Is College Worth the Cost?


This week's issue (No. 26): 

Is College Worth the Cost?

or "why colleges cost more and educate less...and what to do about it."
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editor's note:

In a previous job, I interviewed a lot of people. One of the things I'd ask them was, "What do you think is the purpose of college?" It can be a hard question if you haven't thought about it. Consider how your answer might differ depending on whether you are a student, a professor, an alum, a parent, an employer, an administrator, or an elected official.

Two of the most popular answers are: 1. Colleges are designed to teach people how to think for themselves and 2. College prepares students to work and increases their economic value.

These five outstanding articles and essays explore arguments about how colleges may be failing on both of those goals. I know a lot of young parents on this list who'd like to know if all that college saving you're starting to do will be worth it. These articles are a good place to start thinking abou

Read wisely. Read widely.


1. College Calculus: What's the real value of higher education? (the return on investment is lower than many people think) - The New Yorker

2. Don't Send Your Kid to the Ivy League (a former Yale professor argues our top colleges are useless at providing a real education) - The New Republic

3. The World is Going to University (a look at the global rise in higher education) - The Economist

4. The Real Reason College Tuition Costs So Much (hint: It's not going to professor salaries...) - The New York Times

5. The Upwardly Mobile Barista (Starbucks and Arizona State pioneer a solution to make college work again) - The Atlantic

College Calculus: What's the Real Value of Higher Education?
by John Cassidy in The New Yorker || Article Link
(19 minute read) and totally worth the time

College has never been more popular. "About seventy percent of all high-school graduates now go on to college, and half of all Americans between the ages of twenty-five and thirty-four have a college degree. That’s a big change. In 1980, only one in six Americans twenty-five and older were college graduates. Fifty years ago, it was fewer than one in ten."

Is this wonderful news? It depends. Many people go to college to make a financial investment in their future. But some get saddled with crushing loans it takes decades to pay off. How do you know if the investment a good one?

John Cassidy suggests, "One way to figure this out is to treat a college degree like a stock or a bond and compare the cost of obtaining one with the accumulated returns that it generates over the years. (In this case, the returns come in the form of wages over and above those earned by people who don’t hold degrees.)

"When the research firm PayScale did this a few years ago, it found that the average inflation-adjusted return on a college education is about seven per cent, which is a bit lower than the historical rate of return on the stock market." 

Slightly underperforming the stock market may sound bad, but the stock market is a lot more volatile than the labor market. In other words, stocks might suddenly drop 30%. That is less likely with the wealth you've generated from your college investment. Oh, and by the way, the return on investment for college rises to 15% a year if you finish in four years.

The trouble is those figures are for averages.  They don't tell the whole story "because they disguise enormous differences in outcomes from school to school..." For example, "Students who attend M.I.T., Caltech, and Harvey Mudd College enjoy an annual return of more than ten per cent on their 'investment.' But the survey also found almost two hundred colleges where students, on average, never fully recouped the costs of their education." For graduates of those schools, college is a net loss.

This article is chock-full of stats and clear thinking. Well worth the read as you are considering "investing" in your own or your child's education.


Don't Send Your Kid to the Ivy League 
by William Deresiewicz in The New Republic  || Article Link
(21 minute read)
also well worth the time, but the book is better


Deresiewicz used to teach English at Yale and just published a book about how the Ivy League fails to educate students to have substantive lives. It is called, "Excellent Sheep: This Miseducation of the American Elite and the Way to a Meaningful Life."

I read the book because ever since my own
since my own days at Princeton I've been interested in what "elite" education does for and to people. I loved my college time and grew tremendously there, both intellectually, socially and even spiritually. But there was something about the experience that made uneasy. Something I felt but couldn't describe at the time. There was a pervading sense that everyone at school was expected to become "a leader" and "a success" but there wasn't much exploration about what those ideas meant. 

Without any guidance, for a lot of us, the definitions remained unexplored. The meanings we defaulted to came through the recruiting materials from banks and consulting firms that landed on at our dorm room doors: leadership equaled financial security, prestige, the admiration of your peers. Never mind that it turns out that the leaders I admire most turn out all to have led at great personal cost.

Deresiewicz writes, "what these institutions mean by leadership is nothing more than getting to the top. Making partner at a major law firm or becoming a chief executive, climbing the greasy pole of whatever hierarchy you decide to attach yourself to."

There's nothing wrong with positions of authority. I admit I still them attractive. But I don't think they are worthy core goals for life. They seem hollow. It's not the spot you fill on the corporate ladder, it's what you do with where you are. 

This hollowness at the core of elite education is something that provokes an allergic reaction from Deresiewicz: 

"Our system of elite education manufactures young people who are smart and talented and driven, yes, but also anxious, timid, and lost, with little intellectual curiosity and a stunted sense of purpose: trapped in a bubble of privilege, heading meekly in the same direction, great at what they’re doing but with no idea why they’re doing it."

Admission to the top schools is so competitive that the one kids who make it through tend to be the ones who've only experienced success. A track record like that makes you impressive. It's less likely to make you deep. It's less likely to provoke you to think about what you want to achieve. Thus without character-forming intent from the schools, ivy league educations often amount to simply another set of hoops for type-A kids to jump through to prove they are capable rather than an opportunity to really learn how to think. 

The truth is, I think for some students elite education can confuse them more than direct them. It will inform them, but fail to form them. There are specific reasons for this and I'd like to tell you more about it. I have pages of notes on what I've been calling The Wander Years.  

But this email is already long. For now, read the Deresiewicz article (the book has all these ideas in a less choppy form). He gives a great diagnostic of the malady, though I disagree with his prescription for addressing it.

The World is Going to University 
 in The Economist | Article Link
 (6 minute read)
Everywhere but Africa, more people are going to college. According to the Economist, "The global tertiary-enrolment ratio—the share of the student-age population at university—went up from 14% to 32% in the two decades to 2012; in that time, the number of countries with a ratio of more than half rose from five to 54."

And the best universities are almost all in the U.S. "In 2014, 19 of the 20 universities in the world that produced the most highly cited research papers were American."

But being good at research and being good at educating students are two different things. "American graduates score poorly in international numeracy and literacy rankings, and are slipping. In a recent study of academic achievement, 45% of American students made no gains in their first two years of university."

What's going on? Maybe it's the financial model. "The market for higher education, like that for health care, does not work well. The government rewards universities for research, so that is what professors concentrate on. Students are looking for a degree from an institution that will impress employers; employers are interested primarily in the selectivity of the institution a candidate has attended."
The Real Reason College Tuition Costs So Much 
by Paul F. Campos in The New York Times || Article Link 
(5 minute read)
Why does tuition cost so much?

It is not because the government isn't paying a lot.
 According to Paul Campos, "Public investment in higher education in America is vastly larger today, in inflation-adjusted dollars, than it was during the supposed golden age of public funding in the 1960s."

"Such spending," writes Campos, "has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher."

It's not because professors are getting rich. "Salaries of full-time faculty members are, on average, barely higher than they were in 1970."

"Moreover, while 45 years ago 78 percent of college and university professors were full time, today half of postsecondary faculty members are lower-paid part-time employees, meaning that the average salaries of the people who do the teaching in American higher education are actually quite a bit lower than they were in 1970."

This article, and others I've seen pin a lot of the increased cost on the growth of expensive college administrators. "According to the Department of Education data, administrative positions at colleges and universities grew by 60 percent between 1993 and 2009, which Bloomberg reported was 10 times the rate of growth of tenured faculty positions."

The Upwardly Mobile Barista
by Amanda Ripley in The Atlantic || Article Link 
(43 minutes read) 
I read this in two chunks, about 1 month apart. I was inspired both times.


Starbucks is sending it's employees back to school. In the summer of 2014 Howard Schultz, the CEO of Starbucks, "announced that his company would team up with Arizona State University, one of the nation’s largest public universities, to help Starbucks employees finish college."

"As long as they worked 20 hours or more per week,"
reports Amanda Ripley, "any of the company’s 135,000 employees in the United States would be eligible for the program. Those who’d already racked up at least two years’ worth of credits would be fully reimbursed for the rest of their education. Those with fewer or no credits would receive a 22 percent tuition discount from Arizona State until they reached the full-reimbursement level. Without saying so, Schultz was acknowledging an awkward truth about working at Starbucks: no one wants to be a barista forever."

Schultz has been praised and criticized for the social experiments he runs through his coffee chain, like his failed attempt at addressing racial tensions through customer-barista interactions this Spring.

I don't agree with all his views but I like his creativity and I think this project with Arizona State is a beautiful experiment. 

The project attempts to help people complete college, something that 45% of people who start college don't do. Part of the reason people quit is financial, which Starbucks is addressing directly. Others just don't receive good guidance and service from the schools. This was one of the most interesting parts of the article to me:

"We assume that people drop out of college because of the cost. But that’s only part of the explanation. Listen closely to former students, and you’ll hear them tell stories about bureaucracies losing their paperwork, classes running out of spots, nonsensical tuition bills, and transcript offices that don’t take credit cards. The customer service is atrocious."

"Simply put, many Americans fail to finish college, because many colleges are not designed to be finished. They are designed to enroll students, yes. They are built to garner research funds and accrue status through rankings and the scholarly articles published by faculty. But those things have little to do with making sure students leave prepared to thrive in the modern economy."

Arizona State, which has a huge and successful online program has developed an innovative way to address this dropout problem:

"To help students find their way, the school has developed a tool called eAdvisor—a user-friendly system that provides guidance to all 66,000 undergraduates about which classes they must take to graduate on time, and then tracks their progress along the way. If a student falters by, for example, dropping a required class, eAdvisor automatically e-mails the student and his or her adviser. The system has had an immediate and impressive effect. In 2006, the year before the school began using eAdvisor, only 26 percent of on-campus students from families earning less than $50,000 a year graduated within four years. By 2009, that rate had gone up to 41 percent."

Parting thoughts
More and more, a college degree isn't what qualifies someone for high-level white collar work. College degrees are becoming the norm across all sorts of jobs, table stakes for any job, not just executive roles. More and more, it is the quality of institution and amount of grad work done that separates one potential hire from another. So while college isn't a great ROI for everyone, in the arms race of human capital, it's hard to afford not going.

Having Starbucks cover college costs is likely well worth the investment of time for many employees. I'd love to see other companies compete for talent with this sort of HR benefit.

The Starbucks program relies on a partnership with a school, Arizona State, that is delivering the education primarily online and with the assistance of paid "coaches" who help students go through their own curriculum.

In some ways, this design is a throwback to the old Oxbridge model of have independent study with a don overseeing your work. In other ways, I think this represents more of what the future will look like. More MOOCs. More online delivery. And more opportunity for the one part of the world where higher education isn't increasing: Africa. 

The new year of school has begun. Good luck to all the students. 

- Max

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