Mar 122011
The idea that going to college is a financial boon to your lifetime income is rarely questioned. But is it? When you take into account the lost work time, tuition, interest on debt, etc. do you really come out ahead? Are you better off going to a “name” school with high tuition versus a lesser rated school with lower tuition?
These are some of the topics Laurence Kotlikoff discusses in a recent article. He states:
The notion that education pays and that better education pays better is taken for granted by almost everyone. For college professors like me, this is a very convenient idea, providing a high and growing demand for our services.
Read his take on these issues here.
This is a subject that every parent and grandparent is concerned about. Unfortunately, it appears that Kotlikoff shines a distorted light on it. The premise “When you take into account the lost work time, tuition, interest on debt, etc. do you really come out ahead?” implies that an education at any college may not be worth as much as you think. However it appears that all assumptions are based on “expensive” colleges. When he states that BU is the “lesser expensive” alternative, one has to wonder what he considers expensive.
“Tuition and room and board at Boston University will rise 3.75 percent, to $49,758, in the 2009-2010 academic year”(http://www.bu.edu/today/campus-life/2009/03/13/2009-2010-tuition-rises-3-75-percent).
Obviously, the majority of people don’t go to expensive schools, so immediately his analysis, that may be otherwise accurate, only applies to a relatively small population.
He also doesn’t account for any unemployment. Recent statistics indicate that where national unemployment is around 9%, the rate for people with a college education is less than 5% while for people without that education the rate is over 12%, if I recall correctly. Maybe several points over.
Finally, a strictly economic analysis is all well and good, but life is not made up of just money. My ‘relatively expensive’ education did not contribute one whit to my ultimate career path, but I feel that it has enriched my life in many ways on an almost daily basis. What is the value of that?
My $0.02
This is a subject close to my heart. I finished my Cambridge PhD in 1996 only to learn that the competition for academic jobs was stiff (100-200 applicants for every opening). Then I worked as an adjunct and was paid $16,200 for a full time equivalent teaching at a local seminary. That was less than the Ontario minimum wage. Now I enjoy what I do very much, DIY investing, but clearly my PhD is not a prerequisite or a qualification for that.
I had to laugh at an article in the Chronicle of Higher education that actual lists statistics on the jobs that college educated people do. Apparently, 317,000 waiters and waitresses in the US hold an undergraduate degrees or better, 8000 have a PhD! So here are my links:
http://righteousinvestor.com/2010/10/30/i-have-a-phd-in-theology-would-you-like-fries-with-that-the-education-bubble-v/
http://chronicle.com/blogs/innovations/why-did-17-million-students-go-to-college/27634