What is the value of a College Degree?

What's a College Degree Worth?

Increasing tuition costs, mounting student debt and the highest unemployment rate ever are fueling an ongoing debate:  What’s the value of a college degree in today’s tough economic environment? What do you actually gain from a college education? How can that be measured against the dollars-and-cents cost of tuition? What can be done to make a degree more affordable for more families? And how do students choosing a college today truly compare them beyond their sticker price?

The Value of a College Degree

According to a 2011 report from the Georgetown University Center on Education and the Workforce, earning a bachelor’s degree is still the best path to middle-class employment and wages in the United States, and while those with only a high-school diploma can achieve the same status, it will become harder for them to find and secure such jobs.

“Career Clusters: Forecasting Demand for High School Through College Jobs, 2008-18” outlines the different industry clusters expected to offer the best prospects for employment and wages for those with a high-school diploma, an associate degree, and a bachelor’s degree.

Jobs are still available for those with only a high-school diploma, the report finds, but they are mostly in male-dominated career clusters like manufacturing. The study also concludes that women need education beyond high school to earn the same wages as men with only a high-school diploma.

“The days of workers graduating from high school and working their way from the mailroom to a corner office at a large company are gone,” according to a Chronicle of Higher Education article on the report. “Today’s economy puts a premium on education, training, and flexibility.”

Beth Gamber “It is imperative that our graduates must proceed to a level of higher education to increase their economic chances,” said Bethany Gamber ’95, who has served as a guidance counselor at Northeastern High School in Manchester, PA, since October 2003. “A college degree is still going to afford a student a lot more opportunities in the workforce than someone with just a high school diploma. Our mission statement at Northeastern has changed within the last two years to this: ‘The Bobcat Way: 100% of our students will graduate and be fully prepared for a post-secondary education.’ ”

A 2010 report by the College Board (“Education Pays: the Benefits of Higher Education for Individuals and Society”) indicates that workers with a college degree earned much more, but it also concludes that they were much less likely to be unemployed than those with only a high-school diploma. Even during the recession, the report indicated, a degree offered protection from unemployment. The 2009 unemployment rate of college graduates 25 and older was 4.6 percent, compared with 9.7 percent for high-school graduates.

“Consistently over time, unemployment rates are about half for college graduates,” said Sandy Baum, an author of the report. “And jobs began recovering for college graduates about a year and a half ago. While it’s easy to find a college grad who’s unemployed, you’re statistically much less likely to be in that circumstance if you have a higher level of education.”

Several surveys also show that college graduates themselves believe in the value of their degree. A 2011 Pew Research survey found that 74 percent of graduates from four-year colleges say that their education was “very useful in helping them grow intellectually.” Sixty-nine percent said “it was very useful in helping them grow and mature as a person,” and 55 percent claimed that “it was very useful in helping prepare them for a job or career.” Moreover, 86 percent of these graduates think “college has been a good investment for them personally.”

“One Year Out,” a 2011 survey conducted on behalf of the College Board, revealed that an overwhelming majority (86 percent) of students who graduated from high school a year prior believe that a college degree is worth the time and money. Even a large majority of those not currently enrolled in college – 76 percent – agree.

In an article on Poynter.com, San Francisco State University Professor Sarah Fidelibus points out that the Pew Study indicates that even those who have graduated with student loan debt rate their education as a solid investment, feeling they have benefited both financially and personally from their degrees. “And it is perhaps this second, less tangible benefit – the personal value of college – that the media are least likely to explore,” she wrote. “But it is the one that matters most.”

Tom LaForgia “ . . . where I teach, students arrive on campus from a variety of cultural, linguistic, and socioeconomic backgrounds,” she said. “Having the opportunity to listen to one another, collaborate and problem-solve together enhances the lives they will live after college.”

Tom LaForgia ’08, major gift officer at witf (Central Pennsylvania’s NPR and PBS affiliate) and a member of the Alumni Board who previously worked in admissions at his alma mater, agrees that it’s the intangibles of a college degree – beyond the diploma – that are sometimes overlooked in the discussion of value.

“I earned more than a diploma at York College,” he said. “Years after graduation, I continue to benefit from an outstanding and affordable, hands-on education in both my personal and professional life.”

How Do Colleges Spend Tuition Dollars?

While affordability is the goal that many agree needs to be reached, there are a number of different remedies being presented to control the increasing cost – and, some say, subsequent inaccessibility – of higher education. But before launching into a discussion on how to “fix” the cost, it’s helpful to understand the complexity of the issue.

According to the National Association of College and University Business Officers (NACUBO), the main drivers of cost at most colleges and universities are the direct educational expense of the faculty and the academic services that support instruction. NACUBO indicates that the average private four-year institution spends:

  • 10 percent of its operating revenue on “institutional and community costs.” This category includes the costs of extracurricular cultural activities and facilities (e.g., museums, theaters, and performing arts centers), religious programs and facilities, and athletic and recreational programs, as well as gardens, arboretums, and similar entities that contribute directly and indirectly to the educational experience of an undergraduate.
  • 20 percent on “financial aid.”  This category consists of all institutional grants, whether from unrestricted or restricted sources, but not federal and state grants administered through the institution.
  • 70 percent on “instruction and student services.” These costs include the core educational expenses related to faculty effort, student services such as advising, and administrative effort directly related to academic programs. In addition to the direct costs of each of these components, this category includes the allocated costs for general administration, facilities operations, and depreciation of plant and equipment. 

Jar of Change “Colleges spend millions of dollars on extracurricular cultural activities and facilities including athletic and recreational programs, performing arts centers, student union buildings, art galleries, residence and dining accommodations,”

said Frank Mussano, Ph.D., dean of adminis-trative services at York College. “While these may not be viewed as direct scholastic expenditures, they are important educational investments. Furthermore, the typical private college spends about three-quarters of its tuition revenue on faculty salaries and the academic services that support instruction.”

It is increasing costs in these areas that are driving the current trend of rising tuitions, according to David H. Feldman and Robert B. Archibald, economists at The College of William & Mary who published a book, Why Does College Cost So Much? in 2010. They offer three reasons why tuition has climbed at most institutions.

First, the authors point out that higher education is a people-intensive industry, one in which technological progress has not reduced the number of labor hours needed to “produce” the service. “Students interacting directly with professors and other students in small groups remain a benchmark of quality in education,” they wrote.

In addition, the two argue that higher education relies on an extremely highly educated labor force. “Starting in the late 1970s, the cost of hiring highly educated people began a sustained rise. This has driven up costs in any industry that cannot easily shed expensive labor.”

Lastly, new technology in higher education tends to change what we do and how we do it. “Colleges must offer an education that gives students the tools they need to succeed in the modern economy. The contemporary chemistry student, for instance, needs to be familiar with current laboratory tools, and they are more expensive than the chalk-and-test-tube world of the past.”

“Every field of study has been impacted by technology in how education is delivered,” said Matt Smith, dean of business affairs/CFO at York College.

“Smart classrooms, wireless connectivity, cell phone applications and other technology advancements have become the norm; you simply cannot compete without them. Perhaps more significantly, we must use technology to properly train our students for the workplace.

“As an example, we have made a significant investment in simulation labs for our nursing students. These labs enable our students to develop critical skills by managing through realistic crisis situations created in a safe, simulated environment. Is it more expensive? Absolutely. Does it improve outcomes? You bet.”

Some experts looking for a way to make college more affordable point to a more efficient, accountable model of learning in higher education. Considering the previous figures and factors, however, where do institutions make cuts and continue to ensure that students receive a quality educational experience?

College presidents surveyed in 2008 by The National Center for Public Policy and Higher Education and Public Agenda expressed concern over simultaneously accomplishing both these goals. A report based on their responses, “The Iron Triangle,” showed that presidents were most concerned with three challenges facing higher education: the increasing cost of higher education; the challenge of providing access to new generations of students; and the need to maintain and improve educational quality (along with the need to be accountable for that quality.)

While any of these alone are challenging, most of the presidents see these three missions as being in tension – a change in one impacts the other, according to the report. “For example, while many of the presidents believe that greater efficiencies are possible, most also believe that, for the most part, efforts to enhance access or improve quality will ultimately drive up costs.”

Mussano, who has worked in admissions at York College for 24 years, agrees, but he also sees signs of institutions changing the way they do business to accomplish both quality and efficiency.  “In recent years, the world of higher education has been reeling from the effects of a ‘perfect storm’ comprised of a faltering economy, declining demographics, an emergence of globalization and the dramatic rise of information technology,” he said. “This tumultuous environment has transformed how we live and do business. More specifically, colleges have become more focused on affordability and are placing a greater emphasis on accountability.

“Financially strapped parents and students expect colleges to justify and contain costs while simultaneously providing relevant financial aid resources. They are also looking for clear, tangible evidence that students are being properly prepared for future success (i.e., retention and graduation rates, internship opportunities, employment ratios, average starting salaries, demonstrated academic proficiencies). Fortunately, colleges are applying emerging technologies to improve productivity and enhance learning outcomes.”

How do students choose a college in today’s environment?

Terrance Peavy Terence Peavy ’92 vice president for enrollment management and marketing at Saint Peter’s College in New Jersey, believes that colleges and universities should consistently “justify their costs.”

“During the ‘glory years’ of admissions, from 1994-2000, no one was asking these questions,” he said, “and we had no problems filling our classrooms. “The difference now is that many people struggle more to pay for a college education, so they have to examine the choices more carefully.”

Peavy believes that comparing education to the housing bubble – a popular notion in current media coverage – is like “comparing apples and coconuts. The people who took out mortgages during the bubble knew they couldn’t afford the houses they were buying, and the brokers selling them those mortgages also knew that, but they pushed them to commit anyway. Choosing a college is a transparent process. Those of us in higher education present a clear picture of the costs so that families know if they can or can’t afford us.”

Peavy also believes that students have more of a voice and more options than the media is portraying.

“The media is sensationalizing the price of a small group of colleges at the top, including the Ivies, and making it seem as though all schools are charging those extremely high tuition rates,” he said. “No one talks about the models that are efficient and working, like York College."

I’m proud that my alma mater has built a sound financial model, one that includes using innovative ways to not put the burden of growth on students through significant tuition increases. York is fiscally sound, patient and prudent. There’s not enough publicity given to schools like this.”

Peavy’s career in higher education has led him to three very different types of schools. After graduating from York College, he worked in admissions for seven years at Fordham University, a research university that enrolls just over 15,000 students in 10 schools. He then moved to The New School, a very progressive university of 10,000 undergraduate and graduate students, where he eventually served as assistant vice president of admissions for five years. He came to Saint Peter’s, a small, private Jesuit college in Jersey City, in June 2009 as vice president for enrollment management and marketing.

Throughout his career, however, Peavy has remained committed to the premise that choosing a college is a personal choice, one that is ultimately about fit. “My conversations with families these days focus on values and outcomes,” he said. “I can talk about the benefits of attending Saint Peter’s – the Jesuit influence and personal attention, for instance – but ultimately it comes down to fit.”

The current economic situation has made the concept of going to college commoditized, according to Peavy. “The process of choosing a college should focus on more than just earning a diploma,” he said. “Families should also focus on the best opportunity for the student to learn more about him- or herself.”

“Your choice of college is not only about the next four years, but really about the 40 after that as well,” LaForgia agreed. “It’s an important decision that should be made considering a number of factors, not just price. Every class, professor, and friend at York College taught me something that I use daily. In addition, I can count on an incredible group of alumni to help me excel as a young professional.”