Students in my classes overwhelmingly reject the notion that governments should redistribute income. They consider it theft to tax a deserving wage earner to give subsidies (or “welfare”) to others. So, many are genuinely surprised to learn that taxpayers are subsidizing them, covering up to half the cost of education at a public research university. (Many assume if they don’t get a Pell grant, they are paying their own way.) While state subsidies have declined in recent years (still around $80 billion this year), federal subsidies have increased; approximately $150 billion will subsidize students this year. Is student aid a good investment, or just another special interest subsidy? What could possibly be the rationale to take tax dollars from a retail employee, for example, to pay someone else to become a wealthy doctor or lawyer?
The answer is that education does more than enrich individuals; it provides “public goods” as well. Education is expected to produce innovation and economic growth, foster citizenship, improve social cohesion, and increase mobility. When more people are educated, everyone benefits. Unfortunately, education is hard to finance. There have been experiments where investors paid students’ tuition in exchange for a portion their future earnings, but private investment has never supplied sufficient education for a modern economy. This “public good” of education rationale is accepted by mainstream Republicans as well as Democrats, so although some programs may be affected, there is no chance that federal student aid will disappear.
Of course, accepting that higher education is an investment doesn’t mean the money is always well spent. Degrees can’t produce public benefits if they are empty credentials. According to the just published Academically Adrift: Limited Learning on College Campuses, 36% of graduating seniors failed to increase their ability to reason, think critically, or write while in college. (If you prefer your glass half-full, 64% of seniors did increase their ability.) Simply increasing the number of such degree holders could hardly be in the national interest. Another troubling statistic raises further doubts: only 31% of adults with bachelor’s degrees are “prose literate,” meaning they are unable to understand and compare written arguments – a troubling prospect for a democracy.
Even if higher education does yield overall economic growth, your returns, as they say, may vary. Governments can only guess how much of a public good to provide, and allocations are usually made for political reasons. If more degrees are produced than the economy demands, the value of the credential decreases. In China, colleges have turned out so many degrees that many recent graduates are earning less than factory workers, competing for jobs to shovel waste or work as street peddlers. Because there is insufficient private demand, graduates in Egypt, and other developing countries, famously fill counterproductive bureaucracies to overflowing. Similar horror stories are not unknown here. For example, by most measures, there is an oversupply of law-school graduates and PhDs in some fields – a growing concern as more white-collar services are outsourced. Today, one in four college grads earns less than the top quartile of high school grads. Plumbing is harder to outsource to India than many jobs that require degrees.
Unfortunately, many students are banking on a misleading statistic: over a lifetime, the average college graduate supposedly earns a million dollars more than the average high school grad. A more careful analysis, which took into account the four to six years of foregone earnings and the cost of attendance (including student loans), concluded the average college premium is closer to $300,000. That’s still significant, but averages can be deceiving. Marginal performers in low-demand fields may actually come out behind, particularly if they incur significant debt. We do a disservice to many by pushing the myth that a four-year degree is the only way to succeed in life.
So, as costs continue to escalate, when does college cease to be a good investment? Today, if you’re not using your time productively. No system is free of waste; governments and institutions certainly have room to improve, but you have to shoulder your share of responsibility. Are you one of the students just passing through, blissfully confident that minimal effort will get you a magic diploma and guaranteed economic security? It won’t.
Graduating still increases your odds of financial success. But to make years of college into a good investment, you need to do more than fill a seat. Why not fully exploit a rare privilege? Take advantage of academic “coaches” who want to help you learn to think critically and to express yourself clearly. Draw on the helpful resources of Student Services. Get involved in a cause and develop leadership skills. Explore truth and beauty. Students who leave campus with an unquenchable thirst for learning improve their individual prospects and are well worth society’s investment, too. If you’re not headed in that direction, maybe you are just collecting welfare checks.
Steve Sharp teaches Comparative Politics and is the Executive Director of Financial Aid & Student Employment