Debate about the military-industrial complex will soon be replaced by talk about the education-industrial complex. Higher education is grossly oversold by a cabal of educrats, professors, politicians, lenders, and other vested interests. The rate of return on college degrees is wildly overstated for several reasons:
1. The lifetime ROR data are for past years and decades, and do not take into account the current experience of recent college graduates in today’s job market–which is not likely to improve much in the near future.
2. The ROR studies do not consider the personal characteristics that differentiate college-bound HS graduates from the non-college-bound. The former generally are already somewhat smarter, more ambitious, better spoken, better connected, have more family wealth, etc., on average. Accordingly, their lifetime earnings would be expected to be higher regardless of college. How much of their higher income can be attributed solely to going to college? That is the question never posed to those overselling college degrees.
3. The type of degree granted matters hugely. My daughter graduated from the afore-mentioned Harvey Mudd College in 2003 and has made little money because her major was English (some coursework taken at adjoining Scripps College). Is now starting on a master’s degree in Accountancy to remedy the earnings problem.
In short, college has been hugely oversold by vested interests, and the victims are the indebted-for-life graduates struggling with dashed job hopes.
If there is one thing to be learned from this experience, it is that incentives matter. In the same way that the housing bubble became so big for so long was because the participants all had the incentives in front of them to keep it going (lenders, buyers, RE professionals, Fannie/Freddie, politicians), so also the education industry has grown due to incentives. Professors’ work loads have fallen over the years and their compensation (especially on a per-hour basis) usually exceeds what they could make in the private sector. College administrative staffs have exploded in number and compensation. Campus facilities and dorms are towers of excess. The students and their parents see college not as an intellectual pursuit but as a consumption item (social life, status, etc), with the degree devalued since “everybody has one”…
As a nation, our pursuit of credentials has left us overeducated in the formal sense of having degrees, but without knowledge and introspection in a broader sense. We are now awakening to this and college enrollements will have a much-needed downward adjustment.
