Is The Cost of College Worth Debt?

[Annie]

Perhaps the better questions are: How much debt is it worth? Is or should college the right goal for all?

Glenn Harlan Reynolds: Further thoughts on the higher education bubble | Washington Examiner

Further thoughts on the higher education bubble

By: Glenn Harlan Reynolds
Sunday Reflection Contributor
August 8, 2010


Examiner contributor Glenn Harlan Reynolds blogs at Instapundit.com and hosts "Instavision" on PJTV. He teaches law at the University of Tennessee in Knoxville.
Back at the beginning of the summer, I had a column in this space in which I predicted that higher education is in a bubble, one soon to burst with considerable consequences for students, faculty, employers, and society at large.

My reasoning was simple enough: Something that can’t go on forever, won’t. And the past decades’ history of tuition growing much faster than the rate of inflation, with students and parents making up the difference via easy credit, is something that can’t go on forever. Thus my prediction that it won’t.

But then what? Assume that I’m right, and that higher education - both undergraduate and graduate, and including professional education like the law schools in which I teach - is heading for a major correction. What will that mean? What should people do?

Well, advice number one - good for pretty much all bubbles, in fact - is this: Don’t go into debt. In bubbles, people borrow heavily because they expect the value of what they’re borrowing against to increase...

But a college degree is an expensive way to get an entry-level credential. New approaches to credentialing, approaches that inform employers more reliably, while costing less than a college degree, are likely to become increasingly appealing over the coming decade...

 

[Liberty]

Good read. I am happy I pay cash for my tuition. (Yes, I earned it myself.)

 

[syrenn]

If you want something...PAY for it.

 

[Annie]

Good read. I am happy I pay cash for my tuition. (Yes, I earned it myself.)

I'm very much pro-university studies, I've spent more time in advanced studies than required schooling. However, it's become the norm for nearly everyone to pick up after high school and that just doesn't seem to be working out for those coming out.

We bemoan the lack of classes for the gifted and academically challenged, yet on some level seem to have bought into the idea that all are academically qualified to go to university. Is it any surprise that university education has been dummied down?

On the other hand, how many kids that were naturally talented in trade type skills, were made to feel wrong if they weren't so keen on going to college? How well were they going to do in those required courses of British Lit? Probably as well as the average liberal arts student was in the required Trig courses, but that was one or two course out of two years required.

Actually today's economy is for the first time in my lifetime that parents are listening to kids who say they want to try something else, before going onto college. Nearly everyone knows of someone under 25 who has a university degree but can't find an entry level job with benefits, at least one they consider entry level. Young people are trying to gain skills in what are traditionally the 'trades', though the unions aren't really hiring apprentices. The kids are picking them up off the union track. Electrical, plumbing, roofing, brick laying, all are skills and services needed. Car repairs is another. These are not jobs that China or India can be outsourced to.

I'm guessing in a few years there will be major uproars in a state like IL, that requires union workers and wages for all work. Lots of things are changing, it will be interesting indeed to see where it all goes.

 

[Toro]

This is an interesting topic.

The price of higher education has skyrocketed over the past 20 years, and it is now a legitimate question for many people whether or not it is worth it, especially for those getting a degree outside of the professions.

But even within the professions, it may not pay. One paper recently concluded that it no longer made financial sense to get a degree in law unless you get a job with a top decile firm.

y undertaking some straight-forward analysis of the factors that come into play I hope to spur future generations of potential law school attendees to think about the question rationally, as one of making an investment. If your law school education were a stock or a bond, offered in the marketplace, would you buy it? Should you buy it? Why or why not

My methodology is as follows. First, I identify the costs of attending law school. These are two: the opportunity cost of not entering the workforce immediately after graduation from college, and the out-of-pocket costs, primarily tuition, fees and books, inherent in attending law school. Based on these costs, I calculate the annuity-like return that must be achieved to recover the costs. This process is more complicated that it might seem, as it importantly requires isolation of the true benefits in terms of compensation offered by a law degree and the identification of an appropriate discount rate for converting such incremental compensation to net present value. ...

Suppose we convince ourselves that 17% is the appropriate discount rate for the incremental earnings generated by a law degree. Then Solid Performer would need to expect to earn, on average, $33,121 more in his first year of legal employment than he would have earned had he not gone to law school. Given that his hurdle compensation is $80,035, it follows that he must expect to earn $113,156 in his first year. Moreover, the $33,121 wage differential would need to be maintained, and indeed increased at a rate of 3.5% per annum, throughout the remainder of his career. ...

For the Class of 2008, the last year for which statistics were available, the median salary of a fledgling lawyer was $72,000. That salary obviously does not stack up very well against the required salaries set forth in my table. But that median salary tells a hopelessly deceptive story. The distribution of salaries was in fact bi-modal, with fully 42% of salaries falling between $40,000 and $65,000, and a smaller but still very significant number clustered at the elite Biglaw starting salary of $160,000. ...

With the tiniest bit of twenty-twenty hindsight, it is possible to identify, already in the third year of law school, some of the students who have made what has turned out to be not only an ex ante bad investment but an ex post losing investment. Thus, consider the 50% of hypothetical Solid Performers who do not end up with a job offer from a Biglaw firm. They begin their legal careers at a salary that is no higher, indeed is actually lower, than the one they could have obtained without having gone to law school. They are unlikely ever to dig themselves out of that hole.

SSRN-Mamas Don't Let Your Babies Grow Up To Be...Lawyers by Herwig Schlunk

 

[Liberty]

Good read. I am happy I pay cash for my tuition. (Yes, I earned it myself.)

I'm very much pro-university studies, I've spent more time in advanced studies than required schooling. However, it's become the norm for nearly everyone to pick up after high school and that just doesn't seem to be working out for those coming out.

We bemoan the lack of classes for the gifted and academically challenged, yet on some level seem to have bought into the idea that all are academically qualified to go to university. Is it any surprise that university education has been dummied down?

On the other hand, how many kids that were naturally talented in trade type skills, were made to feel wrong if they weren't so keen on going to college? How well were they going to do in those required courses of British Lit? Probably as well as the average liberal arts student was in the required Trig courses, but that was one or two course out of two years required.

Actually today's economy is for the first time in my lifetime that parents are listening to kids who say they want to try something else, before going onto college. Nearly everyone knows of someone under 25 who has a university degree but can't find an entry level job with benefits, at least one they consider entry level. Young people are trying to gain skills in what are traditionally the 'trades', though the unions aren't really hiring apprentices. The kids are picking them up off the union track. Electrical, plumbing, roofing, brick laying, all are skills and services needed. Car repairs is another. These are not jobs that China or India can be outsourced to.

I'm guessing in a few years there will be major uproars in a state like IL, that requires union workers and wages for all work. Lots of things are changing, it will be interesting indeed to see where it all goes.

My experience at university of colorado (Ill be a senior in the fall) has overall been the same as high school to be honest. Professors are lazy, especially tenured ones, and they hand out A's fairly easily in my experience, at least in the arts and science department. I went to community college my first year of college and it was more challenging than state university. go figure.

Not to mention the simple fact that 90% of my professors hate me because i dont subscribe to their liberal indoctrination haha. my papers on political subjects such as sustainability however get graded fairly which i am happy about. My final paper of rhetoric and writing advanced was about how cap and trade is a government power play. the professor commented "I disagree with you 100% but you have a good argument" and then there was a fat A on it.

 

[uscitizen]

College is not for all.
Technical educations are all many desire or can handle. And we need those people keeping things running for those with college degrees.

Everyone who works makes a contribution to our society and country and should not be belittled.

 

[Greenbeard]

In part the answer to the question in the OP depends, of course, on what it is you want to do, in which case it may not be a simple dollars and cents analysis. I agree that not everyone may be cut out for university-level study and certainly not everyone requires a liberal arts education. But I wouldn't take that to suggest that someone should become a plumber simply to avoid taking out a student loan, even if the job in the field they want to enter ends up paying a salary comparable to what a plumber would make.

Having a degree doesn't guarantee you an entry level job when you graduate but there's no denying that a great many entry-level jobs use credentials as a sorting mechanism by requiring that applicants have a BA. So is it worth taking on debt to get a degree? Depends on what you want to do, what's important to you (just money?), and if you're looking for an intellectual experience like that. There's no reason to push everyone into university-level studies but I'm also not comfortable with pushing otherwise qualified and enthusiastic candidates away from that simply for financial reasons.

 

[KissMy]

I have 3 Family members that have graduated over the past 2 years with nearly $100K student loan debt each. Not one of them has a full time job paying $9 per hour or more.

 

[Annie]

In part the answer to the question in the OP depends, of course, on what it is you want to do, in which case it may not be a simple dollars and cents analysis. I agree that not everyone may be cut out for university-level study and certainly not everyone requires a liberal arts education. But I wouldn't take that to suggest that someone should become a plumber simply to avoid taking out a student loan, even if the job in the field they want to enter ends up paying a salary comparable to what a plumber would make.

Having a degree doesn't guarantee you an entry level job when you graduate but there's no denying that a great many entry-level jobs use credentials as a sorting mechanism by requiring that applicants have a BA. So is it worth taking on debt to get a degree? Depends on what you want to do, what's important to you (just money?), and if you're looking for an intellectual experience like that. There's no reason to push everyone into university-level studies but I'm also not comfortable with pushing otherwise qualified and enthusiastic candidates away from that simply for financial reasons.

I agree that a liberal arts background is useful in many endeavors, yet most universities have dumb down those courses so badly, that AP equivalents for the 100 level exceeds what the universities are offering. Grade inflation in most schools is also worse than in secondary schools, which is no consolation to the high school education. Truth is, AP courses are what regular courses were 50 years ago.

If a student wants engineering, medicine, law, sciences, there's no alternative to universities. The proliferation of BA's though, have led to it being a requirement to many entry level positions, with no discernible reason other than an assumption of finishing what you start. However, many employers have found that that's not true, in many cases it's just proof of loans or parents paying.

 

[Liberty]

I have 3 Family members that have graduated over the past 2 years with nearly $100K student loan debt each. Not one of them has a full time job paying $9 per hour or more.

let me guess, one has a degree in fashion. the other has a degree in cosmetics, and the other...possibly a degree in women's studies? lol

 

[Annie]

I have 3 Family members that have graduated over the past 2 years with nearly $100K student loan debt each. Not one of them has a full time job paying $9 per hour or more.

Two of my 3 have graduated within the past 3 years. My daughter is making over $50k, and is paying back substantial loans. She was a music ed major. It took her more years than normal though to complete, she has significant learning disabilities. However, with a music and teaching degree she is now employed by a university and is working on her master's.

My son graduated with high honors a year ago last spring. He had a full time job, without benefits for 8 months, since then has only been able to find part time work. He's returning for a master's in January. Middle child has returned to university, dropped the English major and is now in accounting program.

I'll admit, none of my kids were naturally inclined towards hands on work. Problem with parents that also weren't. Their father has a BA, BS, MS, Phd. I've 3 BA and MS.

As US Citizen said earlier, anyone who works contributes and should not be put down. The one thing I know as a liberal arts specialist, there's nothing learned in university in that realm that one cannot learn through self-study, especially if you publish and accept criticism.

 

[Samson]

College is not for all.
Technical educations are all many desire or can handle. And we need those people keeping things running for those with college degrees.

Everyone who works makes a contribution to our society and country and should not be belittled.

You are correct.

But, what Annie is saying, "on some level seem to have bought into the idea that all are academically qualified to go to university," is also my experience: high school counsellors rarely know how to "track" anyone outside "college prep." As a result, ROTC is effectively non-existant. Technical Educations are available to some, in VERY large school systems, but it is extremely difficult to qualify for them.

 

[Wry Catcher]

The value of education is not measured by income.

 

[Samson]

I have 3 Family members that have graduated over the past 2 years with nearly $100K student loan debt each. Not one of them has a full time job paying $9 per hour or more.

Two of my 3 have graduated within the past 3 years. My daughter is making over $50k, and is paying back substantial loans. She was a music ed major. It took her more years than normal though to complete, she has significant learning disabilities. However, with a music and teaching degree she is now employed by a university and is working on her master's.

My son graduated with high honors a year ago last spring. He had a full time job, without benefits for 8 months, since then has only been able to find part time work. He's returning for a master's in January. Middle child has returned to university, dropped the English major and is now in accounting program.

I'll admit, none of my kids were naturally inclined towards hands on work. Problem with parents that also weren't. Their father has a BA, BS, MS, Phd. I've 3 BA and MS.

As US Citizen said earlier, anyone who works contributes and should not be put down. The one thing I know as a liberal arts specialist, there's nothing learned in university in that realm that one cannot learn through self-study, especially if you publish and accept criticism.

My solution to the difficulty in high-school education is to transform all public high schools to technical institutions. If a 14 year old's parents wanted them to go to college, then they would be responsible for paying all, or part (depending on income) of the college prep tuition. The lowest cost alternative for collge prep would be internet based campuses, but other alternatives, private schools, and community colleges would also be available.

 

[IanC]

If high schools still had academic tracts and significant standards we wouldn't need to have children spend the money or the time just to signal to prospective employers that they are intelligent and diligent workers. Anything more than about 25% of HS grads going to university probably means degees are largely dumbed down.

 

[Annie]

The value of education is not measured by income.

and the level of education does not necessarily reflect knowledge. Worse yet, it no longer necessarily even represents the quality of persistence.

 

[Samson]

The value of education is not measured by income.

It is measured by the number of non-sequitur posts a graduate makes.

 

[Samson]

The value of education is not measured by income.

and the level of education does not necessarily reflect knowledge. Worse yet, it no longer necessarily even represents the quality of persistence.

"Quality of Persistence?".....seems to be a very subjective measure.

Most employers realise that a degree and a GPA doesn't tell the "whole story."

 

[psikeyhackr]

The value of education is not measured by income.

and the level of education does not necessarily reflect knowledge. Worse yet, it no longer necessarily even represents the quality of persistence.

"Quality of Persistence?".....seems to be a very subjective measure.

Most employers realise that a degree and a GPA doesn't tell the "whole story."

Do you ever consider that employers want their employees in debt?

I had a former Xerox sales manager tell me that he liked for his salesman to be in debt because it made them hustle. So it could be more than just a matter of whether or not the education is worth the money.

If we really wanted to educate people wouldn't it make sense to create a national recommended reading list. But do educators want everyone thinking that they just need to read/study the right books?

psik