The Higher Education bubble – College degrees are still worth the time...

The Higher Education bubble – College degrees are still worth the time and money

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WASHINGTON, January 16, 2014 – Last week, Richard Vedder and Christopher Denhart wrote an editorial in the Wall Street Journal arguing that college enrollment is going to start dropping, and rapidly. They argue that a college education is a no longer a ticket to the middle class, that college degree holders are earning less now relative to non-college degree holders (they did not cite from when to when nor provide a link to verify their findings), and that college is now more expensive than ever before, leading to mass underemployment. These authors point to a drop in college enrollment already, and that the trend against going to college will carry forward.

Unfortunately for Vedder and Denhart, they are exercising selective use of statistics. They are not telling their readers the whole story. College enrollment will continue to increase even as tuition prices inflate.

Firstly, Vedder and Denhart write that college enrollment has dropped 1.5 percent over the past year. That is entirely true, but only part of the story. From the data provided by the National Student Clearinghouse, it is clear that the decline in college enrollment is largely from for-profit four year universities. Traditional colleges, the kind of colleges the readers of Vedder and Denhart’s piece were likely imagining, increased their enrollment. Public four-year universities increased their enrollment by .3 percent, and non-profit four-year universities increased their enrollment by 1.3 percent. By no means are students giving up on traditional schools.

Most college students are pursuing majors in fields that require a BA. Of the top-ten majors with which college students graduate, seven undoubtedly require a bachelor’s degree to get a job in that field (like biological and biomedical sciences, engineering, and business). Science and engineering degrees are growing twice as fast as other fields. The reality is that college students are largely pursuing degrees that they will undoubtedly need for their first jobs.

Vedder and Denhart are correct to note that college graduates are narrowing the pay gap between themselves and those with only high school degrees. They write, “For those in the 25-34 age range the differential between college graduate and high school graduate earnings fell 11 percent for men, to $18,303 from $20,623. The decline for women was an extraordinary 19.7 percent, to $14,868 from $18,525.” So college degree holders are still earning more than those with high school diplomas, just by less. But that’s not the whole story. According to the same College Board datathat Vedder and Denhart used, those with a bachelor’s degree can expect to make 65 percent more than those with just a diploma.

For those considering a college degree, that number will look enticing.

Perhaps that’s why children and high school students are buying into the idea that more education will pay off in the long term: fully 88 percent of K-12 students agree with the statement, “The more education, the more money I will make.” Few of them believe that college is no longer needed.

Student loans have become the new normal. The rising cost of college is less daunting to this emerging cohort of high school students because everyone has loans. With federal government subsidies and wide availability, there is simply no reason for this cohort of kids to turn down the college opportunity. No data suggests otherwise.

 Vedder and Denhart are guilty of writing a horribly misleading post on the Wall Street Journal. The higher education bubble is not popping–if anything, it’s booming. And it will continue in that direction for many years to come.
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