Is college worth it?
Jon McGee is vice president for planning and public affairs at the College of Saint Benedict and Saint John’s University. Much of his work and writing focuses on demographic and economic trends and their impact on higher education and public policy. He presented on “Is college worth it?” at the 2015 state ACT Conference. His book, Breakpoint: The Changing Marketplace for Higher Education, examines key forces of disruption in higher education and offers a framework to colleges and universities for addressing those issues. And in his distant past, Jon was on staff at the Minnesota Private College Council.
- Why has there been so much focus lately on whether it’s still worth going to college?
- What is the return on investment?
- Are there any drawbacks to assessing college primarily on economic value?
- Do graduates think it was worth it?
To begin to understand that question, you have to understand something about the evolution of both the American economy and higher education since 1945. Prior to 1945, college was mostly a luxury good: relatively few had earned a college degree and few had access to college (most people then had not even finished high school). Still primarily a manufacturing and agricultural economy more dependent on physical human capital than intellectual human capital, U.S. economic success prior to 1945 did not require mass access to higher education. Following the end of World War until about the mid-1960s, access to college was extended as an earned privilege, principally for military veterans. The Cold War was developing, the economy was changing, and scientific expertise, in particular, became much more highly valued. The launch of the Russian Sputnik satellite in the mid-1950s added public policy motivation to broaden access to college.
By the mid-1960s, half of all recent high school graduates in the country were enrolled in a college somewhere. With the passage of the federal Higher Education Act in 1965 (the most significant public policy intervention in higher education up to that time) and continuing until about 1990, America experienced the commoditization of higher education. College became a mass-market good supported by changing public policy and undergirded by a changing economy increasingly less reliant on physical capital and manufacturing and more dependent on intellectual capital and services. High school-to-college continuation rates increased from 50 percent in 1965 to 60 percent in 1990. Though more and more people took advantage of higher education as a mass market good after 1965, it surely remained at its roots a transformational good, a signature experience offering a gateway to a better life than was available to prior generations.
During the waning years of the 20th century, with the birth and boom of the Internet and the advent of a truly global and integrated world economy (which expanded opportunity but sounded the death knell for much of the traditional manufacturing economy in the United States), higher education became a different sort of good. No longer simply a nice-to-have experience, a college education became a necessity good. As the return and opportunity associated with a high school education declined, and as demand for a more highly educated labor force rose, post-secondary education — meaning any education beyond high school — became an increasingly necessary experience for access to the middle-class and the hope of economic self-sufficiency and sustainability. The educational bar had been raised.
In fewer than 50 years, college displaced high school as the threshold test for economic independence and success. The signals to prospective students and their families have been clear. While they often have significant concerns about rising college costs, parents today overwhelmingly expect their children to go to college. In 2012, more than 90 percent of all parents with at least one child under age 18 indicated that they expected their children to attend college. The evolutionary trajectory is important because people view a product, service or experience differently when it becomes a necessity than when it is a luxury. The stakes associated with going to college are higher than ever for students — and consequently much higher for colleges and universities, too. The evolution from luxury good to necessity good has, at a minimum, fueled anxiety and more fervent public policy calls for accountability and regulation.
There is no separating the cost of college from the worth or value equation. As the sticker price has risen, concern about both college cost (how to pay for the experience) and the economic return to the investment have risen exponentially. Where once value may have been assumed — even if that assumption was incorrect — it is no longer so.
Students select particular colleges for many reasons, but the big reasons for going to college at all have been remarkably consistent over the last 20 years. And they are not all economic or remunerative. While students clearly seek access to better jobs and higher incomes, they also express strong interest in cognitive outcomes: learning more things that interest them and gaining a general education and appreciation of ideas.
The term “worth” is much more complex than it would seem. Students and families assess value through a number of different lenses, weighting those perspectives differently at different stages of the college process. It essentially boils down to three forms of value or worth:
- emotional value (Will I fit in?)
- experiential value (What can I do?)
- economic value (What opportunity will it create for me?)
While much of the media attention focuses on economic value, emotional and experiential value play equally and sometimes larger roles in college selection.
We need to answer this with a key caveat on the front end: we are talking about averages. Individual results can and do vary, for a variety of reasons. With that in mind, I think the Pew Research Center put it best in their February 2014 report, “The Rising Cost of Not Going to College”:
On virtually every measure of economic well-being and career attainment — from personal earnings to job satisfaction to the share employed full-time — young college graduates are outperforming their peers with less education. And when today’s young adults are compared with previous generations, the disparity in economic outcomes between college graduates and those with a high school diploma or less formal schooling has never been greater in the modern era.
Income. The most significant economic returns to college are associated with degree completion; those who have some college but no degree do worse (on average) than those who have completed a degree, two year or four year. Though income opportunity varies — sometimes significantly — by academic discipline, the earnings return for completing a four-year degree is very high. The Pew Research found that median annual earnings of those aged 25 to 32 who earned a bachelor’s degree or more exceeded the median for those with associate’s degree by more than 50% in 2013. The gap was wider than for previous generations when they were the same age.
Unemployment. Employment results are similarly impressive. The unemployment rate for college-educated workers (all ages) in early February 2015 was just 2.8%, compared to 5.7% for the whole economy. While opportunity is almost never guaranteed (and colleges do not control labor markets), the probability of both higher earnings and employment rises with educational attainment, irrespective of a student’s choice of academic major.
Lifetime return. Of course, we can’t judge economic value solely in relation to income or even employment. Rate of return analyses also take cost into consideration. A recent analysis by the Federal Reserve Bank of New York (PDF) suggests that the average lifetime return to college is both persistent (over time) and very high. They estimated that in 2013, the lifetime return (which measured economic return in relation to the cost of college) averaged 13% for baccalaureate degree holders. The rate of return flattened out around the year 2000, but still remained robust through the Great Recession. By comparison, the historic return to equity investments is 7%. Returns varied considerably by academic discipline, but even among the lowest returning disciplines, the average lifetime return still exceeded the historic return to equities. In other words, it’s appropriate and valuable to think about college in investment terms.
There are many, and here I need to return to my original caveat and expand on it. Undergraduate education traditionally serves three important purposes. The first is transactional and principally economic. A bachelor’s degree prepares a student to begin their professional life. It equips them with the skills and knowledge that will launch a career that, ideally, is meaningful and successful. Colleges and universities have always taken this responsibility seriously.
The next two purposes are transformational, both cognitive and developmental. In addition to academic work and learning (an experience driven by intellectual engagement and discovery), life on campus historically also has been about the formation of character. College shouldn’t tell students what to think or do but rather:
- how to think about issues and ideas
- how to thoughtfully weigh important questions
- how to develop their own values as they wrestle with issues and questions
Economic returns are the subject of a lot of attention these days, and clearly they are important. But they aren’t and mustn’t be the only consideration. To reduce the worth of college only to an economic outcome is to miss the point of social value, inspiration, aspiration, motivation and opportunity. Chasing occupations because of their current return and demand is little more than clairvoyant speculation. At its best (or luckiest), it can fill high need and high demand jobs. At its worst, it risks disequilibrium in an economy that is constantly in motion. So for those who encourage majors in science, technology, engineering and math (STEM), remember that not everyone can or should major in a STEM discipline. It is simply impossible to predict the return and value of particular occupations over time. For example, there were no webmasters in 1990 nor could those occupations have reasonably been projected. The most we know occupationally is what we understand now. The best approach is to provide students with durable skills that transcend time, careers, and occupations. All specialized knowledge and skills have an expiration date, sometimes sooner rather than later.
Finally, an exclusive focus on economic returns diminishes and devalues the notion of social value: we need educated people in all occupations — preferably where there are occupational and vocational matches. People who like what they do and are skilled at what they do they will be good at what they do. Arranged occupational marriages don’t work.
Yes, the Pew Research results make that clear. They found that 91% of college graduates (across generations) believed that their college education has paid off or will pay off. That’s a remarkable conclusion. Moreover, baccalaureate degree earners were more likely than all others to report that they:
- have a career track job (86%)
- have enough education and training to get ahead in their job (63%)
- are “very satisfied” in their current job (53%)
We recently found with a survey of our young graduates (those out three and five years) at the College of St. Benedict and Saint John's University that they overwhelmingly indicate that their experiences prepared them well to perform ethically and with integrity, that they were well prepared to think critically about complex issues and that they were well prepared to function effectively in a changing environment and to embrace challenge and accept risk. Those are outcomes research indicates employers value most, and Minnesota’s private colleges — like Saint Ben’s and Saint John’s — deliver.