This past Tuesday, David Leonhardt of The New York Times addressed a common question confronting many American households, “Is College Worth It?” His conclusion, “Yes, college is worth it, and it’s not even close.” In his report, he cites new analysis from the Economic Policy Institute in Washington that reports that Americans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree and that this disparity far outweighs the increasingly high costs of college.
But, as Ben Casselman of FiveThirtyEight.com puts it “just because people who graduate from college are better off, doesn’t necessarily mean that going to college is a good decision. Most of the benefits of college come from graduating, not enrolling.” Specifically, as debt levels for college attendance continue to rise, the wage premium for people with “some college but no degree” has been stagnant. That means that people who start college but drop out are likely to be worse off than people who never enrolled in the first place—the National Center of Educational Statistics (NCES) reports that this is roughly 2 in 5 students.
Although some may see this result as a clear limitation or discouragement for higher education, Leonhardt argues that this is really just a call for greater focus to be spent improving graduation rates as the need for advanced training will only increase. Others, like the Consumer Financial Protection Bureau (CFPB)*, have taken a different angle calling for greater transparency in the financing of college education. With their “Know Before You Owe: student loans project,” they have developed a resource allowing students to compare aid packages offered by different institutions. This consumer empowerment angle has also been championed by states like Texas who have begun to provide students tools like myfutureTX.com to measure return on investment for its state universities.
There really is no simple answer to the question ‘is college worth it?' Preliminary evidence suggests 'yes' for those that graduate, but the odds of this result are not good. Further, considerable variation exists for those that do graduate based on factors like school, major, and financial aid. What is clear is that continued attention must be paid to understanding the causes for this variation and identify ways to mitigate these risks through programs before (e.g., preparation in primary education), during (e.g., transparency in costs), and after (e.g., student support program) the decision to attend college has been made. *Consumer Financial Protection Bureau (CFPB) is a client of Fors Marsh Group.