For Too Many Americans, College Today Isn't Worth It

Tyler Durden's picture

Authored by Glenn Reynolds (from "The New School: How the Information Age Will Save American Education From Itself"), originally posted at WSJ,

In the field of higher education, reality is outrunning parody. A recent feature on the satire website the Onion proclaimed, "30-Year-Old Has Earned $11 More Than He Would Have Without College Education." Allowing for tuition, interest on student loans, and four years of foregone income while in school, the fictional student "Patrick Moorhouse" wasn't much better off. His years of stress and study, the article japed, "have been more or less a financial wash."

"Patrick" shouldn't feel too bad. Many college graduates would be happy to be $11 ahead instead of thousands, or hundreds of thousands, behind. The credit-driven higher education bubble of the past several decades has left legions of students deep in debt without improving their job prospects. To make college a good value again, today's parents and students need to be skeptical, frugal and demanding. There is no single solution to what ails higher education in the U.S., but changes are beginning to emerge, from outsourcing to online education, and they could transform the system.

Though the GI Bill converted college from a privilege of the rich to a middle-class expectation, the higher education bubble really began in the 1970s, as colleges that had expanded to serve the baby boom saw the tide of students threatening to ebb. Congress came to the rescue with federally funded student aid, like Pell Grants and, in vastly greater dollar amounts, student loans.

Predictably enough, this financial assistance led colleges and universities to raise tuition and fees to absorb the resources now available to their students. As University of Michigan economics and finance professor Mark Perry has calculated, tuition for all universities, public and private, increased from 1978 to 2011 at an annual rate of 7.45%. By comparison, health-care costs increased by only 5.8%, and housing, notwithstanding the bubble, increased at 4.3%. Family incomes, on the other hand, barely kept up with the consumer-price index, which grew at an annual rate of 3.8%.

For many families, the gap between soaring tuition costs and stagnant incomes was filled by debt. Today's average student debt of $29,400 may not sound overwhelming, but many students, especially at private and out-of-state colleges, end up owing much more, often more than $100,000. At the same time, four in 10 college graduates, according to a recent Gallup study, wind up in jobs that don't require a college degree.

Students and parents have started to reject this unsustainable arrangement, and colleges and universities have felt the impact. According to a recent analysis by this newspaper, private schools are facing a long-term decline in enrollment. More than a quarter of private institutions have suffered a drop of 10% or more—in some cases, much more. Midway College in Kentucky is laying off around a dozen of its 54 faculty members; Wittenberg University in Ohio is eliminating nearly 30 of about 140 full-time faculty slots; and Pine Manor College in Massachusetts, with dorm space for 600 students but only 300 enrolled, has gone coed in hopes of bringing in more warm bodies.

Even elite institutions haven't been spared, as schools such as Haverford, Morehouse, Oberlin and Wellesley have seen their credit ratings downgraded by Moody's over doubts about the viability of their high tuition/high overhead business models. Law schools, including Albany Law School, Brooklyn Law School and Thomas Jefferson Law School, have also seen credit downgrades over similar doubts. And now Democrats on Capitol Hill are pushing legislation to give colleges "skin in the game" by clawing back federal aid money from schools with high student-loan default rates. Expect such proposals to get traction in 2014.

America's higher education problem calls for both wiser choices by families and better value from schools. For some students, this will mean choosing a major carefully (opting for a more practical area of study, like engineering over the humanities), going to a less expensive community college or skipping college altogether to learn a trade.

For their part, schools must adjust to the new economic reality, as some already have. In 2011, the University of the South in Sewanee, Tenn., cut tuition by 10%. The discount not only increased enrollment but, ultimately, brought in more money. For academic year 2014-15, Ashland University in Ohio has cut its tuition by 37%—more than $10,000. Faced with plummeting applications, the law schools at George Mason, Penn State, Seton Hall and the University of Iowa have rolled back or frozen their tuition fees.

Many colleges, according to a survey released last spring by the National Association of College and University Business Officers, are also offering hidden discounts in the form of increased financial aid. The survey found that for the fall of 2013, the average "tuition discount rate" for incoming freshmen (that is, the reduction of the list price through grants and scholarships) hit an all-time high of 45%. Such variable pricing is likely to become more widely publicized in the future as competition for students increases and as parents paying full tuition object to being taken advantage of.

But discounts don't address the real problem: high costs. What's really needed in U.S. higher education is major structural change. To remain viable, colleges and universities need to cut expenditures dramatically. For decades, they have ridden the student-loan gravy train, using the proceeds to build palatial buildings, reduce faculty teaching loads and, most notably, hire armies of administrators.

Most of the growth in higher education costs, according to a 2010 study by the Goldwater Institute, a libertarian think tank, comes from administrative bloat, with administrative staff growing at more than twice the rate of instructional staff. At the University of Michigan, for example, there are 53% more administrators than faculty, and similar ratios can be found at other institutions.

Under financial pressure, many schools have already farmed out the teaching of classes to low-paid adjuncts who have no job security and often no benefits.

This approach could be extended to administration, replacing salaried employees with low-paid "adjunct administrators" to handle routine functions. Many in the corporate world have reaped considerable savings by outsourcing back-office functions, and there is no reason this approach can't work in higher education. (If U.S. News & World Report wants to improve its widely cited college rankings, it might start by giving schools credit for leaner administration.)

Another reform that would be useful at both public and private institutions is budget transparency. University finances are notoriously Byzantine, and administrators generally like it that way. But change is afoot here too.

Several years ago, the state of Oregon launched a website, updated daily, that shows where every state dollar is spent. The result: Anyone can see how much Oregon's higher-education system is spending on things like travel, instruction and athletics. This is the sort of transparency that taxpayers should demand from public universities—and perhaps even from private universities that receive significant amounts of public money, as nearly all do.

New instructional methods can also contribute to cost savings. Online courses are already making inroads, and the model makes intuitive sense for many subjects: Take the top teachers in a field and give online access to their lectures to students at many different colleges. There isn't a lot of one-on-one interaction in such courses, but how much genuine interaction is there in a live 200-student lecture class?

Once students have acquired basic instruction in larger, less personal classes, they can apply it in smaller advanced classes, where they would deal with faculty face to face. This approach is already used to great effect by the popular Khan Academy, a sophisticated not-for-profit website where primary and secondary students view lectures at their convenience and perfect their skills through video-game-like software. Students can then use classroom time to work through problems with teachers and apply what they have learned. The idea is to take advantage of mass delivery where it works best and to allow individualized attention where it helps most.

Traditional universities are experimenting too. The Georgia Institute of Technology is offering an entirely online master's degree in computer science for $7,000. This isn't a ghettoized offering from the extension school but rather, in the words of Georgia Tech Provost Rafael Bras, "a full-service degree." The Massachusetts Institute of Technology has already put many of its courses online; you can learn from them and even get certification, but there is no degree attached. If MIT were to add standard exams and a diploma, its online degree might be worth a lot—perhaps not as much as an old-fashioned MIT degree but more than a degree from many existing bricks-and-mortar schools.

Another alternative, already beginning to get some traction, lies in the rise of various certification systems. A college degree is often used by employers as an indication that its holder has a reasonable ability to read, write, show up on time and deal with others. But many employers are unhappy with the skills that today's graduates possess.

This has led to the rise of certification schemes from within the higher education world, including the Educational Testing Service's Revised Collegiate Learning Assessment (CLA+) and ACT's WorkKeys, which is explicitly aimed at employment skills. Manufacturing companies are working with online schools and community colleges to create "stackable certificates" that vouch for specific competencies. Such programs may someday bypass higher education entirely, testing and certifying people's skills regardless of how they obtained them.

But what about the "college experience"—late-night dorm bull sessions, partying and pizza? Won't it be ruined by these new approaches to instruction? Not necessarily.

We may eventually see the rise of "hoteling" for college students whose courses are done primarily online. Build a nice campus—or buy one, from a defunct traditional school—put in a lot of amenities, but don't bother hiring faculty: Just bring in your courses online, with engineering from Georgia Tech, arts and literature from Yale, business from Stanford and so on. Hire some unemployed Ph.D.s as tutors (there will be plenty around, available at bargain-basement rates) and offer an unbundled experience. It's a business model that just might work, especially in geographic locations students favor. Grand Cayman is awfully nice this time of year.

On the other hand, for some students, avoiding the traditional campus-based college scene might be a boon in the long run. Recent research by the sociologists Elizabeth Armstrong of the University of Michigan and Laura Hamilton of the University of California, Merced, points to the problem of what they call the "party pathway." In a study they conducted among 48 female students in one residence hall at Indiana University from 2004 to 2009, they found that young women who were similar in terms of "predictors" (grades and test scores) nonetheless emerged from college on very different career trajectories. Those from more modest circumstances were often done in by their partying-related stumbles and actually experienced downward mobility after graduating.

None of these alternatives to a traditional university degree is "the answer" to the higher education bubble. And we certainly shouldn't discard entirely the old-fashioned approach to college, whatever its shortcomings. A rigorous liberal arts education, with an emphasis on reading carefully and writing clearly, remains a tremendous asset, for employment as for citizenship. (The key word here, however, is "rigorous.")

But there is no point in trying to preserve the old regime. Today's emphasis on measuring college education in terms of future earnings and employability may strike some as philistine, but most students have little choice. When you could pay your way through college by waiting tables, the idea that you should "study what interests you" was more viable than it is today, when the cost of a four-year degree often runs to six figures. For an 18-year-old, investing such a sum in an education without a payoff makes no more sense than buying a Ferrari on credit.

The economist Herbert Stein once said that if something can't go on forever, it will stop. The pattern of the last few decades, in which higher education costs grew much faster than incomes, with the difference made up by borrowing, can't go on forever. As students and parents begin to apply the brakes, colleges need to find ways to make that stop a smooth one rather than a crash.

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Gringo Viejo's picture

College today is nothing more than a money making, cottage industry designed to indebt young people and feed "academics". In reality, Heald & Harvard are not dissimilar from one another.

walküre's picture

The yield from college education is not measureable in the overall income growth or other economic growth in this country. Bottom line is that colleges are money pits. The bankers love them of course. They love every aspect of financing hopes and dreams with shackles and chains.

NotApplicable's picture

College is a place where stupid people go to get a piece of paper that says it doesn't matter.

Pool Shark's picture



"For an 18-year-old, investing such a sum in an education without a payoff makes no more sense than buying a Ferrari on credit."

Actually, it makes far less sense; at least you get to drive and enjoy the Ferrari...


Breezy47's picture

And if taken care of the Ferrari appreciates in value.

Skateboarder's picture

The required Ethics for Engineers class at my school was taught by a lawyer.

MillionDollarBogus_'s picture

I have a B school masters degree, make a truckload of $$ per year, and the yearly moniker says it all..

Is higher education a waste of money...??

No way, Jose.....


Son of Loki's picture

The local Kmart went bankrupt and left an empty store front that was then filled by a new "university" that named itself somehting like, University of the Western States.

How do these places get accredited?

Who would be 'innocent' enough to fall for these schemes?

old naughty's picture

Supply and demand...

Why is demand still high (Oh, blame it on the Asians?)

and we're still looking at yields!

Takes two to tango, no?

Crisismode's picture



A "University Educaton" is an enormous waste of money . . .


 . . . a gift from your parents for Four Years of Partying.


And Then you meet the Real World.


Uh-Oh ....... party time is over!


FredFlintstone's picture

"Accredited"? Ha, ha, good one. If a place like this feels the need to obtain any "accreditation", I am sure that an organization is in business for the sole purpose for providing it for a fee. Ever see those "top 100 restaurant" signs in a chinese establishment? There are companies who sell those. 

666's picture

The AFT often writes about the high cost of tuition in their publications and how something needs to be done; however, they never seem to acknowledge that they are one of the main reasons for said high cost.

Tijuana Donkey Show's picture

Son of Loki, I work around all of this, and I know how they do it. They buyout a defunct or bankrupt college, and ride it's accreditation. It's like a reverse listing, where you buy a shitty listed company to get your company on the market. 

vulcanraven's picture

Allow me to chime in, I am in no way waving my dick around with what I am about to post.

I was raised by a single mother and barely graduated from continuation high school. Attended a local occupational school briefly after graduating from continuation and took a few computer classes. My father has been out of the picture since age 4 and never bothered to pay child support or assist in my development in any way.

I pull in an annual salary of 80k at a huge tech company with bloated, overvalued stock. I am humbled by the horrors of the world and appreciate every opportunity I have been presented with. I have never burned bridges and have made the most with whatever I was born with, in all actuality my public school education ended in 8th grade.

Thank fuck for the internet and sites like Zerohedge. I have learned so much more about my trade from message boards like this one, Youtube, etc. I get a daily education here and appreciate all of the posters that offer their thoughtful insight into various wordly topics.

I guess if you have enough drive to make something out of yourself and you aren't a general piece of shit with your life you will do alright, even without college.

Mr Pink's picture

Congratulations and the MIC thanks you for your 30k per year donation for drone strikes on innocent children, arming Al CIAda, political assassinations, NSA spying, Obomber's vacations and greens fees, bail outs for foreign banks....

The global assrape couldn't happen without your hard work!

vulcanraven's picture

I would gladly not pay taxes but ask Irwin Schiff about how that worked out for him.

TGC004's picture

Good for you, and best hopes for your continued success.  I was fortunate to be raised by a pair of very savy hard working parents, who happened to move our family around alot as my father scaled the corporate ladder.  It wasn't until I was in college that I had a decent shot as I was in 3 different high schools in 4 years in 3 different locations, none in the same state which meant I was never in the same ciriculum from one year to the next.  College gave me stability, success and a career that has served me very well.  I am not "rich" by my own definition (meaning I fly commercial, not private), but I am doing ok.


If your kid doesn't have the apptitude to do something professional, well, I pay my plumber and electrician about $150/hr - same with the mechanic who services my car.  A person can do pretty well in the trades if that is their calling.

fleur de lis's picture

Good for you Vulcanraven. You overcame harsh odds to become a success and still you seek to learn and expand. You'll be okay. Also at one time the trade schools were an established alternative path toward livelihood which is more than anyone can say about academia these days. They churn out thousands of graduates in fields with no hope of employment, leaving them to scavenge the shrinking job market for anything to ease the burden of debt. I hope the trade schools make a comeback but it seems that academia has cornered the market. 

vulcanraven's picture

I watched it happen to my ex girlfriends sister. She dumped over 150k into a photography school and upon graduation could not find a job doing photography so she settled for a management job at Hot Topic. Then she got pregnant and moved in with some poor sap. This was in 2005, I bet she still hasn't paid off her student loans.

Musashi Miyamoto's picture

I can walk to the street corner and make significantly more money than you. You can get any accreditation you want significantly cheaper and less time consuming than 4 years in school. It is the knowledge, confidence and social skills that puts money in your pocket.

Tijuana Donkey Show's picture

Dude, dealing is hard work, read the writeup in Freakonomics about how dealing is just like McDonalds. The dude on the corner gets minimum. 

CultiVader's picture

Never can pass up an opp to tell this one...left a 70k union plumbing job and went back to school ON YOUR DIME. In fact I am paid to go to a State U as my grants exceed my costs. Will exit with an advanced degree in the field I was born for but couldnt pursue earlier in life. Will pay it all back in taxes over the course of my third career. BTW living most comfortably in the Bay Area with baby number 2 due soon. This shit can be done fellas. You just have to get creative and take some chances. No need to go into debt, just play the game right.

hunglow's picture

makes no more sense than buying a Ferrari on credit

More like a real Ford GT.

Rafferty's picture

F*cking great. Third level 'education' today is all about indoctinating innocent minds with Cultural Marxist PC BS. and of course all those Diversity Managers gotta be paid for too.  A massive purge is required.

J S Bach's picture

We homeschool our 5 & 6 year olds.  They're already excelling at reading, math and science projects.  By the time they're of "college" age, they'll be eons ahead of their public-schooled "peers".  It's the only way to reset the standards for the future.  If you don't buck the system, then you're a part of it.

Bro of the Sorrowful Figure's picture

Ive started to J S Bach the system as well

J S Bach's picture

Thank you, BOTS...

Believe me, it's not easy.  It's a sacrifice for my wife as well as myself to make homeschooing work.  But, like our anscestors, we must forego the comforts and luxuries we might otherwise enjoy for the sake of our progeny.  I wouldn't be able to sleep at night knowing the kind of filth and "learning" our children would be imbibing from the state-approved curricula of the public schools.  If you can in any way do it, homeschool your children.

(My nom de guerre had 20 children... and those who survived infancy were educated - more or less - in the home.)

Hedgetard55's picture

What? Pine Mattress went co-ed?

Occident Mortal's picture

Whilst I firmly believe your education expands your personal capacity far beyond your earning power, there should always be a rationality behind choosing how you pursue your own future.

If you choose to spend $50,000 studying the classics then you might be more cultured and broader minded than otherwise, but you shouldn't expect your studies to boost your earning prowess dramatically.

On the flip side, if you study something difficult like mechanical engineering or dentistry then your studies will certainly move you further from the epicenter of commodificated labour but your education won't atutomatically accelerate you to escape velocity.

Unskilled labour is a commodity. Skilled labour is a commodity plus 3 months training. In order to earn decent money you have to break out of the herd and really differentiate yourself, you have to become uniquely skilled. Education is just the start of this, but only if you choose your pursued skills wisely.

kaiserhoff's picture

epicenter of commodificated labour?

   How about just strong backs and willing hands?  But yes, unskilled labor, or labor of any kind is worth less all the time, a trend that shows no serious possibility of reversal.  We all need specialized niches to achieve outsized earnings.  Easy to describe, and difficult to do.


Zero Point's picture

Imagine what unskilled labour would be worth without competition from welfare?

Go dig that hole boy, and we'll give you a cup of rice. Maybe.

BraveSirRobin's picture

Today, we have the Educational Industrial Complex.

Dinero D. Profit's picture

If your Daddy is rich, you get sent off to fancy college, and you join a sorority/fraternity, and you meet your economic peer, and you fall in a love arrangement, and your Daddy throws you a big wedding, and gives you a down payment on a nice condo, -this is what higher education is all about. 

BraveSirRobin's picture

That and a steady supply of weed.

redpill's picture

As with any other sector of the economy, when government distorts supply and demand with credit it creates an increasing imbalance over time that is inherently unsustainable and will eventually colllapse.  This happens over and over and over yet for some fucking reason we keep doing it.

gaoptimize's picture

You forgot the "demand" side.  Credentialism is written into almost every time and materials and support contract that Government writes as "qualified personnel" clauses. It is just as bad with state licensing requirements, bars and boards.  This issue may to so intractable that it will be resolved only by the collapse.

kaiserhoff's picture

Well said.

Illinois now licenses interior designers.  God forbid anyone should come up with a pink and green room, outside of Russian oligarchs and African Dictators;)

lunaticfringe's picture

This is an excellent piece of the comment thread. Let me say this.

I am a retired lawman with a B.A. in Law Enforcement. I retired about 6 years ago. These are my observations about American belief systems.

Americans think that you must have some sort of credential for every simple task. It has gotten so fucking ridiculous- that you don't dare comment on any subject without risking some asshole asking for your credentials.

Secondly, if corporate America wants to demand that we obtain 100k degrees to get some 50k job- why in the fuck are they not paying for it. My attitude is simple. If you are going to require a bunch of worthless credentials to screw widgets on a thinga ma jig- why in the hell aren't you paying for it?

I'd like to go back to school- but I simply can't make it pay nor do I want to put up with all of the college gouging from books to insurance. Fuck em. People aren't the problem- our system of education and our corporate welfare business model gets the gold and silver medals.

BraveSirRobin's picture

Yes, credentialism has gotten quite out of control. One reason credentialism has gotten out of control in government contracts, hiring, and promotion is that it's an easy thing to "evaluate" non-subjectively. But they do not care if the PhD comes from lick-a-stamp U or a well regarded and rigorous program. All the evaluator has to do is count up the tick marks next to the qualification, and he who has more wins. It also allows the government to defend against complaints of unfair practices in awarding contracts, hiring, and promotion, and serves the interests of the lazy and gutless who do not want to take a hard analytical look at what they are doing.

At one time I was a government contractor (I quit and changed careers because I hated taking money from the government for useless and wasteful endeavors), and managed 23 people, 19 of who had PhD's in rarafied fields, plus other credentials such as PMP, PE, DAWIA III, etc. But my best guy, who I had a real hard time convincing the government to allow on the contract, was a man with an associate's degree in HVAC maintenance, yet who self-taught himself physics, and possessed 17 patents. I also had a hard time getting him integrated into the team because the PhD's looked down on him, even though among the rest of them they had only 1 patent and an average of 4 peer reviewed publications each. But they were superior because they had the credentials. When I left, I made Mr. HVAC the boss of them all.

I hope one day we come to our senses and realize credentials does not equal performance, and vice versa.

brettd's picture

Obama tells doctors he's limiting their pay...

But not colleges that put your kids into debt prison.


Son of Loki's picture

It used to be a joke the plumber made more then a brain surgeon. It's not a joke anymore; it's true!

walküre's picture

Sometimes a plumber is all that's needed.

fleur de lis's picture

The colleges get away with this because they have no skin in the game. They should be required to assist graduates in placement or dissuade students from going into debt in areas they know to be full or unlikely to employ. Colleges have turned into academic feeding stations.

cynicalskeptic's picture

Sadly the 'academics' are NOT the ones receiving this largess.  The real money goes to overpaid 'administrators' - the academic equivalent of business 'executives'.   The old saying 'If you can't do, teach' goes further.  When you can't teach, you 'administer'.

The head of my engineering school is making near 7 figures.  For WHAT?!?!?!    Those successful alumni that have donated substantial funds would have done so no matter who was running things.  Other than that, WHAT on earth could the Head of a school DO? The professors - and their skills - make the school though we've seen a 'cheapening' with increased TA instruction.  There are now LESS full time tenured professorships.   When I went, 30 years back, even the H&SS departments had some GREAT professors - even if most of the nerd engineering and science types could've cared less.  

What exactly do all these overpaid 'administrators DO?

And I DO believe very much that there is value to knowledge for knowledge's sake - that a 'liberal arts' education has value - perhaps MORE so than a business one where history and things like ETHICS and MORALITY are markedly absent.  

Having said that, one must be prepared to accept the consequences of studying 17th Century French poetry or some other arcane area of interest.  Your employment opportunities WILL be limited.  The scions of wealth have the luxury of studying anything - and in a meritocracy, the truly talented will be recognozed and rise to the top of any field of expertise  BUT producing a plethora of expensively but mediocrely educated college graduates trained in the arcane instead of the practical does NOT benefit a society.

Funny - if you design a bridge or building that collapses there are VERY REAL consequences.  Yet you can DESTROY a company, a nation's economy - lose BILLIONS and destroy the lives of millions (causing - directly or indirectly - the deaths of far more than might die in a bridge collapse- without any consequences.    Maybe that's why I like engineering - things work or they don't - none of this BS in evaluating 'management' successes or rewarding faked financial results.  You CAN'T fudge the numbers in engineering without consequences - Challenger anyone?  It was TOO FUCKING COLD.  Plain and simple - no matter how bad Ronnie wanted a 'teacher in space' to talk about during the State of the Union'.

Gringo Viejo's picture

@cynical: Excellent post. + 100. When I was in college 40 years ago it was about giving quality education to young people....not picking their pockets.

Frank N. Beans's picture

Does everyone donate to the college they graduated from?  I do, but I'm conflicted about it.  I want to help current and new students, but I don't want to support higher (costlier) higher education.

DblAjent's picture

Northeastern Univ '93

It's twice the size today as it was then. Christ - they have purchased that entire section of Back Bay into Roxbury, with the exception of Wheelock and Museum of Fine Arts.

Thanks for the ed and have a nice day. They don't need more of MY money.

rqb1's picture

Set up a scholarship program in your name at your hs.  It could be as little as 1k/y, but give it to some kid from your town, not some admin.

DblAjent's picture

I have two in college, and one graduating HS this year. Those are the recipients of my donated scholarships.

For my first kid, I purchased the Florida Pre-Paid. Locked in 1994 FL tuition rates for a 2010 HS grad. now she's rocking it at a state school. best decision I ever made...

NickVegas's picture

Stupid idea, putting more money into the system just keeps the status quo, and some kid only becomes a partial debt slave, instead a full on boot licker. The whole system is designed to break your spirit, your inquistive nature, and make you jam a bunch of their shit in your head so you can reguritate it randomly on a "test". The only advantage I can see is you understand the programming of the other slaves, and that gives you an advantage over someone who skipped all the bullshit.