As tuition costs continue to increase, more and more recent graduates are saddled with large college debt, and many are questioning the value of a college education. Is a college degree still worth it? How can students ensure that they are making a financially sound investment in their future? And what is driving the spiraling increase in college costs?
The Cost of College
The cost of college is far outstripping increases in U.S. wages and inflation. According to CNBC News, “Between 2000 and 2013, the average level of tuition and fees at a four-year public college rose by 87 percent (in 2014 dollars); during that same period, the median income for the middle fifth of American households advanced just 24 percent.”
Over the past 35 years, college tuition at public universities has nearly quadrupled, while tuition at private universities has increased approximately 271% since 1975.
“If you look at the long-term trend, [college tuition] has been rising almost six percent above the rate of inflation,” said Ray Franke, a professor of education at the University of Massachusetts, Boston. “That’s brought immense pressure from the media and general public, asking whether college is still worth it.”
According to CNBC News, costs have risen sharply as schools compete for top faculty, build and maintain state-of-the-art facilities, and attempt to attract prospective students with impressive campus amenities. There is also the increasing cost of college athletic programs and coaching salaries, especially at small Division I programs.
Another key factor in rising costs is the continual expansion of school administration. A professor at California Polytechnic University, Pomona, performed an analysis which found that between 1975 and 2008, the total number of full-time faculty members in the C.S.U. system grew from only 11,614 to 12,019; in contrast, the total number of administrators grew from 3,800 to 12,183. Moreover, the compensation for high-ranking university administrators is trending toward seven-figure salaries. Ironically, teaching salaries have remained relatively flat.
Despite this rapid – and alarming – increase in the operating costs of universities, it is important to note that, according to U.S. News & World Report, almost no one pays the actual sticker price. In 2014-2015, almost 90 percent of incoming freshmen at private universities were given some type of institutional grant or scholarship aid, according to a study from the National Association of College and University Business Officers.
As public subsidies for schools have dropped to their lowest numbers in 10 years, college students are now paying half or more of their education costs, according to Delta Price Project researchers. As a result, the total level of student debt outstanding is at more than $1.2 trillion, there are more than 40 million borrowers, and the average balance is $29,000.
This large debt has resulted in significant life changes for recent college graduates. Men and women struggling with student debt “are postponing marriage, childbearing and home purchases, and…pretty evidently limiting the percentage of young people who start a business or try to do something entrepreneurial,” said Mitch Daniels, president of Purdue University and the former Republican governor of Indiana. “Every citizen and taxpayer should be concerned about it.”
In general, data still continues to show that college graduates have more career options and financial opportunity than those who have only earned a high school diploma. In 2012, full-time employees with bachelor’s degrees earned 60 percent more than workers with only a high school diploma. However, graduates dealing with large student debt may not experience as many benefits.
Additionally, high debt and lower job security has resulted in more and more students choosing to pursue higher-paying careers in the tech industry and financial services. Fewer graduates are seeking professions like social work, education, and health care. Similarly, the debt created by college costs may also cause graduates to be more risk-averse and less entrepreneurial. A study by Researchers at the Federal Reserve Bank of Philadelphia and Pennsylvania State found that more student debt led to the formation of fewer small businesses between 2000 and 2010, with a 14 percent decline for small businesses with one to four employees.
The Value of a College Degree
Despite the consequences of student debt, Americans continue to believe strongly in the importance of higher education. A survey of 1,000 parents conducted by Discover Student Loans found that 95 percent want a college education for their child, but increasingly parents are becoming more price-conscious or unable to pay for college. 25% of the survey’s parents said they could not contribute to their child’s college education.
“Credentialism” is the trend in many professions to screen for higher qualifications for jobs that may not require them. A 2014 study by Burning Glass, a labor analytics firm, revealed that while only 42 percent of current management employees had earned bachelor’s degrees, 68 percent of managerial job postings required a bachelor’s degree. In computer and mathematical positions, 39 percent of workers had bachelor’s degrees, and in contrast, 60 percent of new job listings called for them.
According to Time Money, “It is not that college graduates are earning so much more, but that the incomes and economic opportunities for high-school-only graduates have collapsed.” The bachelor’s degree is becoming a requirement for many middle-skill careers that previously did not necessitate having one.
According to CNN Money, Goldman Sachs reports that many students do not benefit from going to mediocre colleges, ones that rank in the bottom 25% of all universities. These students may be better off going to 2-year schools or doing other kinds of training. Students who attend top-tier universities and major in business, healthcare, and tech see much higher returns on their education in terms of future salaries.
The Impact of Specific Majors
Students are increasingly focused on particular college majors that will lead to employment and have greater earning potential. According to U.S. News, “The prevailing wisdom and research indicate a growing emphasis on – and necessity for – career-ready degrees such as computer science, engineering and finance – often included as part of STEM disciplines (science, technology, engineering and mathematics).”
Engineering, finance and accounting majors receive a specific technical education and often have the opportunity to intern at companies that are preparing and considering them for full-time jobs. Many of these candidates get direct offers after their internships.
Nevertheless, Peter Cappelli, a professor at the University of Pennsylvania’s Wharton School, warns against choosing a vocational major based on the hot jobs of today, because these positions might not exist by a student’s graduation date. Highly tailored majors, such as social media or sports management, are popular but can result in unemployment or settling for low-paying jobs that do not require a bachelor’s degree.
The Value of a Liberal Arts Education
“Graduates studying lower paying majors such as arts, education and psychology face the highest risk of a negative return,” notes Goldman. “For them, college may not increasingly be worth it.”
However, college education is complex and cannot be simply reduced to a cost-benefit analysis. Peter Cappelli, asks families to be more realistic about the role of college degrees and to appreciate the actual merits of a traditional broad-based education, often called a liberal-arts education.
“To be clear, the idea is not that there will be a big financial payoff to a liberal arts degree,” Cappelli writes. “It is that there is no guarantee of a payoff from very practical, work-based degrees either, yet that is all those degrees promise. For liberal arts, the claim is different and seems more accurate, that it will enrich your life and provide lessons that extend beyond any individual job. There are centuries of experience providing support for that notion.”
According to U.S. News, “employers readily identify the creative, communicative and problem-solving acumen traditionally associated with liberal arts majors as the most valuable attributes of new hires.”
Liberal arts majors are not only finding employment in education and the creative industries. Charles River Associates, a litigation consulting firm that serves the financial services and technology industries, mostly recruits liberal arts graduates.
“We are hiring almost exclusively from liberal arts schools,” explains CRA Vice President Monica Noether, because intellectual curiosity is “exactly the kind of thinking [that] good liberal arts programs do to train their students.”
Choosing an educational path is an extremely complicated – and extremely individual – process. No matter what today’s prevailing trends may be, there is no one-size-fits-all plan that will guarantee high salaries and low debt.
However, there are steps that all students and families should take in order to identify their best-fit options. A college education remains valuable, but it is more important than ever to plan your journey in the most informed and reasonable manner possible. During high school, pursue volunteer and internship opportunities that will allow you to gain exposure to careers that might interest you, and speak to people in your fields of interest to learn how they found success in their chosen career paths. By clarifying your strengths and interests earlier, you may be able to identify scholarship and grant opportunities that will further help you afford your educational goals.
By gaining a greater understanding of your future goals, you can make decisions regarding colleges and academic programs that will allow you to grow and thrive, as well as weigh a college’s features against the price of tuition. In short, you’ll be able to find the best college for the best price.
That said, identifying possible paths should not mean committing to one. Remain open to exploring the variety of academic and career options that you encounter. Once you begin college, there are many resources available to assist you in course and career planning. You should take every advantage of these support tools and networks, as these will only further help you maximize the value of your college experience.
The journey of college admissions is an exciting yet stressful road. Collegiate Gateway is always happy to help, as you embark on this inspiring process of educational possibilities!