The costs of college education have skyrocketed. According to a CNN Money report in September of 2012, over the past decade, tuition costs at a community college have gone up by 40 percent and by a whopping 68 percent at four-year public universities.
The financial support provided to support higher education has declined. In March of 2013, State Higher Education officers released a report disclosing that in constant dollars, state and local appropriations per full time student had gone from a high of $8,670 in 2001 to just $5,896 in 2012.
There is great variability in the amount of financial aid available for students from institution to institution and from state to state. Josh Freedman makes this point in his Atlantic article in which he asserts that the “high-tuition, high-aid” model is a myth.
As an example, Freedman reports that Penn State and the University of North Carolina (UNC) “have the same share of students with Pell Grants, meaning they have a similar percentage of low income students.” Still, Penn State — with a much higher tuition — only provides scholarships or financial aid to 29 percent of its students, compared to nearly 50 percent of students who receive it at UNC. This causes Freedman to conclude, “The model is not high-tuition, high aid. It’s just high tuition.”
Paying that high tuition wouldn’t be bad if there was a good paying job available upon graduation. But, as the country continues to slog its way through a slow economic recovery with a high unemployment rate, that is definitely not the case for the many of the recently degreed.
An Accenture survey released at the end of April of 2013 disclosed that forty-one percent of workers who have graduated in the past two years say they are “underemployed and working in jobs that do not require college degrees.” Almost one third of the 2011 and 2012 graduates state their current salary is $25,000 or less. A mere 16 percent of those students scheduled to graduate in 2013 reported that they had already secured employment as of April 1, 2013.
So, the question arises does a college degree by itself guarantee a solid return on investment? Isabel V. Sawhill and Stephanie Owen of the Brookings Institution argue that it’s not the degree that matters as much as the major selected and the college attended.
Sawhill and Owen observe that “On average, the benefits of a college degree far outweigh the costs” with the total wage premium for a bachelor’s degree in lifetime earnings of $570,000. They note, however, that the “key phrase here is ‘on average.’”
Sawhill and Owen emphasize that not every “bachelor’s degree is a smart investment.” They highlight that:
Nearly one in 5 of the 853 schools studied by PayScale offered a negative ROI (return on investment) The lifetime earnings of an education or arts major working in the service sector are actually lower than the average lifetime earnings of a high school graduate
This lack of earnings potential in combination with a staggering student loan debt can be crippling. In June of 2013, the One Wisconsin Institute released a study that showed the overall impact extends far beyond the individual student. According to the Institute the “trillion dollar student loan debt crisis” is a “clear and present danger not just for the finances of students and their families but to our national economy.”