Personal Thoughts

I cannot speak for everyone, so I will offer my take on how the worth of a college education.  Everything I have researched during this blog has shown that higher education is getting more expensive, while the financial assistance available to students is becoming more difficult to obtain.  Enrollment is rising, competition is rising, bachelor’s degrees are becoming less valuable then they once were due to many factors and master’s degrees have become mandatory for many careers.  Where once a degree was considered security for gaining employment that is simply not the case and large numbers of students are out of work or not working in their desired field.  However with all that said it is also true that an education is invaluable.  It opens doors which are not open to those without bachelor’s degrees and serves as a maturation ground for young boys and girls to grow into men and women who can contribute to the world.  How large that contribution will be is entirely dependent on the student but the crucial part of the equation is arming the student with the education they need to make a difference in their community should they so choose.  I firmly believe that no matter the financial cost higher education is always worth the investment.  Education is, as cliché as the statement has become, an investment in our future.

Cash does not rule everything around me

One of the final issues to discuss is, “Is a college degree emotionally worth the investment?”  This is entirely subjective.  I have a science background, and will be receiving my bachelor’s degree in biology with a minor in chemistry so I am accustomed to using hard numbers and observable evidence to evaluate my decisions.  In this case that is not possible.  There is no number to assign to the subtleties that contribute to one’s satisfaction with their college experience.  Far beyond the hard knowledge gained by attending a higher education facility are the social and networking skills that are sharpened and honed during college.  Fraternities, clubs, sports, research and societies all give the student little tastes of what it will be like to live and work with others and is a place where blunders are often made and quickly forgiven.  College is a place of cultural and social maturation.  I am not the same person I was when I entered small, rural Longwood University and I am sure that the changes I experienced are not unique, but shared among all college attendees in one form or another.  That being said, every individual student has experienced their college years in a slightly different way than I have and while our experiences cannot be directly compared, I would venture to say that every one of my peers has grown and matured as a social entity during their four, five or six years in college.

This maturation is an invaluable tool that benefits the one time student for the rest of their lives.  In the work place, at home, with the family; all these situations require interactions that are entirely separate and unique.  By immersing oneself in an atmosphere where there a multitude of different backgrounds and attitudes and thought processes and beliefs it allows one to evaluate themself.  Comparing and contrasting your beliefs and attitudes and having them challenged and questioned by others strengthens your beliefs or illuminates the holes in your own logic.  College is a time where cultural assumptions are challenged and disintegrated and the lenses through which one views the world are shattered and replaced.  This may happen throughout a lifetime, but in my own experience coming to college was the event that affected me the most and completely shattered some of my unconscious prejudices and predispositions.  Where else is such an opportunity available?

Loan repayments

The topic of loan repayment is one area yet to be discussed here.  As already established, the financial value of a student’s degree depends largely upon the area of study they pursued.  Math, IT, health oriented and engineering majors tend to yield the highest returns.  That is not to say that the other majors are worthless, or money pits.  On the contrary a student has the ability to make a living pursuing nearly any field they so desire, however the standard of living will be very different for a biological engineer than an elementary art teacher.  Even further, a masters degree yields higher returns than a bachelor’s degree.  With higher student debt averages now than ever before the repayment of those loans has become the major concern for graduating bachelor’s degree holders.

In an article on money.cnn.com by Kim Clark, the loan repayment plans, structures and rules are laid out and ranked according to the best options.  There are four options laid out in the article, the salary dependent plan, standard 10-year payment plan, graduated repayment plan and the extended repayment plan.  They each have their own benefits and drawbacks and which one is best for a particular student depends on the student, how much they owe, and how much they make.

The income-dependent payment plan is fairly straight forward, you pay up to 15% of your income in student loan payments, but no more.  However, every time your income increases so do your loan payments.  This is rated as the best option in the article and there are many perks to being able to have variable payments proportional to your income.  After 10 years of on-time payments, any remaining debt CAN BE forgiven, which is another bonus but is not guaranteed.  For the unemployed they may have $0 due for payment until they find a job, however interest is accrued and adds up exponentially.

Then there is the ten year payment plan.  This is the standard plan which students are usually automatically assigned to if they do not opt for another option.  For a student owing $25,000 their monthly payments will be about $290.  The total amount paid, with interest, will be about $35,000.

The graduated payment plan begins with low payments, about $50 at first.  These payments increase on a schedule which allows the student to pay their loans off in ten years.  The payments increase regardless of income, so the student should be very confident in their income and raises before committing to this payment plan.  The total paid with interest will be about $36,000 for a student owing $25,000 in loans.

By far the worst plan is the extended payment plan, because the student will pay a total of about $52,000 with a $25,000 loan.  However, this allows the student to pay the loans off in up to 25 years.  Monthly payments are lowest with this plan, on average, at around $175.

In my opinion, with the interest rates on all these loans, they amount to near usury.  A student with $25,000 will pay about $10,000 in interest alone and will be in debt for 10 years before they even begin their careers.  This can be especially detrimental to students who cannot find work in their field immediately, as they must begin paying off those loans within six months of graduating without exception.  They may be forced to take a lower paying manual labor job to pay off those debts, leeching energy and time from them and inhibiting their ability to find good work in a career within their field of study.  Additionally, if a student takes a year off between undergraduate and graduate schools they have to begin paying off loans in the interim and instead of focusing on gaining experience and research in their field, they have to find work wherever they can to pay loans and have enough to live on.  How can a student be expected to launch a successful career and life when they are burdened with such long-term,  expensive debt borrowed from the public trust and private institutions with little to no forgiveness mechanisms?

Student Satisfaction with their Universities and Degrees

Noel-Levitz is a company which conducts a survey every two years which includes student satisfaction on a number of issues and included over 80,000 students in its 2011 survey.  In that survey they listed, though gave no numbers for, the top areas which are challenging universities today as well as the top strengths as seen from the student’s perspective.  The top three strengths included valuable course content in the student’s major, excellent instruction, and knowledgeable academic advisors.  The top three weaknesses included not being able to register for classes that are needed; tuition paid was not a worthwhile investment, and faculty being biased in their treatment of students.  It would appear that there are two camps within the student realm, those who are interested in their major and get along well with their professors and advisors and the, “others” who experience unfair treatment, have issues completing their necessary coursework and feel as if their money was wasted.  The causative factors of these two viewpoints could be argued and debated at length and ad nauseam, but it would be fruitless to do so.  The existence of two differing and seemingly opposed viewpoints is evidence in and of itself that the college experience is not equal for all who attend higher education institutions.  This raises more questions than it answers, including “Can a blanket statement of worth be applied to all people, in all majors, at all institutions?”.  My answer is a resounding NO.  The evidence I have gathered during the course of this blog has been absolutely clear in its implications that not all degrees are created equally.  In terms of financial stability, the engineering, IT, health and mathematical fields tend to be the most promising.  All other majors appear to be generally lower in their rate of returns.  This does not mean that those majors cannot be rewarding, but one should be certain that they love that subject and are willing to trade income for personal satisfaction before embarking on such an academic quest. 

Earnings comparison between bachelor’s degree, advanced degree, and high school diploma holders.

I recently came across a very interesting article which compares the earnings of people with high school diplomas, bachelor’s degrees and advanced degrees.  Advanced degrees covered any type of degree that required more schooling after the bachelor’s degree.  This article was written by a man named Johnathan James, who is an Economist at the Federal Reserve Bank of Cleveland.  His abstract states that college wage premiums have increased over the last thirty years, meaning that the amount that people with college degrees are earning after school is increasing and he did some research into the causes of this increase.

In his research he found many figures and tables which he includes in his article.  They paint a very easily to understand picture of how exactly the wage premium has increased, and that this premium is intrinsically tied to the major the student completes his or her degree in.  The wage premium for those holding bachelor’s degrees has increased only slightly, but the data show that the wage premium for those holding advanced degrees has had a much sharper increase since 1977.  The value of the bachelor’s degree has increased nominally, but it is the advanced Master’s and Doctoral degrees which have seen the most significant increases in value.

James then goes on the break down the wage premiums by major.  It is immediately apparent that the majors with the best return on their investment are science and math based, namely engineering, health and business.  However that is only for those with bachelor’s degrees.  With advanced degrees the majors with the highest premiums are engineering, physical science, and computers/mathematics majors.

This is all relative information.  The wage premiums shown in the graphs are shown as a ratio of wages earned by those with bachelor’s/advanced degrees versus those with only high school diplomas.  This means that those with the highest wage premiums are not necessarily the highest paid majors, but they do have some of the best returns on their investments when considering how much more a person is paid with a degree.

As to how this all fits into the discussion of the value of a bachelor’s degree, it shows that the value has indeed grown.  However, this statement comes with two caveats.  The value of bachelor’s degrees has grown only slightly, and only for certain majors.  It seems that the value of your education depends largely on what your education consists of, and what you intend to do with that education after school.

The issue of student debt, I believe, is one which has been firmly established and repetitively argued to such an extent that I will spend only a moment summarizing the major point.  Student debt is rising as tuition rates rise.  This is a major part of the degree value equation and weighs heavily on students and their families.  In this article by Alex Usher student debt is compared between the world’s largest nations.  In the first few pages I was struck by the lack of debt forgiveness programs in the United States.  Germany has a fantastic program by which student debt is repaid based upon merit and completion.  For simply completing a degree program a student qualifies for forgiveness of at least part of their tuition, and if a student finishes with more than 10,000 euro of debt or in the top third of their class they are forgiven of ALL debt.  According to the OECD Better Life Index, Germany’s educational performance also happens to be higher than the United States’ on their standardized measures.  This is only correlational, and I want to stress that correlation is not causation, but I believe it is reflective of the high value that Germany places on education.  The average student debt and income after graduation between the U.S and seven other countries were tallied by Usher, and in comparison to the other seven the U.S. had the highest debt to income ratio, except for Sweden.  The author suggests in his conclusions that the U.S. could relieve a large portion of student debt by offering one low interest rate for the life of the loan, as opposed to subsidizing the loan during school but then applying crushing loan rates once the student is out of school.  The loans themselves are not as much of a problem as are the punishing rates of interest applied to them after the student graduates.  However, they also say that there is no “silver bullet” solution to the loan problem but that it would behoove the leaders of the world to look at the examples set by other countries and implement the sensible plans that produce results around the world.

Policies like those implemented by Germany are expensive without a doubt.  In the atmosphere of today, debt is not just a student problem but a national issue.  We are trillions of dollars in debt and counting, but our government still fights tax raises and spending cuts with gusto.  I wondered if there was a correlation between these different policies regarding loans and the tax rates in foreign nations.  A quick search led me to OECD again, where I found that indeed those countries with more forgiving student debt policies tended to have larger tax rates as a percentage of their GDP.  Again this is correlation not causation but the money would have to come from somewhere and taxes would be the logical revenue source.  It is unrealistic to assume that the U.S. will raise taxes enough to cover these kinds of forgiveness policies.  However, now that I have a better understanding of the differing policies regarding student debt it is clear that debt will only continue to be a major concern and may become an even larger burden to future students.  How does this relate to the worth of a college degree?  Quantitatively, it seems to me that without reform of our student debt policies and continued reduction of education expenditure on the state level the value of all degrees will only decrease with time.  Especially as the average income of Bachelor’s Degree holders continues to decline at the same time.

First dip into the Research

I must first open with a disclaimer; I do not have the single definitive answer to the question I posed with this blog.  However, in the pursuit of a plausible response I will devote this blog to analyzing two questions on the benefits of a Bachelor’s degree.  The first; are the benefits of obtaining a bachelor’s degree at least equal to the costs?  Second; has a bachelor’s degree become a mandatory pre-requisite to well-paying jobs?  Both questions are over-arching and broad headers which entail their own premises and conclusions and consequences.  As an example, if a bachelor’s degree has become mandatory for most careers, while simultaneously becoming more expensive with fewer grant and scholarship opportunities, how would that affect the wealth gap in America?  Or the achievement gap?  Also, would being a mandatory pre-requisite completely invalidate my argument by making my initial question a pointless query?  If a degree is required to get a job, and a job is required to support oneself, does that mean a degree is required to support oneself and is worth pursuing regardless of any cost incurred?  These queries will be the heart of my discussion, however to begin with it is necessary to do some qualitative research to attempt to reach a satisfactory conclusion to my original questions.

Delving into the first question of whether the costs incurred by college attendance are at least equal to the outputs I came across an opinion article written by Tomas Nieto in The Daily Aztec, the San Diego State University school newspaper.  He raised many prescient points.  Since bachelor’s degrees are becoming more common they are less valuable for students hunting for jobs after school.  He also argues that the higher tuition charged by prestigious Universities is becoming a huge drain on the students that is not paying off, as they are meeting the same adversity as those students attending less expensive institutions.  When considering the fact that many times parents are the ones signing for school loans beyond those provided by the government there is another factor added into the “college worth” equation.  He then makes a statement that UCSD has made attempts to reduce the number of Biology majors as there are not enough spaces for students in the required classes, and that he has had personal experience not being able to fit into the needed classes.  This brings up two points, how moral is it for Universities to discourage their students from declaring certain majors because of the Institutions own shortcomings, and does this indicate a possible bias by the author due to his personal involvement?  In my opinion, the efforts by UCSD to discourage Biology majors seems highly immoral, as those students are paying premium tuition rates to get a Biology education, and UCSD has a responsibility to take only as many students for a major as they can support.  As for a possible bias, I believe the tone of the article is embittered which, coupled with his professed personal stake in the subject, strongly suggest that the author is biased.  Nieto correlates decreasing educational funding with increasing tuition rates which seems like a logical cause and effect relationship, however his conclusions are unfounded and unsupported.  Another point brought up by Nieto is that students attending schools with lower tuition rates will graduate with less debt, thereby adding to his or her educational value.  A major shortcoming of this article was the lack of quantitative or even opinionated support for his arguments, many times it appeared to be the authors own conclusions which, I would argue, were falsely drawn or over exaggerated.

In further research I found an article by the Delta Cost Project (deltacostproject.org) the sources and outlets for educational funding were analyzed in detail.  The 48 page report intensely detailed the spending habits of educational institutions.  That article shows that, in fact, federal funding has increased or stayed the same over the years between 1995 and 2006, but State and Local funds have certainly decreased.  The President’s 2013 budget shows that over the last three years there has been a increase in the amount of loans available to students via Federal Direct and Unsubsidized Perkins loans.  So if the Federal Government is actually increasing the amount of loans available via mostly unsubsidized loans, then why is the price of college and student debt rising so sharply?  In the paper by the Delta Project, they contend in the summary that the increased cost of tuition is due not to increased Collegiate spending but due to the reduced state funding of higher education.  The Institutions continue to shift the cost to the student in the form of increasing tuition costs.  In Nieto’s article, he provided a figure which compared the average debt per student increase from 1992 to 2010 and the median earnings by educational level in 2008.  For a Bachelor’s degree the median earnings are about 55K per year, however the average debt is about 35K.  I would contend that at that kind of ratio, where you owe 63% of your first years earnings, in school debt is a fantastic way to begin your adult life straight-jacketed by debt.  I agree with the notion that as Bachelor’s degrees become more common they decrease in value, forcing students to continue on to Masters programs.  This would be a great thing were not the cost of further education so immense that they amount to nearly a full house loan, but with nothing so material to show for your money.  In my experience, my undergraduate career has been only minimally related to my perspective career, so the first four years of my Higher Education career has been merely laying groundwork for further education.  I have no qualifications to do anything when I get out of school.  In that perspective, it has been an expensive four years of liberal education.

These studies and articles paint a picture of decreasing value of Undergraduate degrees.  I do not believe that education can ever be a bad investment, but as the costs of tuition rise they become ever more restrictive and more of a drain on students and their families.  At what point does the cost of tuition become usurious? At this point in my research, I believe that the answer to, “Is my Degree worth its costs?” is largely that it depends.  It depends on how much you pay in tuition to begin with, how many loans you draw upon, what your major is, and what the job market is when you graduate.  That, however, is not the end of the journey.

College Value

What is the true value of a Bachelor’s Degree?  The question is simple, but the myriad of factors both contributing to and detracting from the “value” of an undergraduate degree are complex and constantly transforming.  If the degrees of a generation are losing value, while national and personal expenses are increasing, what does that mean for the future of our nation as a whole?  Adding to the dilemma is the difficulty in quantifying “value” for education.  And if a value can be applied to education, can the argument be made that there is some point where the costs outweigh the benefits, thereby rendering education a bad investment?  And extending the question even further, can that tipping point be quantified and equated?  The multiple levels of complexity inherent in such a simple question can be confusing at best and impossibly obtuse at the worst.  Failing to understand the impacts of the cost of education could result in a population of college graduates without work, drawing on public funds without paying back into them and stressing an already weakened economy.

As a second semester senior Biology major at Longwood University, a relatively small Liberal Arts college in rural Central Virginia, I am confronted head on with the issue of, “What’s next?”.  I think it is an accurate generalization to assume that there is a good number of student’s in identical situations across the nation.  Student debt is rising, the economy is still recovering from a major recession and hiring rates remain low in comparison to the pre-recession era.  As a student who is immediately impacted by all these factors I will delve into the contributing factors, consequences, varying arguments and quantifiable data to attempt to answer the question of, “What is a college degree worth?”.