We're Making College More Expensive by Subsidizing It

I have written a number of times about problems with our higher education system. (See June 2009 post, which has links to other posts.)  I have suggested that a college education isn’t for everyone and that our incessant push to make it so is simultaneously increasing the cost and lowering the value of a college degree.

The various public funding mechanisms we throw at higher ed, including subsidized student loans, are frequently touted as ways to make education more affordable. In reality, they often serve to pull people away from more productive pursuits while pumping loads of taxpayer dollars into overfunded institutions, both public and private.

This is a very similar approach that our nation took to mortgage loans, and it will ultimately produce a similar result. Just as the mortgage bubble pushed the cost of housing above its true market value, public higher ed subsidies are increasing the cost of going to college.

When the housing market finally rationalized to reflect more accurate housing values there was a huge crash that is still impacting us today. When we reach the point that people begin to realize that a college degree isn’t worth what they’re paying for it, we will see a similar devaluation of such degrees. There’s no telling whether this will be a sudden crash or a slower market decline. There are too many variables involved to make an accurate prediction.

This AP article discusses problems with the idea that attending college results in learning. A broad-based study found that after two full years of college, “45 percent of students show no significant improvement in the key measures of critical thinking, complex reasoning and writing.” After four years, it’s down to 36 percent. I wonder how much of that 9 percent improvement is due to the dropout rate as opposed to actual learning.

Students and parents of students should be aware that the study also found that more social involvement at college — fraternities, sororities, hanging out with friends — generally resulted in worse outcomes. Interestingly, “working off campus, participating in campus clubs and volunteering did not impact learning.”

College degrees are not created equal. Degrees that require more rigor, such as in “traditional arts and sciences” produce better learning outcomes. So does studying alone, and copious reading and writing.

While it is generally true that more education translates to more earning capacity, it is not always specifically true. The study found that after getting a four-year degree, a third of former students move back in with their parents. 10 percent of graduates remain unemployed a year after graduation.

Besides, the relationship between higher education and income is not well understood. Does the higher degree generate higher income or do individuals that are capable of earning higher degrees generate more income? Studies exploring the individual’s native level of intelligence suggest the latter. Non-degreed individuals that are equally as intelligent as those that earned advanced degrees tend to earn about the same as their college grad counterparts. In other words, pushing people through college may not actually increase their lifetime earnings.

It seems as if the market is already starting to understand that the average college degree is too expensive for the value it provides. This article discusses the rise in vocational certificates aimed at “skills-oriented fields of study.” Such certificates can lead to a decent career path or may even be a stepping stone on the way to a college degree, if it turns out that such would work out for the individual.

There are some fields of study where a college diploma is a de-facto certificate of skills, similar to a vocational certificate but at a much higher skill level. But there are also fields where a degree isn’t going to produce enough additional value over a career to warrant the cost and effort of getting the degree.

This means that some college degrees will continue to be worth the time and expense, while others won’t. The same was true of the housing market after the crash. There were certain market segments where houses continued to bring in top dollar. But most houses simply weren’t worth what people had been led to believe they were worth.

For the kinds of jobs that do not in reality demand a college degree, our society can and should find more efficient ways to credentialize workers. Traditional college degrees will still play a large role. But reality will eventually dictate a smaller role than is currently the case.

Update 2/2/2011: This AP article explores the relative value of a 4-year degree as opposed to 2-year degrees and vocational training in preparing students for the real job market.