Is Going to College Worth It?

A subversive idea has been rumbling around North American campuses in recent months: Post-secondary education, on a cost-benefit basis, may not be worth the time and money.

A column in The Economist quotes investor Peter Thiel: "Education is a bubble in the classic sense. To call something a bubble, it must be overpriced and there must be an intense belief in it."

Most students would agree that post-secondary is overpriced, but their intense belief is not in education but in what it should lead to -- a well-paid career.

Current costs of post-secondary are certainly mind-boggling to pre-boomer war babies like me. When I entered Columbia University in September 1958, tuition was $1,100 a year. I got through thanks to a mix of scholarships, meal jobs, and student loans. In 1962, I graduated about $2,000 in debt.

Those seem like laughably low numbers today. But half a century of inflation makes a difference. In today's dollars, my tuition was about $8,800. My loan was equivalent to $15,265 today -- not much below the $20,400 median debt of student borrowers graduating with B.A.s in the class of 2005.

What's more, according to BC Stats, by 2007 such grads were earning a median income of $45,000 and 30 per cent of them were already debt-free. That's closely comparable to my starting salary at Vancouver City College in 1967: $6,950, equivalent to $46,565 today. (But it took me five or six years to pay off my debt.)

Outstripping 50 years of inflation

Modern tuition and other costs have far outstripped 50 years of inflation. Columbia now charges $21,544 per year for tuition, plus $600 in fees. Total costs for a year there, including food and lodging, must now be well above $40,000.

Here in B.C., the Canadian Federation of Students says average undergrad tuition for full-time students in 1972-73 was $465 (in constant dollars). In 2010-11, it was $4,802, over ten times as much.

In effect, the provincial and federal governments have downloaded more and more costs onto students and their families, who have somehow found the money. (I well recall when the BC Liberals jacked up tuition fees in 2002; at Capilano College we thought we'd been priced out of the market, but our enrollment rose sharply.)

And yet students and their families have kept paying, and we are increasingly better educated. In the 1986 census, for example, 29.7 per cent of us over age 15 had less than a high-school graduation certificate. In the 2006 census, that dropped to 12 per cent. Only 9.5 per cent of us had a university degree in 1986; in 2006, 24 per cent of us did.

Zach Crispin, the head of the Canadian Federation of Students in B.C., told The Tyee that the average debt of new graduates is $27,000. If they can pay it off in 10 years, they'll also pay an additional $7,000 in interest. That's money they can't spend on housing, clothes, or transportation.

Running up still more debt

Very often, such graduates go right back to school and run up more debt. A B.A. in anthropology or French literature is useless in the job market, so career training has become the new graduate study: a certificate in tourism or business management is more attractive to employers. This boosts enrollments in career programs at "teaching universities" that used to be just community colleges.

What could motivate millions of young Canadians, and their families, to mortgage their futures? Have they really created an education bubble like the housing bubble that still shimmers around Vancouver?

A bubble also requires a large supply of "greater fools," people who will buy something at a higher price than its last owner paid. When the fool supply dries up, the bubble bursts. The owner then ends up "under water," owing more than the house or education is worth.

Can an education go under water? So far, no. Students sacrifice the job income they could earn instead of going to school for four or more years, but they generally make up that loss in their future income. (Besides, over half a million Canadian students work part-time or even full-time as well as taking courses.)

In B.C., for example, the 2006 census showed that young workers aged 25 to 34 with less than a bachelor's degree had a median income of $24,604 -- that is, half of all such workers were earning less than $12 an hour and half were earning more.

Those aged 25-34 with a bachelor's degree had a median income of $30,689 -- or $15 an hour. With a post-bachelor degree, median income rose to $32,365. (For all British Columbians with a post-bachelor degree, median income was $46,138.)

Schools need bums in seats

What's more, everyone else is encouraging students to get as much education as possible. The post-secondary system employs scores of thousands of people, many with advanced degrees and good salaries. They have an enormous stake in high enrollments and extended schooling. Not long ago you could get a pretty good job with a one-year certificate in tourism; now Royal Roads University offers a Master's degree in the subject.

Whatever this may do for the careers of students, it certainly sustains the careers of faculty and administrators. If they can invent an enticing new program, Victoria will approve it, students will pay to enroll, and more faculty will get jobs.

And it makes life easier for employers: If they keep raising the academic requirements for a particular job, they have fewer résumés to read and less to pay those they eventually hire. After all, the more B.A.s, the lower the value of a B.A. and the higher that of a Master's or Ph.D. So untold thousands are paying for academic qualifications that may have no bearing on the jobs they eventually get.

Diminishing returns on a degree

Worse yet, from the students' point of view, is that graduates' incomes are falling. A B.A. in 2000 got you a median income of $33,950, over $3,000 more than in 2005.

The same is true of post-graduate degrees. In 2000, such degrees brought their holders a median income of $35,861 compared to just $32,365 five years later.

If the 2011 census shows this trend continuing, students and their families will have to do some serious thinking. A high-school grad who goes on to post-secondary is forgoing about $100,000 in income (at the rate of $12 an hour) over four years. Assume this student also borrows $27,000 for tuition and other expenses. Repayment would take over four years of the student's entire salary at $30,689... and longer if the student ended up being paid below the median.

Of course, the repayment would take many more years than that. Eventually the graduate might catch up with his or her more affluent classmates. But with ever more graduates being pumped through the system, salaries could fall still further.

In effect, students and graduates are trapped in an arms race. Not that long ago, you could join the Mounties with just Grade 10. High school completion was a rare and respected achievement. Then it became just the admission ticket to post-secondary. Now a B.A. is just the ticket to grad school. We worry about Ph.D.s who drive taxis; before long, that could be the key qualification for such a job.

Re-branding education

The schools are trapped in the same arms race. Remember when Gordon Campbell promoted a lot of B.C. community colleges to "universities"? That was strictly a re-branding exercise, because affluent Asian (and Canadian) families didn't want to send their kids to mere colleges.

The purpose of this arms race is not to advance human knowledge, or to improve the human condition. The vast majority of today's students and faculty have no interest in scholarship or research except as a means to a steady income.

To help them achieve that income, Canadian and American governments since the Second World War have heavily subsidized young people's education. To do so, they had to create a professoriate that in turn needed lots of students to justify its own existence. Uninterested and unqualified students had to be admitted to post-secondary just to fill the professors' classrooms.

Subsidizing business, not students

As post-secondary costs rose, governments shifted an increasing proportion of those costs to the students. The subsidy is now going to employers; they no longer have to train their employees, because taxpayers and students pay for that training in post-secondary. (The employers still get to complain about the quality of their new employees.)

Students, meanwhile, pay for 10 times more of their own education costs than their parents did 40 years ago. And they pay it because the alternative is to live on less in a society with a widening income gap between rich and poor. That is an outcome to be avoided at any cost.

If employers ever decided it would be cheaper to train their employees from scratch, and to disregard academic credentials, our campuses would empty out overnight. Then we'd know that the post-secondary bubble had indeed burst.