Dazed and Confused Students Land $24,000 in Debt
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The Fiscal Times
December 22, 2010

What do 317,000 waiters, 141,476 receptionists, 107,457 janitors and 18,749 parking lot attendants have in common? They’re among some 17 million college graduates who are working in fields that have traditionally not required a college degree.

Some might argue these statistics are a reflection of the depth of the current economic malaise. But Richard Vedder, a professor of economic history at Ohio State University, maintains that the data are a sign of creeping “credential inflation” that is fueled by misplaced national priorities.

Education Bubble?
Education policy, funded by trillions of federal financial aid dollars, is creating an education bubble by shoving millions of kids into costly degrees that they don’t need, he says. The fact that so many graduates are working in jobs that don’t require degrees shows that education spending doesn’t pass a remedial cost-benefit analysis – for both the government and the students involved.

“There is no doubt that education is important to both personal development and the national economy,” he said. “But for more and more students, that degree is leading to some form of disappointment. We are increasingly encouraging people to get college degrees that don’t pay off.”

As things stand, higher education is based on “seat time,” says Mark Schneider, vice president of the American Institutes of Research in Washington, D.C. Students who sit in the right classroom seats for a long enough time and get passing grades — even if those grades are poor — can earn a degree. He’s not alone in that view. Meanwhile, colleges and universities are paid for filling those seats – without regard to how many of their students graduate or how much they learn. “There should be better and cheaper ways to certify someone’s skill set than a four-year college degree,” he says.

Should Everyone Go to College When the Average Graduate is $24,000 in Debt?

To say that Vedder’s conclusion – that fewer kids should go to college – represents a minority opinion is an understatement. Some experts sardonically grouse that his take on the data is “interesting;” others call it “selective” or “elitist.” Economist Nicole Smith, whose colleagues at Georgetown University’s Center on Education and the Workforce have done a detailed analysis of the same BLS statistics, says that Vedder is using flawed data to support a flawed thesis.

“As college costs rise, it’s increasingly important to do
a careful cost-benefit analysis of a degree.”

Yet on one of Vedder’s points, many educators agree: As college costs rise, it’s increasingly important to do a careful cost-benefit analysis of a degree – and that analysis is difficult to do with the current system. “A lot of people are spending a lot of money without knowing how it will connect to wages later,” says Smith. “We owe it to individual students to know the value of this education.”

The need for cost-benefit analysis has soared because college costs have been growing at twice the rate of inflation for decades. And while federal financial aid has climbed to address the increasing demand for more college money, aid has shifted from predominantly grants and scholarships to loans. That’s left an increasing number of students buried in debt. Worse, many of these students never graduate. Only about half of the students who start college graduate within six years of starting, which can leave them indebted and years behind their high school graduate peers in getting paid work.

A Shifting Consensus
Merely entertaining the question of whether a college degree will pay off is a noteworthy shift in education industry consensus. Some years back, concerns about college costs and benefits were waived away with a simple reference to government data that reflected income by educational attainment. The summary version: College graduates earn roughly $1 million more over their lifetimes than someone with only a high school diploma.

The median income of a man with a four-year college degree was $61,280 in 2009 versus $30,303 for a high school graduate, for instance. That $31,000 annual difference in median income works out to $1.24 million over the course of a 40-year career.