The necessity of a college education

By Felix Salmon
September 10, 2012
Megan McArdle is on the cover of the new Newsweek, with a story asking whether college is still worth it, after decades of massive price inflation, and in it she makes a few good points.

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Megan McArdle is on the cover of the new Newsweek, with a story asking whether college is still worth it, after decades of massive price inflation, and in it she makes a few good points.

Firstly, college is now insanely expensive: even if it made perfect financial sense for people of Megan’s generation (she’s 38), that doesn’t for a minute mean that it still makes sense today. Certainly at this point it’s pretty much impossible to (legally) work your way through college. If your parents can’t afford your tuition and you don’t get some kind of scholarship, you will graduate with a large amount of debt — as more than half of undergraduates now do.

On top of that, the supply of new and bigger student loans has been growing at least as fast as the price of college. No matter how much a college charges, it seems, some bright financial innovator somewhere, in either the public or the private sector, is going to be able to find a way to lend prospective students the money. As a result, colleges, especially when they’re in the private sector, can charge pretty much whatever they like — and, unsurprisingly, they end up doing exactly that.

At some point, by definition, college must become a bad deal, at least for some people. Even at a cost of $0, college is going to do you precious little good if you’re, say, illiterate: the opportunity cost alone is meaningful. And the more expensive that college gets, the less of a good deal it becomes. Especially for the large minority of students who end up dropping out: nearly all of them would have been better off never going to college in the first place.

But the math is complicated: the only thing which has been rising faster than college tuition costs is the wage premium that college graduates receive over those without a degree. A degree is becoming more important, not less, in our digital economy. And so while the cost of going to college is rising, the cost of not going to college is, arguably, rising even faster.

There’s no doubt that colleges do seem to be flabbier, when it comes to controlling costs, than they have been in the past: those ubiquitous climbing walls are indicative of a broader arms race in terms of non-academic amenities. There’s a real problem here, surrounding the way in which, at the margin, universities have very little incentive to control costs. Quite the opposite, in fact: in an area where outputs are incredibly hard to measure, there’s a huge temptation to just measure inputs instead, and work on the assumption that the more money you’re spending, the better the education your students are receiving.

But McArdle doesn’t spend much time wondering about how to change universities’ spending behavior: instead, she concentrates on students’ borrowing behavior. And of the two, it seems to me that the borrowing is more rational than the spending. “It’s very easy to spend four years majoring in English literature and beer pong and come out no more employable than you were before you went in,” McArdle writes — but that’s only true if you somehow contrive to drop out of college at the very last possible minute. McArdle talks a lot about the limits of credentialism, which are real, but the fact is that a college degree gets your foot in a lot of doors, these days, which would otherwise remain shut.

And even if you do work your way up the career ladder, that college degree is going to help you, years after you get it, in ways you probably don’t even realize — unless you don’t have one. I can think of two people, in particular, who work alongside college graduates in large organizations with deeply-established HR departments. Both of them are incredibly competent, and would naturally have risen much higher up within their organizations, were it not for the fact that they don’t have degrees. They’ve both been working for many years, to the point at which you’d think that whatever they did or didn’t learn at college would be irrelevant. But it’s not. Degrees don’t just get you in to certain jobs, they shatter a glass ceiling which is very much still in existence for those who don’t have them.

McArdle’s also wrong that credentialism is a zero-sum game. For one thing, we’re part of a global economy, where many employers will hire only college grads — and if they can’t find those college grads in the US, they’ll find them in Ireland or Israel or India instead. If you want lots of Americans to have lots of good jobs, it’s a simple fact that you want those Americans to have degrees: we can’t roll back the clock to a time when employers were happy giving career-track jobs to people without them.

The fact is that while this economy is undoubtedly tough for recent graduates, especially those with liberal-arts degrees, it’s much, much tougher for people who don’t have any degree at all. And as the economy recovers, the graduates will get better jobs, more quickly, than their non-college-educated peers. It’s a simple statistical fact.

The average amount of student debt per student in this country is large in absolute terms — about $30,000 — but is still a small price to pay for a lifetime of access to jobs and promotions which would otherwise be off-limits. It’s easy to rack up much larger debts than that, but most students don’t: they turn out to be rather more sensible, when it comes to debt, than many of the worriers give them credit for.

McArdle also seems unnecessarily worried about the public fisc:

A law passed in 2007 allows many students to cap their loan payment at 10 percent of their income and forgives any balance after 25 years. But of course, that doesn’t control the cost of education; it just shifts it to taxpayers. It also encourages graduates to choose lower-paying careers, which diminishes the financial return to education still further. “You’re subsidizing people to become priests and poets and so forth,” says Heckman. “You may think that’s a good thing, or you may not.” Either way it will be expensive for the government.

“Expensive”, here, is left undefined — but again, at the margin, what would really be expensive for the government would be to preside over an economy slipping ever further behind in terms of the proportion of young adults going off to college. We need more education, and better education, and cheaper education — we do not need less education. So when McArdle proposes apprenticeship programs in lieu of college, I worry, because they feel anachronistic to me. In theory, they might work. But in practice, they’re wholly unproven, and they’re incredibly hard to simply decree into existence.

So yes, college price inflation is something to worry about, as is the inexorable rise in student debt, both on a per-student basis and in aggregate. But the answer isn’t for people to start thinking that college is a bad deal. If you’re the kind of person who can read and understand McArdle’s article, and if you are reasonably confident that you can graduate from the undergrad program you’re applying to, then college is still very much a good deal. In fact, for most of the professions you likely aspire to, it’s downright necessary.


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