Does College Cost Negative $500,000?

Whenever you take on the issue of the escalating cost of college, a frequent response is that the price of higher education is well worth it when you take into account the increased lifetime earning power college grads have over those who only make it through high school.

A well-articulated version of this argument appeared recently in the New York Times, one which seeks to prove that if you factor in the extra income a diploma gets you over a lifetime, the cost of college is actually negative $500,000!

So I guess all of us fretting over upcoming $250,000 (heading towards $800,000) college bills should stop fussing and find comfort in this rosy bigger picture. Which would be fine, except for a few arguments I have with the whole “(College-Cost) minus (Lifetime Earning)” calculation that undergirds this argument.

The first objection is that this calculation largely relies on averages. I highlighted problems with this sort of math when introducing my own calculation that determined if college followed the same inflationary trajectory as housing, a BA should cost no more than $15,000 per year (or $60,000 total). This calculation made use of an average US income of $51,000, but the way averages work that number could be based on 1000 people each earning exactly that amount or by averaging the income of Angelina Jolie ($33 million) and 999 families at the poverty level ($19,790 for a family of three).

In defense of my $60,000 degree calculation, I’ve not been using that number to make sweeping statements (such as accusing any college charging more than $15K a year of ripping off students and their families). Rather, I’ve used it to anchor a set of thought experiments, including ones that reflects on what might constitute the unwritten line items in a tuition bill.

But bolder claims (such as “college is worth it since – on average – it pays for itself and $500,000 besides) requires a much closer analysis of the numbers making up that “on average.” For if just a small percentage of graduates (say doctors, lawyers and corporate executives) make up the bulk of the differential between lifetime paychecks and tuition bills (with everyone else either breaking even or losing money) then we’re looking at a very different story than one which claims a college degree raises all boats.

A second objection has to do with confounding variables that challenge the claim that a college degree – and the increased level of education implied by such a document – is the cause of the large and growing wage disparity between those with a BA vs. those without one.

For instance, nearly twice as many people attend college today than fifty years ago. So does the growing earning gap between high school and college grads reflect the superior skills a college-trained worker brings to the job, or is it just the result of there being more BA holders and fewer high school grads in the employment pool?

The fact that the job application process (like the college application process) has become more automated (and thus efficient) also means that job postings that might have once drawn 30 typeset resumes and hand-written cover letters are today drawing hundreds or thousands of online applications. And one way to cut down the size of that pile is to make a BA mandatory, even for jobs that never required one before.

Neither of these observations gets in the way of claiming that a college diploma improves one’s chances of landing work. They simply reflect the fact that the employment marketplace has, by default, created a new requirement for getting hired for more jobs (a college diploma) for reasons that may have little to do with the virtues of a college education, with colleges using that new requirement to justify the ever-escalating price tag associated with this entrance ticket.

But my biggest objection to the “college is worth it cause you earn more than you pay” argument is that it presumes those of us objecting to the ever-escalating cost of most degree-bearing programs think the whole edifice of higher education needs to be reduced to rubble.

I can understand where such a perception comes from, given how gleefully higher-ed critics were poking at that edifice a year ago when MOOCs were supposed to be about to disrupt the academy to its foundations. And I sympathize with the point the NYT author made that most of these critics are frantically trying to get their own kids into the best schools they can afford.

But even those of us who have been saving to send our kids to school since they were born have a stake in whether or not the college experience (which is wonderful in so many ways that have nothing to do with jobs and money, by the way) must remain the only option forever, no matter what the cost.

We are living in an age, after all, when technology allowed me to pack an undergraduate degree worth of courses into a year’s time for zero dollars. And while I’ve been the first to point out what that educational project lacked when compared to my original residential college experience, my One Year BA also got me thinking about what my kids (or anyone’s else’s kids) might be able to learn and experience if they had $15K a year to work with each year over four years. And as a former employer, I’ve also been thinking about whether I’d be less or more likely to hire someone with an unorthodox, self-directed, post-secondary learning experience on their resume vs. someone with a BA from Princeton.

Now I suppose that we might have reached some sort of pinnacle in the evolution of higher education, which means the only thing we need to figure out is how to find a mix of family income, state subsidies and bank loans needed to keep a system based on perpetually increasing costs afloat forever. But on the off chance that a future million dollar degree can’t ever be offset by $1.5 million in increased lifetime earnings, a serious debate over alternatives seems more than warranted.