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Monday
May162011

Making economic sense of getting a bachelor's degree: What average people and college presidents say.

Every year there's an outcry about how much it costs.

Questioning the value of a college education is a cheap question to pose because almost to a person everyone who I've ever read on the subject says that it's too expensive, not worth the price people are asked to pay, and generally a waste of time and good money.  Well, now there's even more compelling evidence to believe that the complainers are, well, just that, complainers.

Today a study by the organization, Pew Social and Dremographic Trends, made public a study that looked at the subject of the value of higher education, Is college worth it?  College presidents, public assess value, quality and mission of higher education.  What it reveals is interesting...

The general public says it's rip-off--but is it correct?

On the on hand, a survey of the general public shows that a majority [57%] say that the U.S. higher education system fails to provide students with good value; an even greater percent [75%] say that college is too expensive for most American to afford.  

However, on the other hand, adults who actually have a four-year college degree believe that, on average, they earn $20,000 more annually as a result of having the degree!  [In fact, these estimates by the public are very close to the median "gap" reported by census data of the difference in yearly income between high school graduates and college grads:  $19,550.]  

But do the back-of-the-envelope calculations for yourself.

So which is it, a rip-off or a good deal?  If you "do the math," I say the answer is pretty obvious--it's a terrific deal from strictly an economic perspective!  Look at it this way...if a person has 40 years of a productive career and they earn--year after year an added $20,000 during those 40 years compared to someone who didn't graduate--that amounts to an extra, quick-and-dirty total of about $800,000 more than they'd get if they didn't go to college!  

So the next question to be asked is this:  what does it cost to get the extra $800,000?  If it costs more [and let me add quickly, it doesn't] than that amount, i.e., $800,000--then it'd clearly be a bad deal.  But the reality is, it needn't even cost close to that to get a college degree, even from the fanciest, name-brand schools; it costs much less.  Indeed, for most college degrees the cost is substantially less than that.  

Many seem to think that college costs too much--and let's be honest, the reality is, it does cost a lot of money.  It costs a lot from the institution's perspective to render; it costs a lot for students to have to pay for as well.  But how could anyone think that something that was really cheap to provide would end up producing something of immense, substantial value?  Nothing else in life does that I know of, so why should it really be different here?

The problem is actually different than most people think.

In my opinion, the real problem we do have in the U.S. is a way to finance a college degree. We have social and economic mechanisms for the long-term financing of other big-ticket items like houses and cars and boats and second homes--but not a worthwhile college degree.  That's what makes paying for college seem so hard to pull off--you simply can't do it on a credit card or line of credit without loans and post-degree obligations.  

Clearly, we should work as a society on seeing that that problem is solved.  But necessarily making it cheaper is not the answer--and the Pew study seems to support this POV.  [By the way, there are other very interesting findings in the study; I strongly recommend you take a look if you care about higher education for yourself, your children, or our society in general.]
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Reader Comments (1)

You are correct in the value. Good information. How do you get more people to read and understand this. I hear complaints everyday about the cost of college.

May 18, 2011 | Unregistered CommenterKathy

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