Wednesday, September 12, 2012

College is still a great investment. But it’s getting worse.- Better Look Again.

English: Study of rising college costs due to ...
English: Study of rising college costs due to cost shifting from state funding to tuition. (Photo credit: Wikipedia)
Posted by Dylan Matthews on September 11, 2012 at 2:37 pm

Megan McArdle has a provocative new cover story out in Newsweek arguing that college is no longer a good investment. “For an increasing number of kids,” she concludes, “the extra time and money spent pursuing a college diploma will leave them worse off than they were before they set foot on campus.” McArdle overstates the case. College is still a good deal, but it’s getting to be a worse one.
McArdle is certainly right that tuition costs have been far outpacing the rate of inflation for other goods. Here’s how the cost of college tuition and fees have increased relative to the cost of all goods, according to the Bureau of Labor Statistics:
Prices overall have grown by a factor of about 3.6 since 1978, but college tuition has grown by a factor of 12. All told, in the 2010-11 school year, the average cost of college was an astounding $27,435, according to the National Center for Education Statistics.
But buried in McArdle’s piece is a curious admission. “Experts tend to agree that for the average student, college is still worth it today,” she writes. “But they also agree that the rapid increase in price is eating up more and more of the potential return.” So college is still worth it! The best numbers on this come from the Brookings Institution’s Hamilton Project, which calculates the return on investment for spending on college. Hamilton’s Michael Greenstone and Adam Looney estimate that the return on investment for an associate’s degree is about 20 percent, and the return for a bachelor’s is about 15 percent (mostly because bachelor’s degrees are much more expensive). That’s enormous compared to returns from the stock market, bonds, or (for you Ron Paul fans) gold:
CLICK HERE to read the rest of the story and view the graphs on the next site.
Air-trekkers Jumping Stilts
One thing the above story lacks is the cost of paying back the student loans.  If you are unable to get a job right out of college, and have those loans to pay back, you will start getting hit with late fees and penalties that can not be bankrupted away.  Plus the continuing trend of jobs being shifted overseas is NOT going to end.  
The brain drain of the US is well under way and not about to be renewed.  Is college the good investment as reported above after all?
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