Higher education still has economic value, but debt levels test credibility
Real or faked, a “Dear University Alumni Office” letter on tickld.com is making the rounds. It’s from an anonymous college graduate who responds to a fundraising appeal from his alma mater by complaining he can’t contribute more than $3. Why? He’s digging out of tuition debt piled up while pursuing a degree that has yet to land him a job.
Funny in parts, whiny in others, the letter nonetheless says a lot about the accountability struggles in higher education today.
Americans once believed in commanding numbers — 80% or more — that a college degree was a good investment. Recent public surveys suggest confidence has plummeted, in part because the average debt for graduates is growing ($28,102 for Wisconsin college graduates, according to CNN Money) at a time when the economy is still struggling to produce enough high-wage jobs.
Public perception in Wisconsin wasn’t helped by disclosures in 2013 that the university system was building significant reserve funds at a time when tuition was rising. Since that budget flap, Gov. Scott Walker and legislative leaders have twice backed a UW System tuition freeze.
In case you think it’s just those nasty Tea Party Republicans who are clamping down on higher education, President Obama is pressing for a rating system — run by the federal government — that would require colleges and universities to report more about tuition increases, graduation rates, student debt, and how well graduates fare in the workforce.
No wonder, then, that UW System President Ray Cross would tell a recent gathering in Madison that another two-year tuition freeze is “not necessarily a bad thing.”
“I’m not exactly disappointed with the tuition freeze,” Cross told a WisPolitics.com luncheon. “I’d like to look at it in the bigger picture. … Part of our strategy has to be to reduce the cost to go to college. I mean, student debt is enormous, and if we are oblivious to that, shame on us. That has to be a priority.”
The rise of student debt is one side of that “bigger picture,” as Cross correctly noted, and another is the popular image that incurring that debt isn’t worth it.
From 2005 to 2012, average U.S. student loan debt climbed 35%, adjusted for inflation, while the median salary for college graduates fell by 2%. The Wall Street Journal recently reported that about 70% of a 25-year-old’s debt is consumed by student loans, making it more difficult for young graduates to engage in post-school economic activities, such as buying a home.
That raises the question: Is college debt still “good debt” that pays for itself over time?
Cross and others in higher education make the case that going to college — physically at a campus or virtually online — still makes economic sense for many people, especially given the options.
Recent studies confirm that people with college degrees consistently earn more and are unemployed less often. The Georgetown Public Policy Institute reported in 2012 that the gulf in earnings between young adults with a bachelor’s degree and those without is as wide as it has been in 50 years. Another study, “The Rising Cost of Not Going to College,” released this year by the Pew Research Center, confirmed that the gap between college graduate earnings and those who hold only a high school diploma “has never been greater in the modern era.”
In between on the wage scale are people who hold technical college or two-year associate degrees. Their salaries are closer to the average for a four-year degree than a high school diploma only.
Tuition in the University of Wisconsin System is near the bottom for peer schools, which suggests a higher value per dollar invested for those who complete their degree work. However, that’s small comfort to graduates who don’t land the job they dreamed they would find. For most, it comes down to market economics. Wisconsin-bred students will pay reasonable tuition rates if they believe the jobs, salaries, and careers are there at the end. Many out-of-state students already view Wisconsin tuition as a bargain, so they might even pay more (which would subsidize in-state students) for similar results.
Higher education sowed the seeds of debt discontent over decades and is now reaping a bitter political harvest. The best course for college leaders is to remain publicly accountable and transparent while not being shy in arguing that higher education still pays for itself over time.
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