Is a college degree worth it?

A reader of the popular Instapundit blog describes what's going on in academia.

While visiting with old college friends on New Years’ Eve we did a back of the envelope calculation on the cost and value of our BA degrees in Accounting from 1981. We attended a small well regarded Midwestern liberal arts college from 1977 to 1981. Tuition, room and board was between $3,000 and $4000 per year so around $16000 for our BA. As entry level accountants in public CPA firms we earned a salary of around $17,000 per year. So we earned in salary an amount equal to the cost of a BA degree in our first year of employment.

Now that same college, which my youngest daughter is looking at attending costs $42,000 per year. If she earned her BA in Accounting it would cost her $168,000. Her possible first year salary as a CPA? Not even close to $168,000. Maybe around $45,000. What a change in 30 years in the value of that BA in Accounting.

If you think it can't go on forever, you're right.

Trying to save money for college?

Here's how others are doing it, from a survey by Sallie Mae, a company that helps people finance tuition.

• 60% of parents have saved for their child’s college education, about the same as last year despite the difficult economic environment, and are on track to save $48,367 on average by the time their child turns 18. 
• Nearly half of those not saving for college do not know how (18%) or are not sure which are the best college savings options (28%). 24% of saving-for-college parents risk their financial future by using retirement accounts to save for college and make other costly mistakes by not investing in tax-advantaged options, such as 529 college savings plans. 
• Across all parents saving for college, the average amount saved for college in retirement accounts is $6,503, compared to $3,340 in 529 college savings plans. 

Eearlier this year Gallup released the results of a similar survey.

• The combined spending from all sources reported by families for 2009-10 came to an average of $24,097, a 24-percent increase from the year before.
• To meet the increased cost, families reported using larger amounts of grants and scholarships, parent income and savings, parent borrowing, student income and savings, student borrowing, and contributions from family and friends.
• Thirty-seven percent of costs were met with parents' current income and savings, 10 percent by parent borrowing, 23 percent by grants and scholarships, 14 percent by student borrowing, 9 percent by student income and savings, and 7 percent by money from friends and relatives.
• Student borrowing increased 25 percent, from $2,721 to $3,396, while parent borrowing grew 27 percent, from $1,775 to $2,261. Over all, the survey found that slightly more than half of families pay for college without borrowing.

Here's a picture from The New York Times.

Is college worth the money?

It's easy to find numbers showing much higher lifetime earnings for college graduates, but there are nuances in the data.

For example: “A conservative estimate of the net present value of the lifetime average marginal return from a Bachelor’s degree over a high school diploma is $1 million.” George Leef notes, however, that, "For someone earning $30,000 per year with educational loans to pay off, that’s light years from being true."

For the group earning between $20,000 and $35,000 per year—5 percent have a master’s or higher, 15 percent have a bachelor’s, and 11 percent have an associate’s degree. That’s a large number of people with college education under their belt who are earning below-average incomes. Considering the large numbers of college-educated people now working in low-paying jobs, it appears that for many Americans, going to college is not financially worthwhile.

David French has another take on that $1 million dividend: "Since the typical path for disciplined, diligent kids takes them through college, it’s tough to tell how much of that $1.1 million in additional value is added by college or is just inherent in their disciplined approach to life. In other words, if you take an equally diligent and disciplined young man and teach him to be a commercial electrician, will he earn more or less than he would earn starting as an insurance adjuster at Allstate?"

Of course, this approach ignores a vital aspect of college life — the incalculable value of knowledge for its own sake.  Thankfully, there will always be a market for people who want to read Shakespeare, to reflect with Burke on the revolution in France, or to deconstruct fast-food commercials for evidence of patriarchy and hegemony (every culture needs its thinkers and critics), but this market by itself could never sustain our vast higher-education infrastructure.  That infrastructure sustains itself largely by promising to be a gateway to a better economic life.  Yet I’m not convinced that the bachelor’s degree, by itself, has much marginal value compared to the underlying work habits and character of the individual.

Perhaps the rule of thumb ought to be like the one regarding housing: don't buy a house as an investment; buy a house as shelter. And ... get an education to get an education, then think about the work you will do. Perhaps being a cubicle drone for 40 years isn't worth $1 million.

Right now I don't care if you can recite Shakespeare. What I want to know is, can you fix the electrical outlet on my patio?