With debt soaring for college loans and the current generation of post-graduate college students being hogtied by their loan burdens, the question of how much sense this all makes comes to one’s mind. Well, a couple of noted individuals did a detailed analysis of that and came to their own conclusions.
Jaison R. Abel, research officer, and Richard Dietz, Assistant Vice-President for Regional Analysis of the Federal Reserve Bank of New York, cast their eyes on this issue. Unfortunately, repeated requests for an interview were turned down. Their study -- named Do the Benefits of College Still Outweigh the Costs? -- brought to mind one immediate question which is why the New York Fed looked at this issue in the first place.
They came to the conclusion that “once the full set of costs and benefits is taken into account, investing in a college education still appears to be a wise economic decision for the average person.” Once you review their charts and graphs you may come to the same conclusion. The unanswered questions still remain that may make it not so for many college attendees.
Their findings stated that on average, workers with a bachelor’s degree earn well over $1 million more than high school graduates during their work career. A question that would be nice to get answered is whether that is because of the college education or because of the nature of the individuals involved? Certainly many professions restrict your entry into them without a college degree, but that does not mean that the person who succeeds in college succeeds in life financially because of the college degree. We do not have to lurch to Bill Gates or Mark Zuckerberg (both Harvard University dropouts) to know that people who attend even superior colleges don’t often need to attend college to be financially successful in life. When the population of college attendees typically includes the smartest and most motivated people in our country, it follows that they would have higher lifetime earnings than the population as a whole.
But also notice the authors noted that the average earnings are $1,000,000 higher. Let us consider over a 40-year career that would be about $25,000 per year. There certainly are many people who will have either zero increased earnings or something like $10,000 per year on average. Those increased earnings will increase to a higher level as their careers propel forward, leaving these degree holders with little or no increased earnings in the first few years of their career and many harnessed with $60,000 to $100,000 of debt for student loans. I have counselled two young adults in recent weeks with debt exceeding $150,000 for advanced degrees.
This mountain of debt has been documented as being a stall on this generation acquiring homes because of the burden that decreases loan capacity. Also, for many of these people, their burden of debt is stifling them from taking risks to start their own businesses. Both of these issues, home purchases and business starts, are reflective of the costs of college, the debt incurred to attend college, and the resulting sometimes meager increased earnings culminating in casting a giant shadow on the future of many of these young graduates.
One of the questions I wanted to address to the authors of the study was whether people receiving some of the proliferation of degrees that leads them to unknown careers was really worth the time and money to attend college. They did include a section entitled Does Your Major Matter? They clearly stated that certain majors have a greater economic return, while they likewise stated that other majors still gave a great rate of return on investment. What we don’t know is how many of those degrees end up being totally useless because jobs are not available in any shape or form.
As a society we have put a tremendous distorted premium on attending college. Many high school students are told through societal norms that their lives will be a failure if they do not attend college. We have completely de-emphasized training for jobs that are lucrative, but not needing of a college degree. Many of those positions have gone begging in our current environment.
We currently have a person considering running for president for the first time since President Harry Truman who did not graduate from college. Governor Scott Walker attended college for three years, but did not finish. Not finishing college has brought some to question his qualifications to be president. Last time I checked that was not one of the items listed in the Constitution. And the doubters have discounted that his vast experience in government over the last 20+ years might actually be more important than that last year of college. A typical analysis was done by Albert Hunt in Bloomberg entitled Can Walker be President without a College Degree? A discussion like this crystalizes the distorted emphasis on that magical piece of paper.
The authors should have been open to a deeper analysis. It would be nice to address the trillion dollar noose around the neck of college grads for the cost of college. But none of that was done and more needs to be looked at before we continue to give this unbridled premium to colleges -- societally and financially.
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