The Diminishing Value of a College Education

For decades, it's been considered common knowledge that a college degree was your ticket to a well-paying job. Salary surveys back it up, usually showing substantial wage differences between those with a high school diploma and those holding a bachelor's degree. Despite this, the value of a college degree has been rapidly diminishing and could be of little value by the time my own children are young adults.

When evaluating if something is worth the investment, we often look at the time it will take to break even on the proposition. For a basic 4-year degree, that payback is extending itself further and further out. Tuition has been rising at a rate of 7% annually, far past the rate of price and wage inflation. This increased cost means working longer to pay off the same level of education. Wages for college graduates are also diminishing with a glut of employees who hold 2- and 4-year degrees, leading to the pursuit of 6-year and doctorate degrees to try and make up some of the difference. Of course, this may not work for long as more students wise up to it and the market is again flooded with diplomas.

It's also unnerving to many graduates to find out that once they get into the field, they are ill-equipped to do the real-world work required to be more than entry-level. A discussion with Cameron at Magic Valley Mormon revealed that despite spending a semester in an accounting software class, they did not once use a computer. I can't say that the story with my IT colleagues is much better, many of them finding that how things work in the classroom is far from how they work in real situations. I imagine that many graduates find themselves feeling that they cheated themselves out of 4 to 5 years of more useful practical experience.

Employers are also starting to wise up to the experience factor. While many of them will still require a degree for specific positions, more emphasis has been placed on finding candidates who know how to get the job done. Many IT positions state one experience requirement for a degree-holder and another for those without. Usually, the difference is such that skipping the degree and going straight into the field is a better medium-term value than attending college. It may also be of greater value to get specialized certifications to valid knowledge and skills sets, a process that's often a bargain compared to being a full-time student.

With the payback on a degree getting further and further out as costs rise and employers placing more emphasis on experience rather than certifications, college seems like a dubious proposal. While a lot of politicians and educators wring their hands over dropping college enrollments, many don't seem to have done the same calculation that high school grads have. Despite these dwindling enrollments, colleges have unwisely chosen to continue to death spiral by raising tuition and asking for more tax money rather than attempting to thin the herd through more selective admission requirements, cutting staff and wages or bringing more practical experience into their programs. Their refusal to acknowledge the market dynamic, both at public and private universities, is the first step on their march to irrelevance.

It would be great if I'm wrong about where colleges are headed. Given the trend, however, I don't think we can expect much course-changing until it's already too late. 

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3 Responses to The Diminishing Value of a College Education

  1. Bill says:

    I really don’t think much has changed. I made $9600 working full time the first year out of college after making $14400 my last year working part time while going to college.(yes it can be done in happy valley) My friends who didn’t go were all making much more than I was. Some of them still might be but I have long since left most in the dust as far as wages and also in understanding the markets. I believe that starting salaries are a little bit short sighted when considering a lifetime of earnings. Does everyone that graduates with a 4 year degree do better? Of course not. Personally I think one can bank on the mean mid life incomes of college grads to continue to excell. You can’t really use averages because Bill Gates really skews the averages.

  2. Reach Upward says:

    Actually, the value of a degree differs dramatically for different fields. I discussed this in my post at http://reachupward.blogspot.com/2008/01/high-degree-of-value.html , where I include links to articles that delve into these differences. For example, check out this article: http://articles.moneycentral.msn.com/CollegeAndFamily/SavingForCollege/IsYourDegreeWorth1million.aspx?page=all .

    A degree is valuable in a field where it represents a de facto license to practice. Not so much so in other fields.

    Few will acknowledge this (and many will vehemently deny it), but employers use degrees as a substitute for IQ tests, which they are not permitted to administer by law.

    Our programs to ‘make college more affordable for everyone’ have not only driven up the total cost of college; they have flooded campuses with increased numbers of students. This has diluted the average IQ level of students (this is well documented), and has caused higher ed institutions to offer dumbed down curriculum. Thus, a degree is becoming less useful to employers as a tool for ensuring higher IQ job applicants. They are having to explore other avenues to legally satisfy this need, including seeking those with advanced degrees.

    College enrollment levels ebb and flow depending on the economy. When jobs are plentiful and unemployment is low, enrollment declines. When the job market tightens up and unemployment increases, enrollment increases.

    While actual enrollment at some campuses has declined recently, the dollars flowing into college coffers (mostly from subsidy and student loan programs) hves increased dramatically. Thus, administrators have no incentive to pursue efficiencies and keep costs down. Expenditures have been increasingly extravagant and frivolous. Exhorbitant tuition increases have become the norm. This lends to the decreased lifetime value of having a degree.

  3. Jason Randall says:

    I’m considering the idea of going back to school, primarily because my work covers my major with $5500 a year, and there are some programs I just need a little up front guidance to get used to for the things I plan to do in the future.

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