Is College Pricing Killing the American Dream?

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.

 

Follow Gary Liberson, PhD on Twitter: www.twitter.com/gliberson

Comments

[J R M]

02:15 AM on 06/10/2011

Now that people are worrying about the costs ahead of time, they can do something about them. And there is a lot that can be done. Start studying hard earlier - try no later than middle school. Take the most demanding courses you can get and handle and study hard. My daughter is studying 3 to 6 hours a day in 9th grade. Take AP/IB courses if available. Study very hard and do well on the AP/IB tests - you may be able to get credit for a year of college coursework. Go community college, if possible while you are still in high school (Running Start or equivalent if possible) and start earning college credits. Knock off your major prerequisites and general education requirements in Community College. Once again, study very hard - if you are not working, 40 to 60 hours a week. Now go to college to finish up. You have to pay for 2 years - if you haven't earned a scholarship. Work hard and keep focused. By the time you get our you will have mastered your major and will have gotten used to disciplined focused effort. It will stand you in good stead in the future.

Note that this approach is NOT compatible with a rich social life and partying. You can develop a more balanced life after your graduate.

[Gary Liberson]

09:07 AM on 06/10/2011

As a person who earned his PhD going to night school while working full-time with a family, I very much appreciate the effort your daughter is exhibiting. However, it is a solution driven, in part, by the COST of a college degree. A cost that has skyrocketed relative to the benefit over the last 20 years. Your daughter's solution is also a demonstration of my point that we have let these costs increase without much understanding about the implications for how our youth at coping and what pathways are being forgone because of the cost imperative.

Your daughter has a great burning in the belly for success. That single attribute ultimately will lead to success, but for many her route may not be their best path. Cost should not be the sole driving force.

Good luck to you and your daughter.
Thanks for the comment.
Gary

[J R M]

12:29 PM on 06/10/2011

I believe that society is under-investing in education. But the payoff's are far enough in the future that it is easy to ignore in the face of current issues. Ideology does not help. And American popular culture has never valued academic work. My wife grew up in the Soviet Union. While the best athletes were scooped up for athletic training, they also attempted to identify and educate the more gifted children. My wife was a cow girl from a small town with parents who had a 3d and 6th grade education. She was identified and educated with high honors and taught English at a high school level for 12 years before coming to the states.

My daughter goes to a very good high school. I have attended the IB / early college admission meetings. The vast majority of the children at those meetings come from families with at least one immigrant parent. The situation is reversed to some degree at athletic events. This is not a good sign.

I would extend public education through community college, but make attendance optional after 8th grade - the student could return for schooling later, be it 5 years, or 20 years - once they had learned that they need it.