return on college investment: it’s about the variance, people
When I argue that we have too much college, people quickly fall on the well established fact that college graduates make a lot more than non-college graduates. But you don’t need to be an education skeptic to ask a sensible question: what’s the variance? Are some people not making the college premium? How many? Well, turns out that a firm has been calculating the rate of return for college and it varies a huge amount. There are folks who don’t make it back. Some college graduates are making a *negative* rate of return. From the economist:
A report by PayScale, a research firm, tries to measure the returns on higher education in America (see article). They vary enormously. A graduate in computer science from Stanford can expect to make $1.7m more over 20 years than someone who never went to college, after the cost of that education is taken into account. A degree in humanities and English at Florida International University leaves you $132,000 worse off. Arts degrees (broadly defined) at 12% of the colleges in the study offered negative returns; 30% offered worse financial rewards than putting the cash in 20-year Treasury bills.
None of this matters if you are rich and studying fine art to enhance your appreciation of the family Rembrandts. But most 18-year-olds in America go to college to get a good job. That is why the country’s students have racked up $1.1 trillion of debt—more than America’s credit-card debts. For most students college is still a wise investment, but for many it is not. Some 15% of student debtors default within three years; a startling 115,000 graduates work as caretakers.
In other words, before we rush more people into the college, we have to make it cheaper, much cheaper. And we shouldn’t facilitate degrees that massively bad consequences for your economic life chances.