Although it may be self-evident that it is in a student’s best interest to complete his or her undergraduate degree, students often underestimate the cost of not finishing what they have started. And, as we are finding out across a number of studies, not finishing can be a very expensive proposition indeed. This is especially true for adult learners who, historically, have been less likely to finish their undergraduate degree than their younger counterparts in residential undergraduate programs.
Let’s start by looking at the recent recession. A frequent complaint that those of us in higher education hear is that the college degree is expensive and overrated – after all, look at how many folks with a college degree lost their jobs during recession. On the face of it, this would seem to be a reasonable argument. After all, the federal government’s Current Population Survey recently found that during the recession, the percentage of graduates from four-year colleges who were employed fell from 69 percent to 67 percent, and after the recession, it dropped further – to 65 percent. But, hold on, let’s compare college graduates to folks without a degree. Prior to the recession, only 55 percent of individuals without a degree were employed, 51 percent during the recession, and 47 percent afterward. In other words, college graduates were more gainfully employed at all levels – before, during, and after the recession. When jobs are shed in the economy, individuals with less education are more vulnerable than their degreed counterparts. To paraphrase Larry Summers, former president of Harvard, if you think a college education is expensive, try not having one.
Nonetheless, going into debt for an education worries many students – and it is a reasonable concern. In fact, we frequently hear how much students are going into debt to finance their education. But, let’s take a deeper look. Fully one-third of all college graduates will face no debt at all for their education (either because of financial aid or family financing). Of the remaining 65%, the average indebtedness is about $20,000. As Robin Wilson, a writer for the Chronicle of Higher Education notes, that is less than the starting price of a 2009 Ford Escape (Wilson, 2009). The problem is that about 8% of borrowers accrue over twice the amount of debt as everybody else. They also tend to be the ones who are most likely to default on their loans.
But massive debt is unusual and almost always tied to graduate training. Only 1.5% of all undergraduate and graduate students graduate with six-figure student-loan debt. Of those, 90% accrued the debt through graduate or professional studies with 36% being law school graduates and 49% medical school graduates (Hoover, 2012). Annual law school tuition is around $50,000 with total costs, including living expenses, topping $200,000. The average starting salary, however, is only $63,000 and the job market is shrinking (Mangan, 2012). Medical school graduates can expect a higher starting income and greater job security – so the debt usually can be more easily serviced.
At this point, it should be quite apparent that finishing one’s college degree makes the best financial sense, even in a lackluster economy. Although the job outlook may be gloomy for a while, it will be worse for individuals without a college degree. Employers will always seek out the most qualified applicants, and the college degree, in the forseeable future, remains the best assurance of quality. Adult students understand this phenomenon. About half of adult students thought the value of higher education had increased during the recession, 25% of respondents said it had not changed significantly, and only 20% thought its value had decreased (Hoover, 2009). Second, as much as we all hate taking on debt, let’s be reasonable about the nature of the debt. Accruing debt for educational expenses also has the benefit of allowing an individual access to parts of the job market that would not otherwise be accessible. As a result, we should think of the debt as a reasonable investment in one’s future. The Department of Education’s National Center for Education Statistics (NCES) recently reported that individuals with a bachelor’s degree took home, on average, 38% more in annual wages than those with just a high school diploma. Over the course of a lifetime, that difference is close to $1 million (Pilon, 2010).
So, from a purely rational perspective, one only needs to ask whether the average level of student indebtedness for an undergraduate degree ($20,000) is worth the average difference in lifetime earnings between graduates and non-graduates ($900,000). I don’t think one needs a degree in finance to understand that a $20,000 investment for a $900,000 return is one heck of a good deal. Even a more fine-grained analysis taking into account tuition debt, tax bracket differences, and discounted earning streams still shows a significant advantage for the college degree.
Is college expensive? Yes. Will many students have to take out student loans? Yes. Should we do everything we can to keep costs low while offering a high quality education? Absolutely. But it should be pretty clear that taking on debt, in and of itself, is not the major problem. Instead, not finishing the degree is the major problem. The worst possible outcome is for students to take on debt and then not finish what they have started. Not only do they fail to benefit from the increased lifelong earnings a college degree can confer, it is more difficult to repay student loans with lower income.
Obviously, a great college experience is about more than one’s future income. It’s about developing the mind, body, and spirit. Elsewhere I have criticized the notion that the sole purpose of attaining a college degree is to get a job later. None of what I have said here contradicts that position – it simply points out that finishing one’s degree has an important added benefit, better expected lifetime wage earnings.
The recommendation is simple: Finish, finish, finish. Life happens, especially to adult learners. We frequently hear that students stopped their education because of emerging family concerns or finances. We would hope that instead of stopping their education, students would either persevere or, at worst, pause their education. It should be clear that completing the undergraduate degree is one of the best decisions a student can make, while stopping is probably one of the worst.
Hoover, E. (April 2, 2009). Recession has changed views among prospective adult students, study finds. Chronicle of Higher Education.
Hoover, E. (August 1, 2012). Who graduates with six-figure student-loan debt. Chronicle of Higher Education.
Mangan, K. (May 7, 2012). Law professor gives law schools a failing grade. Chronicle of Higher Education.
Pilon, M. (February 2, 2010). What’s a degree really worth? Wall Street Journal.
Wilson, R. (May 22, 2009). A lifetime of student debt? Not likely. Chronicle of Higher Education.