The crushing weight of a college education
WASHINGTON, June 10, 2014 – The end of commencement season leaves new college grads with much bigger concerns than final exams: jobs and debt.
The average student loan debt for the class of 2012 was $29,400. Seventy-eight percent of South Dakota students graduated with debt; in New Hampshire it was 74 percent, 70 percent in Pennsylvania, 56 percent in Texas, 52 percent in California. Nevada students came out best; only 41 percent graduated with debt.
Debt varies by school; the average NYU grad had $35,000 in debt, and 2 percent of grads around the country had more than $50,000 in debt.
Those debt loads aren’t really that bad if you graduate with a good job. With interest, a $29,000 debt is only $36,000 over ten years, assuming a 4 percent interest rate (the interest rate on student loans is tied to U.S. Treasuries). With a median-level job, that’s a supportable debt load.
It’s more complicated than that, of course. The college degree consumes a sizeable chunk of family savings, and the student puts off getting a job – there’s an opportunity cost – in order to buy that college education. On top of that, about 40 percent of new graduates are unemployed or underemployed. For them, that debt load can be disastrous.
CDN columnist Jeff Barrett cites a study commissioned by Canada’s Globe and Mail that reports that 17 percent of Millennials are dependent on their parents, while 43 percent of those aged 30 to 33 are still not financially independent. College debt coupled with no or poor jobs has forced that generation to put off major life steps, like marriage, children, and buying a home.
Some observers argue that we’ve pushed too much of the cost of college education back onto students and their families. There have been calls for larger federal grants, for colleges to bring costs under control, and for taxpayers to subsidize a greater share of the cost of college education.
That’s not all a good idea. Give more money to students to go to college, and don’t be shocked when colleges find ways to take it all. Imagine a program of “Swell Grants” to middle and low-income people to let them afford better housing. It would shock no one except the people responsible for the program to see rents rise to soak up all that extra money. University administrators are at least as smart as landlords, in spite of spending a mind-numbingly large number of years in school.
The real problem isn’t that college costs are too high (they are) or that state legislatures don’t care enough about education (they don’t – most probably never went near the library when they were in college, so don’t understand why colleges need libraries). The real problem is that too many people want their kids to go to college.
You may have heard that a history degree has a low rate of return, that you can’t make money with a teaching degree, and that a liberal arts degree is like inviting life to treat you like you’re wearing a “kick me” sign on your back. That’s all true, but only on average. The truth is more complicated, and much more interesting.
A degree in computer science is on average more lucrative than one in history. So it might surprise you to learn that for the top quarter of students with history degrees, the median income is $85,000, while for the top quarter with CS degrees, the median income is $82,000. The problem with a history degree is that if you’re mediocre, it isn’t worth much, while even a mediocre computer scientist has market value. The best history majors do very well indeed.
It isn’t that the history degree isn’t valuable, but that there are too many history majors who would be better off learning plumbing.
College opens the door to wonders beyond imagination – Homer, mathematics, economics, fine art – and to a better life. But it’s also a scam, with a lot of highly-credentialed hucksters waiting to sell you and your kids useless courses that not only don’t open minds, but nail them shut. Colleges will happily take your money (or the government’s money, or student loan money), spin you around, and send you out the door no better than when you went in and a lot poorer.
Students and their parents have to be better consumers, and they should be aware that there are other options. If you’re after a good job, consider vocational and trade schools. If you want to go to college, know what you want to do with your life and how college will fit in to that plan.
If college were free, it would be a wonderful place to find yourself, but it’s not free. You need to have a clear plan for getting in and getting out. Students who graduate in four years are much more likely than their peers to graduate without debt. Only 32 percent of public university students graduate in four years; that goes to 52 percent for students at private schools, and even higher percentages at more selective schools. An extra year or two really drives up costs; don’t do it.