The Convincing and Confusing Value of College, Explained

The value of college, once taken for granted by most people, has steadily intensified as a point of debate. It’s been the source of countless news articles and dinner table discussions. Many of these stories and discussions simply leave us all more confused. So here’s my summary – in clear and simple terms – about the value of college:

1.??????There’s no better investment return than college – not even close. Long-standing economic analyses have shown that people who earn a bachelor’s degree – on average - make considerably more money over their lifetime than those with a high school diploma. And according to researchers Michael Greenstone and Adam Looney, an investment in a college degree delivers an inflation-adjusted annual return of more than 15%, significantly larger than the historical return on stocks (7%) and bonds, gold and real estate (all below 3%). “If college were a stock, it would be the darling of Wall Street,” according to Dr. Enrico Moretti, author of “The New Geography of Jobs” and an economist at University of California – Berkeley.???

2.??????More college graduates contribute to less income inequality, not more. In his book, Moretti makes a clear case that the decrease in the supply of college educated workers in the U.S. since 1980 has contributed more to income inequality than any other factor. In “The Race Between Education and Technology,” Harvard economists Larry Katz and Claudia Goldin show that if the increase in the number of college graduates since 1980 had kept pace with rates prior to 1980, wage inequality in America would have fallen in the past thirty years, not increased.?

3.??????More Americans getting college degrees not only helps them, but helps raise the wages of unskilled workers too. Moretti found that for a college graduate an increase in the number of other college graduates in the same city corresponds to a salary increase – but not a particularly large one. For a high school graduate, the increase is four times larger. For a high school dropout the effect is five times larger.????????

4.??????These convincing returns on education are obscured by more recent data about high percentages of underemployed graduates and significant regional differences in college graduate earnings. It’s also confounded by long-lasting wage stagnation in the U.S. Recent reports suggest that as many as 40% of recent college graduates are unemployed or underemployed – the vast majority of which is accounted for in the underemployed category. Regional differences make the calculation of the return on a college degree rather complicated. "The average worker with a high school education in Boston makes 44% more than a college graduate in Flint. And a high school graduate in San Jose makes thousands of dollars more than college-educated workers in Merced,” according to Moretti. Further complicating the debate is the fact that current median pay for bachelor degree holders is below 1990 levels – so wage stagnation has hit college graduates along with the rest of the workforce.?

5.??????Which brings us to the next point exacerbating the debate. The astronomically rising costs of college has colored the value debate. During the same time that median pay for college grads has stagnated (since 1990), college tuition and fees have gone up 391%. And to put that increase in comparison to other industries that have been critiqued for rising costs, higher education tuition has outpaced healthcare costs by two-fold over the past few decades. The cost of college is increasing almost eight times faster than wages , a trend that is absolutely not sustainable.

6.??????Along with the rising cost of higher education has come a large amount of college loan debt – about $1.6 trillion worth. This kind of number is hard to fathom, so let’s focus on it from an individual’s perspective. For many people, student loans are necessary to get their degree. It’s now becoming increasingly important for students to think carefully about the amount they borrow for loans relative to their expected earnings after graduation. This is not an easy calculation for many students, especially those right out of high school, who may be uncertain about their college major and future career choices.?Still, there is guidance available. There is ample data available on earnings (by job type and region) to help understand what that picture might look like for various jobs. A more general rule of thumb: try not to take out loans in excess of $25,000 total. Graduates who took out more than $25,000 in loans report lower financial and physical wellbeing for as long as 25 years after graduation. ?

7.??????On top of all this, there have been recent declines in confidence and public support for higher education. Of all institutions measured by Gallup, higher education has fallen more in the past few years in confidence ratings than any of the institutions measured.?This decline in confidence is driven in part by political polarization – with Republican’s views of higher education souring considerably since 2015.?(Note: this trend began before Trump’s election and is tied to several concerns such as free speech being limited on campus.) But getting outside the political divide, the consistent bipartisan view that’s of most concern for the long-run is that college is not relevant to work.?With only 13% of Americans strongly agreeing college graduates are well prepared for work and only 11% of C-level executives saying the same – there’s a lot of work to do on the part of college and corporate leaders alike.

8.??????By far the top college-going motivation of Americans is “to get a good job.” Our lack of efforts to draw a tighter connection between what students learn and what prepares them most for the world of work betrays the most important driver of consumers’ interest in higher education. If we fail here, we fail on the most important part of our mission. Getting value out of college - for the vast majority of Americans - means getting a good job, not just a degree.???

9.??????Resistance to the idea of “college as preparation for a good job” is driven by a misplaced debate in the Academy and among many prominent thought leaders. That debate centers on the liberal arts versus careerism. This is a false choice. New research consistently shows the most effective paths for graduates are one in the same. They are graduates who are both broadly-educated critical thinkers and who possess industry-valued skills and work experience. The either/or debate of a liberal education vs. career-specific training needs to be punched in the nose with a both/and combination by all of us. ?????

10.??Higher education that is more work-aligned with direct routes to fast-growing jobs is the key to unlocking the value proposition of college today and in the future. Graduates who say their education was relevant to their work are much more likely to say their education was “worth the cost.” And as stated earlier, this does not mean the loss of liberal education or interdisciplinary learning but rather the expansion of it across all subjects – in combination with work-integrated learning opportunities, co-ops, and credegrees. ?

11.??The economic investment in college still pays off (on average), but it does not excuse us from working feverishly to lower the cost of higher education or at least stave off further increases. Price acts as a real barrier to both college enrollment and completion rates. Purdue University - one of the country’s most prestigious public land grant universities – has shown us it’s quite possible to freeze tuition for seven straight years while also rising in every category of measurable institutional performance, including rankings. Why Purdue is the outlier in this regard, rather than the guidepost for others to follow remains a mystery. Whatever the factors holding other universities administrations back from capping tuition fees, Purdue’s experience shows the cost issue does not have to be a fundamental structural problem with the industry.????

12.???Emerging models of “college” are among the most promising because they are the most responsive to needs of consumers and employers. Online programs designed for current working adults, employer-driven and integrated programs, and Go Pro Early pathways all align well to the needs and desires of certain kinds of prospective students. Higher education should not be viewed simply through the lens of the “traditional college experience.”

13.??At the end of the day what matters more than anything is whether students make the most of college – not where they enroll. The Gallup-Purdue Index, the largest representative study of college graduates, was a study I led aimed at understanding the linkages between graduates’ success later in life and their experiences while in college. The findings – first released in 2014 – stunned many by showing virtually no correlation between where you went to college and success later. It was entirely about how you did college. Factors such as having a mentor who encouraged your goals and dreams and an internship where you applied what you were learning in the classroom doubled your odds of being engaged in your work and thriving in your well-being later. Where you went made little to no difference. Yet we remain fixated on rankings and brands and the silly notion that higher price equals higher quality. That myth was squarely debunked by my former colleague, Dr. Jonathan Rothwell, who showed there is no correlation between tuition price and alumni satisfaction ratings with their education. The ultimate value in higher education doesn’t come from an institution’s price tag. ?There are many options for students at lower priced institutions, which will yield excellent results for them.????????

Overall, college is a no-brainer investment. But we can’t assume that will always be the case. And there are definitely better ways of doing college. We need to work diligently to reduce or contain its cost, ensure it is increasingly work-integrated and help guide prospective students to the right fit of college and degree options based on their individual needs and aspirations aligned against the realities of regional differences in cost-of-living and employment opportunities. In short, the value of college is not in the “eye of the beholder” as we have come to say about the value of art. Rather, it’s in the “hands of the degree seeker” – in terms of whether they make the most of it. When they do, there’s no better investment value.

Note: A version of this article was previously published on Forbes.com.