It’s hard to put a price on any of these goods. And yet, high and continuously rising tuition is increasingly forcing would-be students and their families to perform some cost-benefit analysis. A college degree, on average, awards you 60 percent higher earnings (PDF), which more than offsets the average $23,000 in student loans that graduates stack up.
But the relative advantage of the degree has been growing for a generation not because college graduates are earning more and more, but because high school graduatess are earning less and less—20 percent less for young men compared to the 1970s. In fact, it might make more sense to speak of a non-college penalty than a college reward.
Then there’s the question of what happens to the 43 percent of college students who, for one reason or another, don’t finish their degree within six years of their freshman year. They may have student loans but no degree to show for it.
Or what about those who graduate into a recession, like the one going on right now, with very high loan burdens? Graduating into a poor job market can reduce your lifetime earnings by 10 or 15 percent—and it’s a disadvantage that never really goes away.
It’s clear that with such sums of money, not to mention people’s futures, at stake, it’s time to have more hard-nosed discussions about the costs and benefits of college. Late last month, the Department of Education under Obama took an important step in precisely that direction. For the first time they’re putting teeth into an existing rule that in order to qualify for federal financial aid, colleges must prepare students for “gainful employment.”
The measure they’re using is how the college’s graduates handle their student loans. If too many of your students leave school with an unreasonable ratio of debt to income (defined as more than 8 percent of total earnings), or if they don’t pay back their loans at all, then presumably they didn’t get enough bang for their buck.
For now, the “gainful employment” standard is being applied only to trade schools, which are usually for-profit. But it’s not a bad question to ask no matter what the status of the college. One would think that this guideline could strike fear into the hearts of the philosophy department at, say, Middlebury College (price tag, $208,600; starting salary, about $35,000) or, for that matter, the film school at USC (price tag, $100,000+; starting salary, $0 to $100,000).
Anya Kamenetz is a staff writer for Fast Company and author of "Generation Debt." Her latest book is "DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education."