There’s a debate among economists about why a college degree is worth so much. That the credential is valuable is not in doubt. According to the Pew Research Center, college graduates earn about $17,500 more annually than high school grads. Why?
The “human capital” school believes that students learn valuable skills in college that employers are willing to pay for. The “signaling” school doubts that the content of a college education is really that marketable. They argue that employers are interested in the traits — diligence, intelligence, self-control — that a degree reflects.
For decades, politicians have bought votes with promises to make college “more affordable.” They passed legislation with names like the “College Cost Reduction and Access Act” and the “Ensuring Continued Access to Student Loans Act.” There are Pell Grants and Stafford Loans, and much more besides.
Shockingly, colleges and universities have increased their prices more than any other sector of the economy except health care, which is also — surprise! — highly subsidized. As Anya Kamenetz writes in “$1 Trillion and Rising,” a report for Third Way: “Since 1978, the cost of college tuition has increased faster than the consumer price index in every single year. That’s not true for any other item in the basket of consumer goods.”
Student loan debt now exceeds all other consumer debt except mortgages. Default rates have reached a 20-year high, with as many as one in six borrowers failing to repay his or her loans. Taxpayers pick up the tab. Just since 2007, the average debt has increased by 43 percent to $26,000. The overhang of student debt is slowing the economy, some argue, as debtors put off purchases of cars, homes and other goods in order to service student loans. For the 30 percent of debtors who don’t graduate, the added debt carries no offsetting reward in higher wages.