Is College Still Worth It?

Megan McArdle says maybe not, citing the rapid growth in costs and weak job market. Justin Wolfers says of course it is, citing the much larger average wages for people with college degrees.

To some degree, I think they’re talking past each other. Megan is saying that college is not worth it for some number of people, and that number seems to be increasing. Justin is saying college is still worth it for most people. That may be true, but when you read him and others like him rattling off the huge average benefits of having a college degree, it almost seems like they think it’s a myth that lots of former students are falling way behind on their loan payments.

It is clear that their exists some number Y larger than zero of people who were given money by the government to go to college and now cannot earn enough income to pay that money back. It also seems reasonable to suppose, since college costs have been rising much faster than inflation – or in other words, since the average cost of college has been rising faster than average wages – that Y is larger than it used to be and is getting larger. This, actually, is the crux of Megan’s argument, which already acknowledges the average wage premiums that the “bubble skeptics” cite in their rebuttals:

Experts tend to agree that for the average student, college is still worth it today, but they also agree that the rapid increase in price is eating up more and more of the potential return. For borderline students, tuition hikes can push those returns into negative territory.

Wolfers likes to cite the differences in the unemployment rate: 4.1% for college graduates vs. 8.8% for high school graduates. Flipping that around, I see that a high school graduate has a 91% chance of finding a job. However, if he goes to college, he can bump that up to 96%, and the job will probably pay better, too. If you can go to college with no debt, it’s a no-brainer. However, if you have to borrow thousands of dollars, it gets a little trickier, because the government will loan you the money no matter what degree you’re pursuing, even though it’s clear that some degrees lead to much smaller average wages than others.

The NYT piece suggests that 1 in every 6 student loan borrowers is in default, implying that they are not, in fact, enjoying that wage premium right now. McArdle’s piece claims that “somewhere between one half and two thirds of undergrads now come out of school with debt.” If we assume that 60% of graduates have debt, and one-sixth of those debtors are defaulting, that suggests that roughly 10% of college graduates right now can’t pay off their loans, even if they have jobs, or that only 90% of them are better off.

So, then, a college graduate actually only has a (96% x 90%) chance of getting ahead, or 87%, which is actually worse than the employment prospects for those who only finish high school (well, if you think it’s reasonable to argue that getting a college degree and then working a coffee shop with thousands of dollars in unpayable student loans is worse than working that same coffee shop without a degree or those loans – maybe the economy will improve and the history major will be able to leave.)

Now before you bubble skeptics get all worked up, there’s a lot of fuzzy math here (what about those not in the labor force?), including the fact that the jobless rate for recent high school graduates is much worse than the overall rate – older non-collegers already have most of the jobs they’re fighting for. But recent college graduates have the same relative problem; it appears that a stunning 53% of recent college grads are unemployed or underemployed. If half of recent grads are making big bucks while another quarter are working non-degree jobs and another quarter can’t find work at all, the average may still be better than high school grads, but from “behind the veil” it definitely doesn’t look like a slam dunk to me in today’s job market.

The good news is you can decrease the overall uncertainty for yourself by figuring out how much a particular college will cost you and what kind of degree you want to pursue. If you can afford to do it with little or no debt, or if you are pursuing a degree with large average returns, there’s a greater chance you’ll come out ahead. But if you’re going to have to borrow tens of thousands of dollars and you don’t even know what you want to do yet, it’s not at all clear to me that you are making a wise decision, no matter how much people say you need to go to college and no matter how willing the government is to give that college all the money they’re asking for so you can try to pay it back later. Otherwise, as Megan says, you’re just buying yourself “a four-year vacation in an increasingly well-upholstered resort.”