As Price Of College Goes Up, Value Of A College Education Drops

This is what happens when government promotes something like higher education with subsidies in the form of “easy money” government loans. We get a bubble, just like the housing bubble which saw the government promoting home ownership with “easy money,” government-backed mortgages.

Soaring tuition costs, a weak labor market and a glut of recent graduates such as Mr. Vonderweidt are upending the notion that professional degrees like M.B.A.s are a sure ticket to financial success.

The M.B.A.’s lot is partly reflected in starting pay. While available figures vary by schools and employers, recruiters’ expected median salary for newly hired M.B.A.s was essentially flat between 2008 and 2011, not adjusting for inflation, according to a survey by the Graduate Management Admission Council.

For graduates with minimal experience—three years or less—median pay was $53,900 in 2012, down 4.6% from 2007-08, according to an analysis conducted for The Wall Street Journal by PayScale.com. Pay fell at 62% of the 186 schools examined.

The growth in student loan debt, in particular, is shocking:

Another burdensome issue: a high debt load. Nearly 60% of graduating M.B.A.s said they expected to repay some loans after graduation, according to a 2012 GMAC survey. Among households headed by people with student debt who attended graduate school and are under 35, average student loan debt climbed to $81,758 in 2010 according a Wall Street Journal analysis of Federal Reserve data. That figure is up from $55,594 in 2007.

Here’s that point in graphical format. As the number of graduates has boomed, the value of the degrees those graduates obtained is declining:

This is a scary phenomena in our society. In addition to the trillions in debt Americans are obligated to pay, not to mention the heavy burden of entitlements younger Americans are expected to pay for the generations that go before them, we’ve created a situation where American students are encouraged to go to college and obtain degrees that are, increasingly, worth nowhere near what they paid for them.

It’s all working out great for the universities. They, of course, get their money up front. It’s the students who are wasting their time, and their money, on overpriced education when most of them would probably be better off going straight into the private sector to gain work experience while avoiding student loan debt altogether.