Colleges Do Not Get Immunity from the Bad Economy

Back when I worked at a college, I remember hearing some co-workers say that colleges do well during most recessions. That was a few years ago when the economy first took a dive. I’m not sure the claim has proven true this time around.

As people suffer under a slower economy the idea of going into debt for a college degree looks less attractive. In response, we hear ideological assertions made by people representing “higher education.” Jordan Weissmann writes at Slate:

I recently reported on PayScale’s newest batch of college rankings, which compare how much a school’s graduates earn to how much they pay for tuition. In other words, it calculates each institution’s financial return on investment, which seems a far saner way to look at the value of a degree than anything that U.S. News, for instance, has cooked up. (In case you were wondering, PayScale ranked Harvey Mudd College at No. 1, with a $1.094 million 20-year net ROI on $116,800 tuition; MIT, Caltech, and Stanford came in at Nos. 2, 3, and 4, respectively.)

But not everybody feels so warmly about the idea of judging schools according to their ROI—particularly academics, who expressed qualms last year when President Obama proposed his own ratings system for colleges that would take into account how much graduates make. With the PayScale list out, Cedar Riener, a professor of psychology at Randolph-Macon College took me—and PayScale—to task with a blog post titled “The Absurdity of Ranking Colleges by Graduate Salaries.” Riener was particularly irked by my decision to focus on colleges at the very bottom of PayScale’s list that offered alumni a negative return—meaning students spent more on their education than they made back in extra earnings.

There are two entangled issues here that need to be separated. Happily, Weissmann concentrates on the more important one—whether or not colleges are worth the debt load and how potential students need to find out what will be the likely result of that debt. But the other issue is Obama’s desire for the government to do the ranking, and to tie college aid and student loans to whether or not a school scores high enough. I want student aid and especially government-backed loans to be abolished entirely. No one could “take advantage” of the government if the government did not offer free money.

But potential students need to think hard about the decision to go to college, what college to attend, and what area of study to pursue. They need to do research to find out what happens to people who graduate from the institution they are considering.

Sometimes the facts are terrifying. CNBC reports,

The Atlantic on Wednesday published a list of schools with a dubious distinction: all of them had a 20-year net negative return of at least $30,000. At some schools, depending on their majors, a typical high school grad will have earned more than some of the graduates by nearly $200,000, the magazine reported.

If someone already has the money and wants to invest the time, then it is fine for him to decide to be an art major. But if he or a parent is going into debt to get his degree, then it makes no financial sense to end up worse off, financially.

There is no need for government action. Lots of businesses can do the research and sell it to potential students. What we really need to happen is for potential students to stop believing all the propaganda that college is the only path to success. If they become discerning consumers who will only enroll in college when it makes financial sense to do so, there will be a market for information to help them make an informed choice.

And college professors need to face up to the fact that they are going to lose business if they don’t offer value.