College Costs Are Rising. Is the Degree Still Worth It?
The cost of college keeps rising and more Americans are questioning whether a degree is still worth the investment. USA TODAY Personal Finance Reporter Daniel de Visé discusses new research on the long-term value of a degree, how the payoff can vary by major and why completing college matters when weighing the investment.
This is a transcript of a conversation between USA TODAY’s Dana Taylor and Daniel de Visé, automatically generated and edited for clarity. There may be some differences between the original audio and the text.
Why More Families Are Questioning College’s Value
Dana Taylor:
Daniel, the debate on whether college is worth it is not new. What’s changed in recent years about how families are thinking about the value of a degree?
Daniel de Visé:
Well, what’s changed is that tuition’s been rising and rising and rising and more and more people seem to be moving toward the view that college isn’t worth the expense. A couple of years ago, Pew Research, which is a great source, found that only 22% of adults think that college is “worth it” for students who have to take out loans, which of course many students do. I think more and more people are just taking this view that should I really spend the money on college or should I spend the time working and just make more money?
What the New 15-Year Texas Study Found
Dana Taylor:
Your story looks at a new study about whether or not college pays off. Tell us about the study and what were its findings?
Daniel de Visé:
Well, it’s a new accreditor. Accreditors accredit colleges. They sort of give their stamp of approval to colleges and this is a new one. And they’ve spent years looking at results from Texas. Texas has really, really good data on college completers and college non-completers and where they go and what they do, so it was this wonderful data set. The post-secondary commission tracked people who’d entered college for 15 years after their enrollment. And then, they used that data set to compare how the people who enrolled in college did financially compared with another group of people who chose not to enroll in college, so they tracked two different groups. What the study found is that after 15 years, the typical student who enrolled in a bachelor’s program at a college in Texas earned about $87,000 more total over those 15 years compared to somebody who chose not to enroll in college.
Now, of course, that’s a very broad finding, but the study also found that every degree program yielded a return, a positive financial return. So even if you enrolled in the lowly liberal arts, I say lowly because liberal arts programs are not associated generally with high wages. It’s not law or business. Even liberal arts students earned more money after 15 years than people who chose not to go to college. And I would need to hasten to add that the people they studied who didn’t go to college, they were working the whole time. These people who went to college after 15 years, even though they were in college for four of those years, they still earned more money in the long run than the people who didn’t go to college.
Why College Grads Start Out Behind
Dana Taylor:
College students often start out financially behind people who don’t attend college, but then catch up later. It might be obvious, Daniel, but can you explain why college grads start off behind their non-college peers?
Daniel de Visé:
Well, that’s right. What this study did is it looked at the money that people earned who went to college or didn’t go to college. Public colleges, and this was a study of public colleges, if you’re going to the state university, you’re often working while you’re in school. This study tracked how much people earned who were college students and then how much people earned who were not college students. And as you might guess, you go to college for four years, you’re not earning as much. So after about four or five years of college, the average college attender was well behind in earnings, the person who didn’t go to college. The person who chose not to go to college earned a lot more. But then, the college person starts to catch up and by about year nine, so this would be maybe five years after you finish college, if you even finish college, by about that time, the person who goes to college catches up.
And for the whole rest of their career, you can imagine, the person who went to college is earning more and more and more compared to the person who didn’t go to college. So that magic breakeven point arrives maybe about five years after you enroll in college.
The Earnings Gap by Major
Dana Taylor:
You touched on this, but I want to dig into it a little bit more. The study found a pretty wide gap by major. What else can you tell us about that?
Daniel de Visé:
Oh, yeah. A huge gap. And these findings will affirm what people probably already know. If you’re a Texas public college student and you enrolled in engineering or architecture, after 15 years, you’ve got $200,000 more than somebody who didn’t go to college. And again, these are figures from Texas, but you can broaden from them to a national view. Business and econ students earned about $180,000 more after 15 years than non-college attenders. And you can go down the list. Biology and health majors earned about $100,000 more than non-attenders. Communications majors, is that us journalists? Maybe so, earned about $70,000 more and then down and down and down to liberal arts, the philosophy majors, the history majors earned on average about $35,000 more than people who didn’t go to college.
Does a Liberal Arts Degree Still Pay Off?
Dana Taylor:
Well, as you noted, liberal arts degrees came out ahead in the long run too. Does that challenge the idea that only STEM or career-focused degrees are worth the money?
Daniel de Visé:
I interviewed some people who know a lot more about higher education than I do. And they told me that if this study … Well, this study will probably continue. If you go 20 years, 25, 30 years after you start college, what experts think will happen is that gradually people who studied history or poli sci or math or creative writing will probably draw farther and farther ahead because it’s said that liberal arts degrees teach thinking skills. It teaches you how to think and you can use thinking skill in any profession. People who end up as CEOs of companies often have liberal arts degrees and they’re just very good thinkers. They’re good problem-solvers. The experts in academia would say that the farther you go in your career, the more even a liberal arts degree will pay off because those are skills you can apply to any job.
Whereas, by contrast, if you’re studying business for four years or computers for four years, there’s nothing wrong with that. But you might not pick up as much general thinking skills, problem-solving skills, just writ large as you would if you were studying philosophy. I studied philosophy, so I’m always talking about philosophy, but you pick your major. Liberal arts study teaches you thinking skills.
Why Finishing Your Degree Matters
Dana Taylor:
Completion seems like a major part of this conversation. How does the value of college change when students take on debt but don’t finish their degrees?
Daniel de Visé:
Well, this study importantly looked at everyone who started college after 15 years. Baked into the numbers in this report are students who dropped out. Now, we don’t know how those students did based on the finding that I looked at, but I think it goes without saying, if you look at reports from the Federal Reserve and other sources within and without academia, if you have a college degree, if you’ve completed college, that’s where the salary bump comes in. If you’ve done some college, an individual employer might be impressed by that. You put in two years at Penn State or something, but it doesn’t carry the same bump in your salary. You see this again and again across different studies that look at wages according to your level of completion. If you go to college a little bit, you might earn a little more money, but if you finish college, you’re likely to earn a lot more money.
Public vs. Private College Costs
Dana Taylor:
Now, this report focused on public colleges in Texas, Daniel, where the average student cost was relatively low. How different might the math look for students considering expensive private colleges?
Daniel de Visé:
Well, right. The numbers in this study would be baffling to somebody who went to say, I don’t know, a private university up North Bates College or Williams College or Amherst or something. If you go to one of those schools and pay full freight, you’re paying around $100,000 a year now. Whereas, in this Texas report, let’s see, the average Texas public student over the years studied spent a total of about $13,000 on higher education. Now, a large majority of college students in America go to public universities and many of them pay pretty small amounts of tuition, so that won’t be surprising to somebody who’s gone to a community college or gone to a modest four-year state university. But there is a world of difference between that and very affluent people who pay full freight at private universities.
Where Do Trade Schools and Certificates Fit In?
Dana Taylor:
Americans are hearing more about trade schools, apprenticeships and other alternatives to a four-year degree. How should those fit into this conversation?
Daniel de Visé:
This same study in Texas looked at certificates, which are credentials that are given generally after a number of months or maybe a year of study, and they are specifically explicitly tied to specific skills. You get a certificate in a specific career area. The certificate students who were studied actually earned less after five years than people who did not enroll in college. This particular study did not make certificates look very valuable. However, and one reason I didn’t really focus on them in my story is that it only looked after five years. It may be that 10 or 15 or 20 years later that someone who’s gotten a certificate in a trade out-earns somebody who did not. But that was an interesting finding and a little bit counterintuitive.
The Bottom Line for This Fall’s Students
Dana Taylor:
For students who are about to start their college journey this fall, Daniel, what’s the big takeaway?
Daniel de Visé:
Well, here is the most important thing. This is just something that you know if you look at something called net price, which is the difference between the sticker price at the college and what people actually pay. I want everybody to take a deep breath here. At public institutions, the average amount that a student pays now after all the discounts and everything is subtracted is only about $2,300 according to the college board. In other words, many, many people have almost all of their tuition and fees covered in various ways by grants, Pell grants and state assistance. Even in the private university world, the average tuition and fees after all aid is taken into account is about $17,000 a year and that’s not all that much. That $17,000 figure is the difference between the sticker price that you see on the website for a place like Carnegie Mellon and what people actually pay on average. And there’s a great many students who pay basically nothing to go to fancy private universities.
Daniel de Visé covers personal finance for USA TODAY. Reporting by Dana Taylor, USA TODAY / USA TODAY Network via Reuters Connect.
