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“The College Payoff” Debate: Day One

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With rising tuition costs at the nation’s colleges and universities, more people are starting to ask “Is college worth it?” “The College Payoff” a new report from the Georgetown University Center on Education and the Workforce tackles that question in purely economic terms and finds that “over a lifetime, a Bachelor’s degree is worth $2.8 million on average.”

We asked Stephen J. Rose, who is one of the report’s authors, and Richard K. Vedder, an Ohio University economics professor who has challenged assumptions of the financial benefits of college, a few questions about “The College Payoff.” Over the next few days, we’ll publish their responses. Tell us what you think about the research and efforts to measure the benefits of postsecondary degrees.

Is college worth the expenses of earning a degree?

Rose: As we show in our recently released paper “The College Payoff,” those with a BA degree earned $2.3 million dollars over a 40-year career while those with just a [high school] diploma earned $1.3 M. This represents an excellent return on investing in getting the degree.

There are several issues that make this simple comparison a bit more complex. First, this comparison neglects to include the 36 percent of college graduates who go on and earn a graduate degree. Since those with graduate degrees earn close to $3 million over their careers, the ability to get a graduate degree adds to the payoff for going to college.

Second, one out of three students who enroll in a four-year institution will obtain a degree. While studies show that those with some college and no degree benefit from this schooling, the returns are much lower. This means that young people who have not done well in their studies in [high school] have to factor in the possibility that they won’t earn a degree if they enroll in college.

Third, there is a lot of earnings variation within each level of education. For example, the most successful 14 percent of HS graduates earn at least the median amount of a BA graduate. Conversely, a small number of BA holders earn relatively low amounts of money and don’t translate their skills into labor market success.

Conclusion: In general, it is well worth the costs for most college entrants.

Is college worth the expenses of earning a degree?

Vedder: For a majority of those who actually earn a degree, college is worth it in the sense that they will earn a decent return on their investment. A “majority”, though, is not “everyone.” A growing proportion, maybe one-third, of college graduates end up in relatively unskilled jobs for which the pay premium associated with the college degree is modest, probably typically less than the cost of college and the work earnings foregone while in college. That proportion is growing over time.

But even worse, 40 percent of those entering college, conservatively, do not graduate within six years. For a large proportion of them, college is, at best, a problematic investment. Looking at those graduating from high school, I would guess somewhere between 25 and 40 percent should go to four year schools, because they have the relatively high grades, tests scores, innate intelligence, ambition and motivation–good predictors of college and often vocational success. But the other 60-75 percent should usually pursue other options. For those with poor academic records, low test scores, modest innate intelligence, and little self-discipline but much immaturity, a less risky investment would be to go to either community college or to career colleges offering specialized training for a specific occupation–electrician, long distance truck driver, beautician, chef, health care aide, etc. And, unfortunately, for some with severe cognitive impairments or other disabilities, going into the workforce directly after high school is probably the soundest option. Those pursuing non-four year degree options can always pursue bachelor’s degrees later if they succeed at their original post-secondary educational experience.