The Cult of College

Is college worth it?

That’s a reasonable question, and it’s what’s behind the Administration’s recent effort to reign in college costs. The value of getting a college education has been an article of faith for so long (buttressed by study-after-study about lifetime earnings and unemployment) that questioning the value of a college education is like questioning the value of happiness. But it’s important: college costs have eclipsed home prices for many as the single biggest expense of their adult lives.

And it’s unclear what we’re paying for: education or the degree. Students in college can acquire valuable skills–advanced math, lab science, critical reading and writing–but they also receive a sheepskin. If it were just the skills that were important, cheating wouldn’t happen. And we wouldn’t bother to punish it.

Between 1992 and 2008, the number of BAs awarded annually rose from 1.1 to 1.6 million. Around 60% of those additional graduates end up in jobs that don’t really need a degree: electricians, waiters, mail carriers. So now we’re seen an explosion in graduate degrees. Where will it end?

Right now we’re on a cost merry-go-round, where high prices lead to more federal aid which requires increased administration which pushes up costs and prices–lather, rinse, repeat. Maybe the President’s proposal of online scorecards and regulatory waivers–combined with massive online courses–will help. For now, though, we’re using subsidized debt to purchase an asset of questionable economic value that everyone claims will only go up in price. Have we seen this movie before? And how did it end?

Douglas R. Tengdin, CFA

Chief Investment Officer

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