Why the College Premium Is Debatable

The value of college has become increasingly debatable.

Let’s take a look.

The Disappearing College Premium

Wages

While a college degree used to be a ticket to higher earnings, the San Francisco Fed cites a stagnating gap between college and high school earnings:

But interpretations differ. Looking at the college wage premium, the NY Fed sees an all-time high:

Student Debt

Currently at for $39,457 for recent graduates, the average actual student debt load has continued to rise. Taking the next step, we can see why the debt load is so worrisome. With a student debt to income ratio of 58% and a $56,305 average starting salary, the debt is a big burden:

Employment

Meanwhile, the job guarantees that accompanied a college diploma are also shrinking. With the unemployment rate of recent college graduates exceeding the overall rate, there are fewer opportunities for the professional business service positions that include lawyers, accountants, consultants.

Some say the reason is the low hire, low fire environment:

ROI for college

Still, when economists compared the wage premium to the cost of college, they calculated a return between 12% and 13%. Proving the college return was substantial, they reminded us that a typical stock return is around 8%.

Consequently, through its Liberty Street Economics blog, the NY Fed concluded that college provides a substantial return:

Our Bottom Line: The Pew Survey

So where are we?

Pew tells us that only 22% of their survey’s participants had an unqualified opinion about the value of college:

But there is a political divide with Democrats saying college is more important then Republicans:

So, even with the NY Times telling us that college graduates feel betrayed,  the facts are more complicated.

My sources and more: Thanks to the NY Times for inspiring today’s post. From there, for wage data, this San Francisco Fed paper came in handy as did Liberty Street Economics research and this article on employment. And finally, we can see a more substantive perspective through Pew’s conclusions.