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College tuition is high, but the cost of not going is higher

College tuition is high. Student loans can be crushing. Is higher education really worth all that money?

Yes, especially in a recession, says a new report from the College Board, a Princeton, N.J., not-for-profit group that administers the SAT and other college-readiness programs. College graduates not only make more money than a high-school graduate who hasn’t attended college, they’re more likely to be employed.

Between 2008 and 2009, unemployment for college graduates rose from 2.6 percent to 4.6 percent, the report found. But in that same year, high-school graduates saw their unemployment rates rise from 5.7 percent to 9.7 percent.

Over the past 20 years, that pattern has held steady: Regardless of the state of the economy, high-school graduates are roughly twice as likely to be unemployed as college graduates.

In terms of pay, the gap has grown. In 1982, college graduates earned 50 percent more than high-school graduates. By 2008, their wages were almost 100 percent higher.

There are non-income benefits, too.

College grads are more likely to say that they find their jobs satisfying. They are more likely to get health insurance, a pension, and other benefits, according to the report.

With increasing education comes more interest in community service, more responsible health choices, better parenting, and other invaluable benefits, says Sandy Baum, an independent policy analyst for the College Board and lead author of the report.

“The skills and values and attitudes are part of the [college] package, and not only for the individual. We have a much richer society if we have people with those skills and attitudes.”

Still, attending college usually means losing four years of earnings at a full-time job, and there are all those student loans to pay off.

“There are so many terrible stories of young people who graduate with six-figure debt, with a degree, in, say, social services, and their jobs will never be able to pay off that debt in any reasonable time period,” says Robert Martin, economics professor at Centre College in Danville, Ky. “It’s an important question to ask, if everyone should go to college.”

“There are certainly people like that,” Dr. Baum concedes, “but they are not representative.”

On average, college grads can pay off their loans and make up the four years of “lost” wages (assuming they didn’t work their way through school) within 11 years of graduation, the report found. Interestingly, those who earn an associates’ degree will be about the same age – 33, on average – when they pay off their loans, because it takes them the two extra years to make up for the lower incomes they earn, compared with college graduates.

After that, the income advantage of the college-educated vs. the non-college-educated begins to grow.

Attending one year of college gives students an 11 percent higher salary than just graduating high school, the report found. A second year offers another 13 percent. A third year is another 14 percent, and so on.

“More education pays off at every step,” Baum says.

A recession makes the difference more acute.

“Whenever you have a recession, it takes hardship and multiplies it by five,” says David Card, an economics professor at the University of California at Berkeley. “Groups that have traditionally had it easy will experience a little discomfort, and groups that have always struggled will really suffer.”

Beth Hawkins is on assignment; Learning Curve will occasionally offer articles from MinnPost’s partners.

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Comments (4)

  1. Submitted by Bill Gilles on 09/21/2010 - 10:50 am.

    Hmm… I wonder if this study controlled for the idea that people who have “more interest in community service, more responsible health choices, better parenting” are also people who are just more likely to get a degree vs a degree fostering such traits?

    Also – what happens to people with ‘some college’? Seeing as how most colleges have graduation rates at or below 50% – I’m very curious how people with all the debt and lost income, but none of the degree – fare vs. high school grads who shunned higher ed.

    BTW – what happened to the MinnPost writer who covered higher ed? She just disappeared and my main source for media news (BrauBlog) never reported why!

  2. Submitted by James Hamilton on 09/21/2010 - 01:06 pm.

    Is college tuition really that high? Annual undergraduate tuition and fees at:

    U of M, Minneapolis-St. Paul: $12,228.

    U of M, Morris: $11,532.

    U of M, Duluth: $11,756.

    Winona State: $8,081.

    St. Cloud State: $6,661.

    Metro State: $5,923.

    Inver Hills Community College: $4,965.

    Normandale Community College: $5,125.

    Consider the number of students receiving financial aid and the amount of that aid. For U of M, Morris, 2007-08:

    Financial Aid (2007-2008)
    % of Students Receiving Financial Aid Average Amount Received ($)
    Any Financial Aid 87%
    Federal Grant Aid 27% $5,072
    State/Local Grant Aid 37% $3,369
    Institutional Grant Aid 72% $2,859

  3. Submitted by James Hamilton on 09/21/2010 - 01:23 pm.

    My post got away from me!

    I was saying, consider financial aid. While not every student qualifies, those who do can receive substantial amounts. Those who don’t, likely because of household income, have a variety of tax benefits available to them.

    See, http://www.getreadyforcollege.org/gPg.cfm?pageID=106&1534-D83A_1933715A=f6c4eb439bd3129145aea7bdce5e5fef039bdbd0

    Frankly, there is nothing wrong with incurring debt for a post-secondary education, if done wisely. The average price of a new car in 2009 was $27,958 (Answer.com). According to one source, average college grad debt for the same year was $21,000.

    http://articles.moneycentral.msn.com/CollegeAndFamily/CutCollegeCosts/HowMuchCollegeDebtIsTooMuch.aspx

    Certainly a four-year degree is a better investment than a car.

    Yes, I’ve left out the cost of living. That certainly ups the ante. But with room/board/tuition under $15,000 a year at most state colleges and at UW schools which Minnesotans may attend at reduced rates under reciprocity, the financial aid available for most and the tax credits and deductions available for all, a four year degree should not be out of reach for those willing to make the commitment to pay for it, now or later.

    Those with college plans might do worse than to start their reading here:

    http://www.getreadyforcollege.org/Estimator/firstQuestions.cfm

  4. Submitted by Steve Rose on 10/05/2010 - 07:39 am.

    In this economy, it is best to arrive at graduation with little or no debt. I’m not sure that the price of a new car is a good standard of comparison. A new car is about the poorest transportation value available. It should be avoided, even if the federal government provides incentives.

    When I attended a state college back in the late 1970s, I worked about fifty hours per week in the summer and about twelve hours per week during school. I paid for my own education and graduated debt free in four years. This was not uncommon; many others did the same. Today, that is rare due to the high cost of education, with respect to what a college student can earn.

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