in both developed and less developed countries have been enrolling
in higher education programs. College has been lauded by governments as a means
of improving both social mobility and economic prosperity. Recently,
disillusionment is growing as a result of rising tuition costs and graduates'
incomes remaining flat or static. There is a significant body of scholarly
material that points to a worsening confidence problem. For instance,
a survey that was conducted and published by the Wall Street Journal,
which is a newspaper that focuses on business news, found that 56% of
people in the United States currently believe that earning a degree is no
longer worth the effort and expense that it requires.
At least for a normal college freshman, this doesn't fit with the
facts. In most places and for most students, getting a college degree still
brings in a lot of financial benefits. Yet getting a degree has become riskier.
The benefits for the best students are getting better, but a worryingly large
number of students aren't getting anything financially good out of their
studies.
New data sets, like tax records, are shedding more light on this
than ever before. They can basically keep track of how much students who
take certain classes or pursue certain degrees at specific
colleges earn in the future. In the long run, this information will help
students avoid the worst payoffs and grab the best ones. Choice of college
degree and time of graduation are very important, but choice of college or
university isn't as important. It could also help states who want to stop
people from getting low-value degrees.
In the rich world, college graduates started making more money in
the 1980s. The college-wage premium, which is what people call the
difference in pay between people with at least a bachelor's degree and those
without one, started to grow at that time. In the 1970s, an American with a
college degree made 35% more than an American with a high school diploma. This
edge had grown to 66% by 2021.
In many countries, the pay premium has either stopped going up or
is starting to go down. Costs have also gone up in places where students have
to pay for their degrees (see Table 1). In the late 1990s, there was no tuition
in England. Now, it costs £9,250 ($11,000) a year, which is the most in the
rich world. From about $2,300 a year in the 1970s to about $9,000 a year in
real terms, the out-of-pocket costs of a bachelor's degree in the United States
have gone up, according to the available published evidence. Most of the time,
students at public universities pay a lot less than those at private
non-profits.
Still, the average degree is still worth something. Studies have
given a rough estimate of how much money an average American earns each year
after getting a bachelor's degree. There is a lot of other published data that
shows the average rate of return for a bachelor's degree in 2019 is around 14%.
In the early 2000s, that was as high as 16%. But it's still a lot of money. And
it's a lot more than the 8–9% that American graduates made in the 1970s, before
pay for graduates and tuition fees started to go up. These figures take into
account both fees and the amount of money a person could make if they worked
full-time instead.
But the averages hides a wide range of results. Until
recently, polls were the main way for economists to figure out who won and who
lost when it comes to getting college degrees. Governments, like those of
Britain and Norway, are now more likely to offer large, anonymous records that
show the real earnings of millions of college students. This makes it much
easier to compare people who has various degrees. The broken-down numbers show
that a lot of students get degrees that aren't worth the money they cost.
The Institute for Fiscal Studies (IFS), a research group, says
that in England, 25% of male graduates and 15% of female graduates will make
less money over the course of their jobs than their peers who do not get a
degree. America has less complete data, but they have started putting out
information about how many students at thousands of
colleges don't earn more than the average high school graduate early on.
Researchers at Georgetown University in Washington, DC, have found that 27% of
students who start at a normal four-year college do not finish it six years
later. More than half of the people who enroll in the long tail, which is
made up of the worst 30% of two- and four-year schools in the U.S., don't meet
this standard.
Table 1: Estimated Average Cost of Bachelor’s Degree (Tuition Fees)
by Country
|
Country
|
Tuition
(International)
|
Living
Expenses
|
|
Argentina
|
Free to $15,000
|
$2,800 -
$5,000/year
|
|
Australia
|
$20,000
(public) - $45,000 (private)
|
$16,700/year
|
|
Canada
|
$20,000 -
$45,000
|
$15,000 -
$17,000/year
|
|
Brazil
|
Free to
$15,000
|
$4,200 -
$17,800/year
|
|
U.K. (England)
|
$17,000 -
$43,000
|
$21,700
|
|
U.K. (Scotland)
|
$25,000
|
$20,000
|
|
Denmark
|
$8,000 -
$21,000
|
$13,500/year
|
|
Germany
|
Free to
$35,000
|
$14,400/year
|
|
Spain
|
$850 -
$28,000
|
$12,000
|
|
China
|
$4,700 -
$46,000
|
$14,600
|
|
France
|
$3,400
|
$12,200
|
|
Japan
|
$7,200 -
$16,000
|
$10,500
|
|
India
|
$$350 -
$5,500
|
$4,600
|
|
Russia
|
$1,300 -
$6,000
|
$6,800
|
|
South Korea
|
$16,800
|
$9,500
|
|
Dubai
|
$7,800 -
$32,000
|
$12,500 -
$45,000/year
|
|
Italy
|
$1,200 -
$7,500
|
$9,600
|
|
United States
|
$9,377 -
$37,000
|
$16,300
|
Source: Culled from Education Data Initiative (Hanson, 2021; Hanson, 2023)
Dropping out without finishing is a clear way to lose a lot
of money. Taking longer than normal to finish college also reduces value
because it wastes years that could have been spent working full-time. Both of
these things happen often. Less than 40% of people in the rich world who are
working on their first degrees finish them in the time they are supposed to.
Three years later, about a fifth of them still don't have any qualifications.
Choosing the right course or degree is very important if
one want to make more money with their college education. According
to The Economist, a news magazine, Britons who study creative arts (less
than 10% of men make a good return), social care, and agriculture are most
likely to have negative returns. Engineering, computer science, and business
degrees are by far the most valuable in the United States. Most likely to have
bad results in terms of earning power are music and the visual arts.
Trying to guess a person's total earnings by program based on the data we have
about America is a stretch. But Preston Cooper, who works at a think tank
called FREOPP, thinks that more than a quarter of bachelor's degree programs in
the United States will not pay off for most of the students who graduated from
college.
Most of the time, what you learn is more important than where
you do it. That's true, but there are caveats. The worst colleges and
universities don't offer much value to their students, no matter what they
teach. But the best available data shows that people who go to public
universities in the U.S. make more money over their lifetimes than those who go
to the more prestigious private non-profit universities. One reason for this is
that the non-profits have high tuition fees.
Earnings figures from Britain call into question the idea
that smart college students will always do better if they are forced
to go to very selective schools. Some young people apply for the easiest
subject, even if it doesn't normally bring in a lot of money, in order to get
into the college or university they want. Parents who want their
kids to go to Oxford or Cambridge no matter what should pay attention to this
problem of earning power after graduation. But there is also proof that taking
a high-paying course just for the sake of it can backfire. Academic research
shows that students who want to study arts but end up studying science make
less money after ten years than they probably would have if they had studied
what they really wanted to study.
Men have more reason than women to worry that the money they
put into college won't pay off. This is because they are more likely to make a
good living without a degree. If one didn't do well in school, going to college
is a risk because they might end up making less money than people who got
the same degree but were better prepared.
In Britain, the return on a degree is usually higher for
South Asian students than for white students because they tend to study business.
On the other hand, the return on a degree is usually lower for black students
compared to what people of the same race earn if they don't go to college.
Compared to white and black students, Asian students in America seem to have
the least trouble paying off their student loans.
Changing Landscape
What do you think the takeaways are from all of this
analysis? Already there are indications that the market for higher education is
beginning to change. At varying points in their education, individuals are
already initiating their own searches for lucrative investment opportunities.
Between 2011 and 2021, there was a roughly one-third decrease in the number of
degrees that were awarded annually in English and in history in the United
States. During that time period, the number of people graduating with degrees
in computer science more than doubled. Others are choosing not to attend
college at all. Since 2011, the number of persons who signed up for
college programs has decreased annually.
Additionally, institutions are undergoing change by
eliminating humanities departments. Recent decisions by the board of Marymount
University in Virginia have resulted in the elimination of degree programs in
nine disciplines, including English, history, philosophy, and theology. There are
several universities, like Calvin University in Michigan and Howard University
in Washington, DC, that have stopped teaching their students the classics.
Additionally, the future of archaeology at the University of Sheffield in
Britain appears to be uncertain.
Employers are also adjusting their practices. Companies are
showing a trend toward becoming less likely to insist that job applicants
possess degrees as well. Tight labor markets and the demand for people with a
wider range of experiences and perspectives both contribute to explain why. It
is worth pointing out that just a few years ago approximately 80% of
the jobs that the technology giant IBM advertised in the United States required
a degree. At this point, it is close to 50%. As a result, having a degree is no
longer the sole indication of the skills that a someone may possess.
Should governments put more emphasis on these tendencies? In
Estonia, the percentage of students who complete their degrees within the
allotted time is one of the several metrics that determine how much funding an
educational institution receives. There are also systems like this in place in
Sweden, Finland, Israel, and Lithuania. The Australian government is making an
effort to encourage students to make decisions that are beneficial to society.
The tuition for undergraduate students studying social sciences, political
science, or communications was increased by a factor of two in 2021, while the
tuition for nursing and teaching was decreased by a factor of two. Students do
not appear to be particularly moved by the recent changes, which may be due to
the lenient terms under which student loans are repaid in Australia. The
government of Britain believes that it can change people's behaviors with
respect to choosing the right college degrees by providing each resident
of England with an online account that details the maximum amount of money they
are permitted to borrow from the state for the purpose of furthering their
education over the course of their lifetime. The goal is to instill thriftiness
in those who have graduated from high school.
Others continue to overspend. The President of the
United States, Joe Biden, is optimistic that the Supreme Court would soon give
its blessing to a proposal that was introduced to forgive a sizeable
portion of the student debt in the United States. He also wants a more
forgiving payback method. Over the course of the next decade, the expenditures
associated with this might add up to hundreds of billions of dollars.
Additionally, Mr. Biden pledges to compile an official list of classes of
"low-financial value." The argument for barring weak programs from
receiving funding from the federal government for student loans is more
compelling. However, if Congress does not take action, this will mostly impact
for-profit colleges, which only enroll a small portion of the total number of
students in the United States.
Many people find it offensive that more and more attention is
being paid to the financial benefits of higher education. Graduates who go into
public service will almost certainly make less money than those who work on
Wall Street. There are many fields of study that are valuable in and of
themselves. However, many students respond to surveys by stating that
increasing their earning potential is one of their top priorities. For students
who come from the most disadvantaged backgrounds and for whom the cost of
higher education is the greatest, satisfactory returns are of the utmost
importance. A startling number of people today have the so-called bad degrees
It is possible for their prevalence to be reduced by the implementation of
improved knowledge, market forces, and smarter policies.
The
bottom line is this: Valuable fields of study are like a good book – you can't
judge their worth by the number of pages or the thickness of the cover. In the
meantime, let's hope the prevalence of bad degrees decreases faster than the
time it takes for a student to realize they accidentally enrolled in a medieval
basket weaving course.
Notes
BBC News. (2021, May 21). University of Sheffield
Archaeology Department Threat 'Blow to UK'. Retrieved from
https://www.bbc.com/news/uk-england-south-yorkshire-57199118
Belkin, D. (2023, March 31). Americans Are Losing Faith in
College Education, WSJ-NORC Poll Finds. Retrieved from Wall Street Journal:
https://www.wsj.com/articles/americans-are-losing-faith-in-college-education-wsj-norc-poll-finds-3a836ce1
Britton , J., Dearden, L., Waltmann , B., & van der Erve,
L. (2020, February 29). The Impact of Undergraduate Degrees on Lifetime
Earnings. Retrieved from The Institute for Fiscal Studies:
https://ifs.org.uk/publications/impact-undergraduate-degrees-lifetime-earnings
Carnevale, A. P., Cheah, B., & Van Der Werf, M. (2020). ROI
of Liberal Arts Colleges: Value Adds Up Over Time. Retrieved from
Georgetown University's Center on Education and the Workforce: McCourt School
of Public Policy:
https://cew.georgetown.edu/wp-content/uploads/Liberal-Arts-ROI.pdf
Cooper, P. (2022, March 31). How to Hold Colleges and
Universities Accountable for Prices and Outcomes. Retrieved from FREOPP:
https://freopp.org/improving-return-on-investment-in-higher-education-principles-for-reform-e6ed38c50ae5
Getahun , H., & Snodgrass , E. (2023, March 10). Catholic
Liberal Arts College in Virginia Courts Backlash After Cutting Several Majors,
Including Religious Studies, English, and Math. Retrieved from Insider:
https://www.insider.com/marymount-university-to-cut-9-majors-including-english-math-2023-3#:~:text=Trustees%20at%20Marymount%20University%2C%20a,student%20concerns%20about%20the%20decision.
Hanson, M. (2023, April 3). Average Cost of College &
Tuition. Retrieved from Education Data Initiative:
https://educationdata.org/average-cost-of-college#:~:text=The%20average%20cost%20of%20attendance,or%20%24218%2C004%20over%204%20years.
Hanson, N. (2021, August 9). Average Cost of College By
Country. Retrieved from Average Cost of College By Country:
https://educationdata.org/average-cost-of-college-by-country
Hardy , A., & Tuttle, B. (2023, March 31). Most
Americans Say College Is No Longer Worth the Cost. Retrieved from Money:
https://money.com/college-costs-no-longer-worth-it-survey/
Horton, A. P. (2020, July 28). Why Australia is Doubling
Fees for Arts Degrees. Retrieved from BBC Worklife:
https://www.bbc.com/worklife/article/20200728-why-australia-is-charging-more-to-study-history
Inskeep, S. (2021, May 10). Howard University's Decision
To Cut Classics Department Prompts An Outcry. Retrieved from NPR:
https://www.npr.org/2021/05/10/995389117/howard-universitys-decision-to-cut-classics-department-prompts-an-outcry
National Center for Education Statistics. (2022). Fast
Facts: Most popular majors. Retrieved from https://nces.ed.gov/fastfacts/display.asp?id=37
Nova, A. (2023, April 22). Supreme Court Will Rule Against
Biden’s Student Loan Forgiveness Plan, Legal Experts Predict. Retrieved
from CNBC:
https://www.cnbc.com/2023/04/22/bidens-loan-forgiveness-to-be-blocked-supreme-court-experts-predict-.html
OECD. (2023). The Allocation of Public Funding to Higher
Education Institutions. Retrieved from OECD Library:
https://www.oecd-ilibrary.org/sites/e1f2d1b5-en/index.html?itemId=/content/component/e1f2d1b5-en
Pew Research Center. (2011, mAY 15). Is College Worth It?
Retrieved from PRC Executive Summary:
https://www.pewresearch.org/social-trends/2011/05/15/is-college-worth-it/
Ruggeri, A. (2019, April 1). Why ‘Worthless’ Humanities
Degrees May Set You Up for Life. Retrieved from BBC Worklife: https://www.bbc.com/worklife/article/20190401-why-worthless-humanities-degrees-may-set-you-up-for-life
The Economist . (2023, April 3). Useless Studies: Was Your
Degree Really Worth It? Retrieved from
https://www.economist.com/international/2023/04/03/was-your-degree-really-worth-it
Townsend , R. B. (2021, February 23). Has the Decline in
History Majors Hit Bottom? Retrieved from American Historical Association:
Perspectives on History:
https://www.historians.org/research-and-publications/perspectives-on-history/march-2021/has-the-decline-in-history-majors-hit-bottom-data-from-2018%E2%80%9319-show-lowest-number-since-1980
