With Costs Skyrocketing, Is College Still Worth It?

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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.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • igx

    “More debt means more risk” Exactly. People should be able to get educated (even if just for the sake of learning something and not job “signaling.”) if they want with out ending up with an excessively risky, poorer life. It’s idiotic. The cost of college goes up and up and society gets dumber and dumber.

    Jason Lewis explains it this way: the vast majority would be better off simply putting their college cost money into a single premium annuity. They would retire way more dependably with less stress.

    Who’s to blame? Government.

    • borborygmi

      Did someone put a guns to the students head and force them to school?

  • igx

    Stay on this Rob. Excellent.

  • kevindf

    It depends on the degree. Many are not marketable.

    • igx

      If the price was what it was worth, it wouldn’t matter. You should be able to get an english or history degree with out it being a huge financial deal.

      • kevindf

        The free market decides that. Ryan Kohler received a degree in “falconry” from NDSU. What’s next; a degree in sorcery?
        http://www.inforum.com/event/article/id/381066/publisher_ID/1/

        • igx

          The problem is government inflates the cost and we have / had this phenomena form the past that college graduation was an “economic signal” that one would be productive in the work world.

          Personally, I don’t think it’s much of a signal anymore. Furthermore, higher education done right and at a fair price is good for people and good for society.

          Instead, we have a giant reverse redistribution debt bomb that makes people dumber, like you point out.

  • ND Observer

    You are right on target. When you in a college town, ask the college students in restaurants, retail and other businesses how many hours they work while taking a full load of classes. About 70% (!!) of college students need to have a job to keep in school, to keep debt down somewhat. Many students are working 30-40 hours per week in one or two jobs. College tuition & fees have soared as wages have not. This while colleges hire scores of new, overpaid administrators on the backs of students but they hire virtually no new professors so that students cannot get classes when they need them in very busy schedules. There are departments which cannot get allocations for faculty with much increased enrollments because administrators want to put their funds into other priories of little use to the state or of little value to students. Two greatly underfunded departments at UND are petroleum engineering and entrepreneurship – exactly the kind of graduates our state needs.

    Administrators suggest more scholarships are the answer. But most scholarships are for those above a 3.5 GPA or athletes, not for the super majority who working and juggling such busy schedules they cannot keep grades up above 3.5. So many scholarships go to the students who least need the financial help. Colleges just want scholarships because those funds get dumped into their funding accounts the beginning of every semester and they do not to collect fees from students i..e make collecting dollars easier for administrators. College administrators should be forced to trim 5% each year for 4 years out of their administrative costs (20% total), including staffing, and reallocate those funds to where it directly helps students and lower their costs, and increases their chances of graduation, and completion on time.

  • Flyby_Knight

    Any diesel mechanic in ND right now is making 3-4 times what an English major does.

    • borborygmi

      And a Dr and Soft ware Engineer are making more then the Diesel Mechanic with out sucking in diesel fumes, So what. College isn’t for everyone one the same the Diesel Mechanic School or Welding School isn’t for everyone.

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