College: worth it, or worthless?

Young people have heard for many years that a college degree will help them earn more money than someone with only a high school diploma. Certainly, there is data that supports this claim. Discovery News reported in December, “In a recent Pew Research Center survey of about 2,000 people, young adults with bachelor’s degrees earned a median income of $45,500 in 2012. For people in the same age group (between 25 and 32) with two-year degrees or some college experience, median income dropped to $30,000. Those who maxed out at high-school graduation earned $28,000.”

The data shows that not everyone who goes to college has the same results and college isn’t for everyone. Andrew Syrios wrote for the Mises Institute, “With the wealth of information on the Internet, many skills can be attained on one’s own.” Adding “The average yearly wage of a plumber and electrician are $52,950 and $53,030 respectively. That’s better than many college degrees and comes without the debt.”

A new study from the Center for Retirement Research at Boston College (CRR) found “Student loan debt was $1.2 trillion in 2015, compared to just $0.2 trillion in 2003. It now accounts for more than 30 percent of total household non-mortgage debt, having surpassed credit card debt in 2011.”

The study, titled “Will The Explosion Of Student Debt Widen The Retirement Security Gap?”, also found the average college graduate now begins their working life $31,000 in debt. Not only are recent graduates starting financially behind their non-college attending peers, over 17 percent of borrowers were more than 90 days past due on their student loans. This delinquency can make it more difficult to get get a mortgage. Adding, “in addition to getting a late start on saving in a 401(k) plan, those with student debt may also delay buying a house, a potential source of income in retirement. Indeed, while student debt is only one contributing factor, the Survey of Consumer Finances shows that homeownership among households ages 30-39 declined from 58 percent to 53 percent between 2001 and 2013.”

The CRR used the data to create the National Retirement Risk Index (NRRI), which shows the percentage “of working-age households that are at risk of being unable to maintain their pre-retirement standard of living in retirement.” The NRRI found a direct correlation between student debt and being “at risk,” with the CRR showing “60.1 percent of households with student debt are at risk compared to 49.2 percent of those without [student loan] debt… for households with student loans that did not complete college the difference is enormous (67.1 percent versus 49.2 percent).”

Based on the numbers from the CRR & NRRI, one could conclude that college actually puts you more at risk of not being able to have a comfortable retirement. This, of course, is because of the increased debt load on those who attend college, whether they graduate or not. Syrios adds, “In the last five years, tuition has gone up 24 percent more than inflation.” That doesn’t include the cost of books, supplies, transportation and other costs associated with attending college.

The driving force behind this increase is the push for everyone to attend college, loan guarantees, and what may be surprising to some, an increase in tax-payer subsidies. Paul F. Campos, a law professor at UC Boulder writes, “the astonishing rise in college tuition correlates closely with a huge increase in public subsidies for higher education. If over the past three decades car prices had gone up as fast as tuition, the average new car would cost more than $80,000.”

If the cost of a quality in-person education is to be affordable – indeed a quality education can already be obtained for free online – tax-payer subsidies need to be eliminated, and governments need to allow a free market to actually exist.