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Skidmore's $200,00 question Putting a price on value
An expensive college education Is it worth it?
Keeping up for the Joneses As tuitions rise, so does financial aid
Proving ground Quantifying quality learning
An educator's education One woman's story
Reaping rewards and paying forward The benefits of a liberal arts education
Both sides now Alumni instructors take stock



Headlines about the high price of college are not new, but the voices questioning the value of the investment are gaining strength. Moreover, there are numerous anecdotes suggesting that in the current economic environment, students are voting with their feet and choosing lower-priced institutions. Yet plenty of objective evidence has affirmed, and even measured, the benefits—both monetary and nonmonetary—of a college education, and of a high-quality liberal arts education in particular.

Individual and societal benefits

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There is no argument about the fact that, on average, individuals with higher levels of education enjoy higher earnings and that those higher earnings generate higher tax payments as well as other benefits to society in general. According to the Census Bureau(1), in 2007 four-year-college graduates working full-time were earning an average of $66,600 per year—$29,100 higher than the average for high school graduates. Some may contend that the earnings differences can be explained by the characteristics of the people who go to college in the first place. But, without exception, careful economic analyses that control for personal characteristics agree that going to college carries a high rate of return. (Of course there are some high school graduates earning more than the lowest-paid college graduates—a variation attributable to numerous factors, from personal to geographic to pure chance.)

Evidence is growing that it is students whose financial constraints put them at the margin of attending college for whom the benefit is actually greatest. Only about 60% of high school graduates from the lowest income quartile enroll in college within a year, compared to almost 90% of those from the top income quartile. Narrowing this gap is vital to the future of our economy. And there is overwhelming evidence that with
the proper financial, academic, and social support, many of these students can succeed in college.

The college experience not only provides an important credential, but it also changes people’s attitudes and behaviors. Before public awareness was raised about the health risks of smoking, about half of adults at all levels of educational attainment were smokers. From about 1960 on, smoking declined precipitously among college graduates, but nongraduates did not process the new information in the same way, and their smoking rates declined much more slowly. Currently the 10% smoking rate among college graduates compares to 25–30% among the rest of the population. Other health statistics reveal that people with higher levels of education are more likely to follow doctors’ orders about medication and more likely to exercise regularly. Analyses show that it is education level—not income —that best predicts these behaviors.

What kind of college?

Discussions about who is likely to benefit from a college education are sometimes plagued by blurred definitions. The image of a traditional-age college student on a residential campus doesn’t describe the experience of most students. Only 62% of students are enrolled in four-year institutions. Of these, 62% attend public colleges and universities, 7% attend for-profit institutions, and 31% attend private nonprofit institutions like Skidmore.(2) Just over half of the degrees awarded in 2006 were bachelor’s degrees, while the rest were associate’s or other less-than-four-year degrees.

Conversations about the need for more college graduates frequently fail to account for these differences. Political scientist Charles Murray, for example, has recently argued that only a small fraction of Americans have the ability to benefit from a college education. When he argues that college is a waste of time for most people, that others should become electricians or enter other trades, he ignores the reality that these occupations too require some form of postsecondary education.(3) Anyone who looks at the distribution of workers required for the future economy will see that a liberal arts bachelor’s degree is hardly the ticket to all of those jobs but that some education after high school is a prerequisite for most opportunities that provide a stable financial future.

For many students, a high-quality liberal arts bachelor’s program is the best preparation for a satisfying and remunerative future. Unfortunately, many young people fail to understand the value of an education that develops critical thinking and communication skills while exposing students to a broad range of ideas and areas of inquiry. In a rapidly changing economy, there is no guarantee that the specialized occupational skills that are most in demand today will remain central in the decades to come. This reality makes the tendency for people to gravitate toward specific vocational preparation in a weak economy particularly worrisome. At a time when too many students and families consider a broad education a luxury they can no longer afford, it is the responsibility of those who have benefited from liberal arts education, and those who offer this experience, to encourage those for whom the goal seems unrealistic to explore their opportunities more fully. While there is some conflicting evidence, the general consensus is that where a student goes to school is likely to have a measurable impact on academic success and on future earnings—not to speak of personal and intellectual development and social networks.

Private colleges have higher graduation rates than public colleges overall, and students who enroll in more-selective colleges are more likely to complete their degrees than similar students who enroll in less-selective institutions. Evidence is also emerging that, particularly for low-income students, attending the most demanding college for which they are qualified significantly improves their prospects of graduating. Unfortunately, many students from low-income backgrounds are undermatched—that is, academically overqualified for the colleges where they enroll. A study of Chicago public school graduates indicated that about two-thirds enroll in colleges that are less selective than those for which they would qualify. The explanations include inadequate guidance, inability to navigate the financial aid process, and the absence of a strong college-going culture in their schools and communities.(4) The results are the same: Their lower graduation rates significantly diminish future prospects for these students.

Debt vs. payoff

To assure that as many people as possible do benefit from a broad and challenging education, expensive private colleges need to provide generous need-based financial aid and also communicate the benefits of this select form of education effectively enough to convince parents that they should make this investment in their children’s futures. It’s a shame that so many are likely to be discouraged by what they read in the popular press, which abounds with misunderstandings about high prices and horror stories of new graduates struggling with excessive debt.

It’s true that college prices have been rising much faster than average prices in the economy for many years. One explanation is the fact that it is much more difficult to increase productivity in education than it is in many industries, particularly those that benefit from rapid technological change. Higher-education institutions could certainly do more to increase the efficiency of their operations; however, faculty
productivity can most easily be increased by raising the number of students in the classroom, and larger class sizes would likely decrease the quality of the learning experience. Other factors contributing to rising college prices include health-care costs, the need for updated technology, increased costs of complying with government regulations, and campus energy costs. At public institutions, the cost of educating students has actually grown relatively slowly in recent years; there, rapid tuition increases are attributable primarily to the failure of state appropriations to keep up with rising college enrollments. In contrast, private institutions are spending rapidly increasing amounts to educate their students—for example, investing more to upgrade facilities, shrink class sizes and teaching loads, and develop new programs.

Despite impressions to the contrary, grant aid to students, both from federal and state governments and from institutions themselves, has more than kept up with inflation. Nevertheless, the combination of increases in tuition, stagnant family incomes at all but the highest income levels, and declining savings rates has made paying for college more and more of a strain for most families. The widespread perception of increased reliance on borrowing is based on reality but is frequently exaggerated. About one-third of all bachelor’s degree recipients graduate without any debt at all—or at least without any debt of which their institutions are aware. Among those with student debt, the average was $22,700 in 2006–07 and is probably about $25,000 now.(5) Given that the annual earnings differential between high school and college graduates is larger on average than this debt level, most students do not have tremendous difficulty repaying their loans. True, they may sacrifice some consumption opportunities that would be available to them if they had earned their degrees without borrowing, but that is not the relevant standard. In fact, many of these students incur additional debt shortly after leaving school, either to buy cars or just on their credit cards. And for the typical student, education debt is an excellent investment.

What is troubling is the small but increasing proportion of students who are borrowing far more than the average. Moreover, in the current economy too many recent graduates are unable to find suitable employment quickly. There is no question that we need to reduce the frequency of unmanageable student debt. But it is equally important that we help prospective students to understand that borrowing for college is a good bet and that choosing not to invest in their futures is likely to be shortsighted. This is particularly true for low- and moderate-income students, for whom a strong liberal arts education can be an especially high-yield and transformative investment. These opportunities can be offered, and expanded, only if colleges them­selves place financial assistance for those with particularly limited financial means at the top of their priority lists, even in this era of diminished endowments and tight budgets.

Sandy Baum is a professor of economics at Skidmore and a senior policy analyst for the College Board.

(1) , Current Population Survey, PINC-04.
(2) Digest of Education Statistics 2008, Table 186.
(4) Melissa Roderick, et al, “From High School to the Future: Potholes on the Road to College,” University of Chicago Consortium on Chicago School Research, March 2008.
(5) The College Board, Trends in Student Aid 2009

(6) Assumes borrowing of entire average cost for a public college and repayment of the loan at 6.8% interest over 10 years. For private-college grads, earnings differential starts later, at age 40.
(7) Data from 2006.
(8) Student-loan debt (adjusted for inflation) for public-college grads rose 8%; for grads from private nonprofit colleges, 18%.