Defenders of the status quo in higher education take it as an article of faith that despite soaring tuition and alarming levels of student debt getting a diploma from a university is ultimately a wise investment that will outweigh the costs.
But with the student loan bubble looking likely to pop (Washington is already talking bailouts), and the cost of higher education not showing any signs of slowing, is that argument still valid?
The Economist is questioning that assumption:
…there is growing anxiety in America about higher education. A degree has always been considered the key to a good job. But rising fees and increasing student debt, combined with shrinking financial and educational returns, are undermining at least the perception that university is a good investment.
Concern springs from a number of things: steep rises in fees, increases in the levels of debt of both students and universities, and the declining quality of graduates. Start with the fees. The cost of university per student has risen by almost five times the rate of inflation since 1983 (see chart 1), making it less affordable and increasing the amount of debt a student must take on. Between 2001 and 2010 the cost of a university education soared from 23% of median annual earnings to 38%; in consequence, debt per student has doubled in the past 15 years. Two-thirds of graduates now take out loans. Those who earned bachelor’s degrees in 2011 graduated with an average of $26,000 in debt, according to the Project on Student Debt, a non-profit group.
More debt means more risk, and graduation is far from certain; the chances of an American student completing a four-year degree within six years stand at only around 57%. This is poor by international standards: Australia and Britain, for instance, both do much better.
At the same time, universities have been spending beyond their means. Many have taken on too much debt and have seen a decline in the health of their balance-sheets. Moreover, the securitisation of student loans led to a rush of unwise private lending.
Unfortunately, this boom in revenues for the universities hasn’t necessarily led to an increase in spending by the universities on educating students:
Despite so many fat years, universities have done little until recently to improve the courses they offer. University spending is driven by the need to compete in university league tables that tend to rank almost everything about a university except the (hard-to-measure) quality of the graduates it produces. Roger Geiger and Donald Heller of Pennsylvania State University say that since 1990, in both public and private colleges, expenditures on instruction have risen more slowly than in any other category of spending, even as student numbers have risen. Universities are, however, spending plenty more on administration and support services (see chart 2).
The Economist provides this chart showing the increasingly lop-sided ration between faculty employees and non-faculty employees:
This trend holds true here in North Dakota as well where non-instructional employment in the state’s university system has grown 40% since 2003 while instructional staff has grown just 3.54%.
North Dakota, much like the rest of the nation, has seen the cost of higher education inflate while the value of higher ed has stagnated. Or, if anything, has declined. The old tropes we’ve been sold on, about how a college degree is a wise investment whatever the cost, is in a word bogus.
There will always be professions for which obtaining a degree is a necessity, and a wise investment, even at inflated costs. But we’re at a point where going to college shouldn’t be an automatic decision for all students coming out of high school.