What critics of American higher education get wrong

BERKELEY — Higher education is under attack in the United States. University presidents have been ousted, big donors are revolting, and the mainstream media is questioning the value of a post-secondary education altogether. “Americans have lost faith in the value of college,” The Wall Street Journal claims. “The math doesn’t work for a growing number of families.”

While students and parents are right to ask about the return on their investment in a college education, much of this criticism should be recognised for what it is: A politically charged red herring. The data show that a college education is still a wise investment and a key driver of economic opportunity and mobility. 

Most of the criticism is focused on Ivy League institutions, but those highly selective schools enroll less than 0.3 per cent of the more than 20 million students enrolled in US universities. The top 146 research universities account for only about 6 per cent of total full-time enrollment (including both undergraduates and doctoral students).

As for the returns on higher education, work by Adam Looney shows that the median annual earnings of workers with at least a college degree are at a historic high, having trended consistently and significantly higher than the median earnings of workers with a high school degree or some college for decades.

Yes, the average real (inflation-adjusted) cost of a college education — including tuition, room and board — is 1.5 times higher than it was in 1980. But this figure hides significant differences among institutions. About 73 per cent of students are enrolled in public institutions, where the average cost of a degree has increased much more slowly than at private institutions. The costs of two-year programs at community colleges are lower still; in 2020, they were about the same as they were 15 years earlier.

Another hot-button issue is student loans, which are now 25 per cent higher per student than they were a decade ago. Totalling more than $1.7 trillion, student debt is the second-largest category of consumer debt (after home mortgages). But this is not because most undergraduates are borrowing larger amounts; rather, soaring student debt reflects increased enrollment in high-cost, lower-quality institutions, particularly for-profit private ones, that have poor completion and job-placement rates for their students.

Moreover, the growth in returns on a college education has outpaced the growth in student debt. In 1980, the average college grad, mid-career, earned roughly $10,000 more per year than her high-school-educated peers. By 2020, that number had nearly doubled to $18,000 in inflation-adjusted 1980 dollars — representing nearly $1 million more in earnings over a lifetime, compared to the average worker without a college degree.

A recent ranking of America’s Best Bang for the Buck Colleges looks at how well schools help non-wealthy students attain marketable degrees at affordable prices. While the list includes top private institutions such as Stanford University, it is dominated by less-known public universities such as Cal State, Stanislaus (in Turlock, California), which is number two on the list of schools in the US West.

College-enrollment rates depend on cost, but they also vary across demographic categories. For example, some 83 per cent of Asian students enroll in college within a year and a half of their expected high-school graduation, compared to 72 per cent of white students, 63 per cent of Hispanic students, and 62 per cent of black students. Enrollment rates also vary by gender. In 2021, 70 per cent of female high-school graduates immediately enrolled in college, compared to only 55 per cent of male graduates. Over three-quarters of high-school graduates in Massachusetts and Connecticut enroll in college, compared to only 41 per cent in Alaska.

Another factor is parental income. About 89 per cent of students from well-off families go to college, compared to 64 per cent of students from middle-class families and 51 per cent of students from low-income families. One-third of all college students in the US today are the first from their families to enroll.

After access and cost, completion is the most important factor affecting the rate of return on a college education. Students who start but do not complete a program earn considerably less on average, and often have debt to repay, resulting in an especially bad outcome. Colleges undoubtedly have more work to do to increase graduation rates. Among newly admitted students seeking a bachelor’s degree at four-year colleges and universities, only 46 per cent of black students complete the requirements for a degree within six years, compared to 78 per cent of Asian students and 68 per cent of white students.

A final factor when it comes to future earnings is the quality and relevance of one’s degree. On average, STEM (science, technology, engineering, and math) degrees return 5-7 times the investment over a lifetime. Degrees in business and finance also have high lifetime returns, and degrees in nursing and health care yield lower but still positive returns. By contrast, degrees in the fine arts, home economics, and, sadly, education yield negative returns (though these results vary widely by institution, geography and student background). Nonetheless, given increased access, improved affordability and the value of degrees in high-demand fields, college clearly remains a great investment.

To tap its potential as an engine of economic mobility, recent congressional proposals aim to boost college completion, for example by using public funding to hold colleges more accountable. That is a good start, but we should not stop there. It is important to remember that the population of students entering college today is not the historical stereotype. Some 37 per cent of college students are aged 25 or older, and nearly half are first-generation. Around 42 per cent are students of color, and 64 per cent of them are also working while enrolled (40 per cent of them full-time). Since these students have different and diverse needs, the priorities for policy should be greater flexibility, tailored programmes, ease of re-enrollment and various forms of non-academic support.

Instead of competing for major donations, football facilities, and legacy students, our best higher-education institutions are, and ought to remain, focused on transforming students and their families’ economic trajectories. There is still plenty of work to be done to ensure that all students graduate with job-relevant competencies. But broad-brush criticisms of college education are not supported by the facts. A college degree is a wise investment and a key driver of economic opportunity and mobility. Policies should focus on measures to improve access and affordability.

Laura Tyson, a former chair of the President’s Council of Economic Advisers during the Clinton administration, is a professor at the Haas School of Business at the University of California, Berkeley, and a member of the Board of Advisers at Angeleno Group. Lenny Mendonca, senior partner emeritus at McKinsey & Company, is a former chief economic and business adviser to Governor Gavin Newsom of California and chair of the California High-Speed Rail Authority. Copyright: Project Syndicate, 2024. www.project-syndicate.org