The ability to earn an advanced degree is inherent in the American Dream. This is true for the benefit of the individual and for society as a whole. If through benign neglect we ignore the runaway cost of higher education, then we are destroying the American Dream. Our universities have created a world where education, for many, is unaffordable.
In business, we often ask, "What is the value proposition?" Or, as the old commercial goes, Where's the beef? This is in part what Naomi Schaefer Riley wrote about in her article: "What is a college education really worth?"
Does it make sense for our best and brightest to just drop out, save money and work for a venture company?
The PEW Research Center looked at the issue of college pricing in their report,"Is College Worth It?" Their findings validate the tensions caused by the high cost of a college education:
- Cost and Value: A majority of Americans (57 percent) say the higher education system in the United States fails to provide students with good value for the money they and their families spend.
- Student Loans: A record share of students are leaving college with a substantial debt burden... a quarter say it has made it harder to buy a home (25 percent); and about a quarter say it has had an impact on their career choices (24 percent).
- Why Not College? Nearly every parent surveyed (94 percent) says they expect their child to attend college... most young adults in this country still do not attend a four-year college. The main barrier is financial.
I like simple facts. Over the last 18 years, every dollar added to the cost of a college degree has only put 14 cents of annual income in a graduate's pocket.
From 1991 through 2009, the U.S. Census data shows average income for full-time working 25 to 34-years-olds with only a bachelor's degree increased about 9 percent after inflation (e.g., men from $55,000 to $60,000 and women from $43,000 to $47,000). Over the same time period, the Department of Education estimates that the cost of going to college increased by 70 percent after inflation, from $48,000 to $80,000 for a four-year education. For about a $4,000 to $5,000 change in income, the cost of a bachelor's degree increased about $32,000 (i.e., about 14 cents of income for each dollar of tuition change).
Universities have a sweet deal -- especially for-profit universities. Advanced degree recipients earn higher salaries. This is an undisputed fact (the Mark Zuckerbergs and Steve Jobs of the world aside). Thus, the institutions with the ability to provide the necessary piece of paper (i.e., diploma) can charge whatever the market will bear, and that seems to be unabated.
There is nothing in these statistics that sounds encouraging, other than the increasing number of people going to college.
Debt permeates the landscape of a graduate's life. Can he afford to complete four years? Will he be able to afford a new car or qualify for a mortgage? Will the pressures of debt shape career choices? Will the graduate be risk averse and less likely to start a small business?
The answers to these questions go to the heart of maintaining a vibrant economy. Yet, while we put elementary and secondary education under a microscope, we have spent disproportionately little time understanding the devastating implications and repairing the damage of runaway costs of an undergraduate degree.