In recent years, folks as different as Mitt Romney, Peter Thiel, William J. Bennett, and the disaffected people of the Occupy movement started turning their attention to the cost of college—and the underlying question always seemed to be whether college was still worth its cost.
There has been a lot of evidence to suggest that college is indeed worth it, and plenty of studies and pundits lining up to tout the evidence.
One of the latest comes from College Summit, a nonprofit group that promotes broader college access. Its report, “Smart Shoppers: The End of the ‘College for All’ Debate?,” notes that people have for years predicted a glut of “overeducated” Americans, an environment where college graduates would not be able to get jobs that reflected their years in higher education. But the opposite has happened, the report says: There is more demand for college education in the workplace, and college graduates in fields that might not normally require college—like plumbing or hairdressing—make substantially more. The report puts the college wage premium—the amount that college graduates make compared with mere high-school graduates—at 80 percent.
However, another new report, from three researchers, examines the question again, with a closer look at economic outcomes and more ambivalence. It considers the individual and societal economic returns of a bachelor’s degree, using data from California’s higher-education system.
The paper, “The Economics of B.A. Ambivalence: The Case of California Higher Education,” was written by Alan Benson, an assistant professor in the Carlson School of Management at the University of Minnesota-Twin Cities; Frank S. Levy, an emeritus professor of urban studies and planning at the Massachusetts Institute of Technology; and Raimundo Esteva, a former research assistant at MIT. The authors, members of the Scholars Strategy Network, say that many past assessments of the return on investment for a college degree have been overly optimistic because those studies assumed that the students were graduating within four years. The authors also say the studies might have overestimated the potential earnings because they looked only at pretax salaries and because they didn’t account for variability in pay.
Nevertheless, the researchers had good news for colleges at the bottom line: Yes, college is still a worthwhile investment for both individuals and society. When the California Master Plan for Higher Education was enacted, in 1960, only 10 percent of Californians had a college degree, and the earnings gap between degree holders and non-degree holders was 35 percent. In 2010, they say, that earnings premium was 43 percent—higher than in the past, but still half the figure cited in the College Summit report. But, the researchers point out, the wage gap is higher now not because wages for college-degree holders have gone up, but because wages for people with only a high-school degree have gone down.
And the researchers note that getting that college degree has become increasingly risky, mostly because of the cost of education. As late as 1990, both men and women graduating from California public colleges would have almost no chance of “financial distress,” or what the authors define as having student-loan repayments in excess of 15 percent of their income. In recent years, however, those burdens have become more pronounced. Thirty-year-old men graduating from the University of California system have a 38-percent chance of financial distress, and women have a 55-percent chance.
The authors recommend establishing better advising for college majors and postgraduate education, and offering more loan-repayment options and advice.
“The BA’s risk removes any guarantee while stagnant wages for college graduates have not kept pace with the growing cost of middle-class fixtures including purchasing health care, educating one’s children, and saving for increasing years of retirement,” the authors write. “College remains a good investment for both individuals and the state, but it is a ‘steppingstone’ to the middle class—not a ticket. As such, it deserves the scrutiny an individual would give to any risky investment.”