College Is A Good Investment For People Who Can Afford It And Have A Plan to Use It

higher ed bubble

Another piece of the college bubble protection propaganda appeared in the Washington Post. Catherine Rampell writes under the headline (perhaps chosen by an editor), “College is not a losing investment.”

College enrollment is dropping again — and that’s a bad thing.

A Labor Department report released this week finds that the share of young people enrolled in college by the October after they graduate from high school has tumbled in the past few years. From a high of 70.1 percent in 2009, it was down to 65.9 percent in 2013. Other reports have found similar declines in enrollment for the entire universe of college students, not just those coming directly out of high school.

First of all, this decline may not have much to do with choices as with demographic decline. Perhaps there aren’t enough people to keep up the enrollment numbers.

But, putting  that aside, is a discussion of college enrollment even rational? We are talking about people who decide to be engineers or get journalism degrees. Are those two things equivalent? Should we care about them as one undifferentiated phenomenon?

Talking about college as one thing is not useful. It represents a bunch of money spent pursuing wildly different goals.

Rampell admits that times are hard for college graduates and that they are graduating into unemployment and debt in increasing numbers. Then she offers her proof that it is all worth it:

Even though unemployment rates for young college grads seem high — especially in the first few months after graduation — they’re still much lower than they are for people without degrees. According to Labor Department data, the unemployment rate for Americans ages 20 to 29 who have a bachelor’s degree was 5.8 percent in 2013. In that same age group, among people with no education beyond a high school diploma, it was 14 percent.

And for those who do find work, the wage premium for higher education has grown over time. In 1979, among full-time workers of all ages, the median college graduate earned 38 percent more than did the median high school graduate; today the college-educated worker earns about 82 percent more. College is, as the Hamilton Project has pointed out, one of the best possible investments you can make, outperforming stocks, gold, long-term Treasurys, AAA corporate bonds and housing. That’s true for both a four-year degree and even more so for an associate’s degree.

These comparisons are worthless. In order to really know how college improves success, a study needs to compare people who are able to go to college but who decide not to do so and people who do go to college. Instead, college graduates are compared to everyone who doesn’t graduate from college. So the average unemployment rate includes people who dropped out of high school. It includes people who were special needs students who never had a realistic chance of being part of the work force in a highly lucrative way. All those people are used to average together and give us a high rate of unemployment and a low income.

But that’s not relevant to a decision by a potential college student. His employment and his income are not going to be dragged down by that average.

In my opinion, if a student has the resources and a plan that includes a college degree, then he should go. But if the price of entry is student debt, then he should pursue a career without it.

The good news is that, once the college bubble bursts, the cost of an education should plummet. Of course, people like Rampell are laying the groundwork to justify a “bailout.” She sings the “spillover” benefits of publicly subsidizing education.

But, hopefully, the implosion will be too big to bail.