Trends in obtaining a higher education have been on the rise the past 20 years. There has been a current trend of increasing tuition costs around the country. Due to the increase in costs, many students have had to take out student loans. But the economic situation in which we find ourselves today, many are defaulting on student loans. Is an education really worth what students are paying?
The education level needed has also been on the rise. It used to be that a high school diploma would get you a descent job, then it was an Associates degree, then a Bachelors degree. Now if you want a descent job, you need a Master's degree.
With the value of degrees decreasing and the cost to obtain the degrees increasing, is the marginal benefit of a degree worth the marginal costs?
9 comments:
Student debt default may be caused by a student not being able to get a job following graduation. I would like to see a study performed on the correlation between students who worked through college and students who achieved employment following graduation.
My brother-in-law, Josh, is currently in the MAcc program at Weber State. He will be graduating in December. Josh mentioned to me that the only students with a significant amount of experience have already lined up employment following graduation. The others are still trying to get interviews with accounting firms.
At a bachelor’s degree level of education, we have those that work through college and may take out a small amount of student loans. We also have those students that do not work through college, live it up, put their education on loans, then hope to get a job out of college and pay it all off in a heartbeat following graduation. Between the student who got experience during his college career, and the other who did not, who will get the job first? With grades held constant, most likely the student with experience. One of the problems with society today, is the reality that our generation is perhaps more indolent, and have things easier than prior generations. Now, I am not saying this is the case for all individuals. However, I would dare to say that this is a growing trend. In other words, those students who are defaulting on loans are probably those that are unemployed. These students are unemployed perhaps because of strapped employment in a hurting economy. Therefore, the student who worked during college not only has less student debt, but is able to pay off student debt because he or she is employed. So my question would be: Are those students that are defaulting on loans, the students who have not worked during college to put themselves through school?
My comment has many assumptions, and I would like to get feedback from others on the matter.
I was raised to believe that the value of education is actually invaluable. My parents worked hard to provide for my sister and I continually stressing the importance of obtaining an education and preaching the blessings that would come as a result of our hard work.
I tend to agree with Lando's assumption that the majority of those who are defaulting on their student loans are those who have coasted through school with little to no responsibility and no obligation to seek employment while attending school simultaneously. If students put forth the effort to obtain an education while actively working and finding out which jobs are of the most interest to them, they will have an easier time finding employment post-graduation; subsequently, the financial obligation of repaying their debts will be less of a burden.
Also, the article states that "the idea that higher education is the only way to get ahead has become widely held". While I value education immensely I don't fully agree with this assertion. There are so many talented individuals - entrepreneurs at heart - who can make great lives for themselves by surrounding themselves with other talented people in order to implement their great ideas. One might view an education and a degree as a fall back or a security for these individuals. While that may be so, I see it as power that will only assist them in achieving their goals.
There is great value in work experience. This article is interesting because, as Aaron pointed out, "the idea that higher education is the only way to get ahead has become widely held". When worded this way, the 'idea' of higher education becomes a fad. A band wagon that everyone jumps on because it is the thing to do. Whether or not higher education is for everyone is not the issue I would raise. Are educational institutions taking an unfair advantage of students?
The article states, "College enrollment has surged one-third in a decade. With rising demand, college tuition and fees have more than doubled over that time, outstripping inflation in every other major sector of the economy — energy, health care and housing"
The problem I see with the trend or societal norm that in order to get a good job you need a degree is that many are simply paying for a degree and not an education. I look at many of my peers and see that rather than doing quality work, they just do work. I must admit, that at times I have done an assignment just to get it done. So rather than paying for an education, some just pay for a piece of paper. I think this creates an externality on society. As many do not take full advantage of attending a university and truly educate themselves, they end up unemployed or underemployed, despite having a degree. The result is that the economy is not using all of its resources efficiently, namely labor and our society is operating below efficiency. I am not saying that anyone who is unemployed or underemployed is lazy or unintelligent, but there are some who do not take full advantage of the opportunity to gain an education.
This is an interesting topic. I recently read an article that talked about college education no longer being worth the money and that student should not get the education unless they can pay for it. I agree with you that to many individuals don't work hard enough during their schooling and "live it up" as one of you said. However, I will graduate wondering if my degree will ever come in handy.
The short answer to Locke is yes. College education is an amazingly high return investment. It's still a positive NPV investment to go to a private school and pay all your costs out of pocket. Much less going to a state school where your investment is heavily subsidized.
But ... part of the problem is that given the low marginal cost for many students, college is then viewed not as a way to make yourself rich, but as a way to major in something that offers benefits that are more non-monetary. It's analogous to going to the grocery and being told everything is on closeout, and responding by stocking up on just junk food.
Lando: student loans don't (usually) default because of lack of work - there are programs in place to help people around this (they don't always take advantage though).
Oooh ... I can probably get in trouble for saying this ... but Lando's brother-in-law describes a situation that seems to be well-known to everyone except students. Higher level degrees help the most when you already have a decent resume. Too many students approach graduate school as a way to avoid beefing up their resumes.
I'm not sure of all the evidence for Lando's main point, but I will offer 2 pieces: 1) strategic default is huge in student loans, and has not been studied much, and 2) American students have been doing a lousy job of majoring in the fields where there are jobs (STEM: science, technology, engineering and math).
Locke: I absolutely think that universities are taking advantage of students. I keep pointing out to my undergraduate classes that there just aren't many accounting majors at the "Occupy" protests.
Mitchell (and Aaron too): the economic evidence that education is important, in and of itself, is very weak. Most of the value seems to be in signalling and screening (Chapter 13) that you can show up, complete assignments, behave appropriately, deal with open-ended situations, and so on.
Gubler Family: I'd emphasize that this may be true on average, but not on the margin. The average includes all the schmucks who just put in time. But, for a particular student, the marginal benefit of more education easily exceeds most alternatives. We just need to have a mechanism to make clear that some majors have better marginal benefits than others.
Dr. Tufte
If part of the problem is the low marginal cost for education, why are institutions offering scholarships if they lower the marginal cost for students even more? It seems to be counterproductive if students aren’t valuing the education they receive just because they don’t have to pay full price for it.
Institutions are rated on attendance and performance so they will do everything they can to make themselves look more appealing both to new students and the government which may subsidize costs and give grants.
Is this just one vicious cycle?
This is a very good question.
Let's turn it on its head and see if we can figure it out.
I think part of the problem is the word and concept of a scholarship. Let's look for an analogy.
Education has useful benefits to the individual and society in the long-run, but it has costs in the short-run. These are borne by that individual, unless they are defrayed through a scholarship.
So here's my analogy: Lasik.
Lasik clearly benefits the individual. It also benefits society (less accidents because drivers don't forget their glasses). But most of the costs are borne by the individual.
So would you have unnecessary Lasik surgery if your doctor offered you a discount? There actually is quite a lot of evidence that people do precisely that.
Might a doctor even offer you the funds to get Lasik to drum up more business for themselves?
But, can you see other stakeholders of Lasik - say, past Lasik recipients or employers of people who had Lasik - contributing to those doctors so they could offer "scholarships" for Lasik?
I think that analogy works pretty well. The part that doesn't work is that last part about scholarships.
Perhaps that is a sign that what is screwed up in education is the whole concept of a scholarship. So, yes, perhaps it is just a vicious cycle.
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