The return on higher education

While U.S. schools have remained competitive globally in the face of declining state subsidies and rising tuition costs, it’s fair to ask whether students are getting what they pay for.

Some argue that too many degrees are a waste of money. The return on higher education would be much better if college were cheaper.

The cost of higher education has surged more than 500 percent since 1985, illustrating why there have been renewed calls for change from both political parties.

Tuition expenses have increased 538 percent in the 28-year period, compared with a 286 percent jump in medical costs and a 121 percent gain in the consumer price index. The ballooning charges have generated swelling demand for educational loans while threatening to make college unaffordable for domestic and international students.

College graduates aged 25 to 32 who are working full time earn about $17,500 more annually than their peers who have only a high school diploma, according to the Pew Research Centre, a think-tank. But not all degrees are equally useful. And given how much they cost—a residential four-year degree can set you back as much as $60,000 a year—many students end up worse off than if they had started working at 18.

Arts and humanities courses all nourish the soul, but not all fatten the wallet. An arts degree from a rigorous school such as Columbia or the University of California, San Diego pays off handsomely. But an arts graduate from Murray State University in Kentucky means earning less over 20 years than a high school graduate, after paying for his education.

Of the 153 arts degrees in the study, 46 generated a return on investment worse than 20-year treasury bills, and of those, 18 offered returns worse than zero.

Technology will give colleges a chance to cut costs and raise quality. Online education will accelerate the trend. In 2012, 6.7m students were taking at least one online course.

Source: The Economist