The Ultimate Question: “Is College Worth It?” (Part 5)

Lots of debt, no degree – the consequences of starting college, but not graduating

In previous blog posts on this topic, we have explored concerns relating to how expensive a college education has become; how many students are graduating with considerable debt; and how difficult it is for some graduates to find good jobs – all preparatory to a final discussion on the underlying question: Is college worth it? Before we take that question on, however, we must review a fourth concern:

Not enough college students are graduating, leaving them in debt and without a degree.

This is the most serious and significant of the four topics we have been discussing.

To begin, there are many studies regarding the economic impact on individuals with college degrees in comparison to those with just a high school education.

A very recent, and thorough, report from the Federal Reserve Bank of New York (“Do the Benefits of College Still Outweigh the Costs?” June 2014) found that “workers with a bachelor’s degree on average earn well over $1 million more than high school graduates during their working lives, while those with an associate’s degree earn about $325,000 more.”

Similarly, a study by the Urban Institute in February 2014 (“Higher Education Earnings Premium”) reported that, in 2012, median earnings for college graduates aged 35 to 44 were $61,255, compared to $35,703 for high school graduates in the same age cohort.

However, it is important to note that the higher salary earned by a college graduate does not come in the form of 25 percent increments for each year of college completed. Those with “some college,” but no degree, derive very little economic benefit at all.

The cost of attending college, but not completing a degree, in terms of both out-of-pocket expenses and loss of income (because of choosing to attend college rather than entering the workforce right after completing high school), is dangerously high, especially if the student has borrowed money to pay for educational expenses. As Education Secretary Arne Duncan put it, “But where you have $60,000, $70,000, $80,000 [of debt] and no degree, that is the end of the world. That is catastrophic.” (Inside Higher Ed, July 3, 2014)

In other words, in strictly economic terms, no one should start college unless he or she is committed to obtaining a degree. The economic impact of starting, but not finishing, is just too high.

And it is here that we have a conflict between expectation and reality. A survey by Sallie Mae in 2013 (“How America Pays for College”) found that “92 percent of families are confident that their students will earn their bachelor’s degrees in five or fewer years.” In reality, less than 60 percent actually earn their degrees within six years of beginning their studies. The Economist (June 28, 2014) expresses this statistic differently: 47 percent of American students (and 28 percent of British students) never complete their degrees.

Given those data, the decision to start college is something of a gamble. The student is effectively making a very expensive wager – a wager that pays off many times over for those who finish, but that can economically cripple those who, for whatever reason, do not complete their degree.

Further complicating matters is the fact that it is difficult to hedge the bet. For example, a student could minimize the size of the bet by going to a community college (much less expensive) – but completion rates at community colleges tend to be very low. (Typically, less than 25 percent of the students starting in a given year will earn an associate’s degree within three years.)

Or a student could make a very large wager and attend an expensive private college where the graduation rates are very high (80 percent or more). The odds of a successful wager are far higher, but the “ante” is much greater, and therefore the costs of failure are much larger as well.

To this point, I have been speaking as if all options are open to all students, and of course they are not. Students from economically disadvantaged backgrounds bear a special set of burdens as they contemplate going to college. They often do not have the benefit of someone in their family who is a college graduate, and to whom they can turn for advice and support; their level of preparation is likely to be inferior to students from wealthier K–12 school districts, meaning that they may face having to take remedial courses in college (increasing their time to completion, and decreasing the likelihood that they will ever complete their degree); they are likely to have fewer college options because of both their economic circumstances and their level of academic preparation.

This is the area that is central to the higher education dilemma in America. The economic premium in having a college degree has never been greater – but regrettably there remains a significant difference between the percentage of students from families in the top quintile of family earnings who earn a bachelor’s degree (54 percent) and the percentage of those in the bottom quintile who earn a bachelor’s degree (9 percent). In fact, the achievement gap between these two quintiles has grown significantly wider in the past 20 years (The New York Times, “Income Inequality and the Ills Behind It,” July 30, 2014).

I will devote a future blog post to this issue of growing educational and economic disparity, but next week, I will finally endeavor to answer the question we have been considering for the past several weeks: “Is College Worth it?”