I sometimes wonder: would I encourage my kids to go to college?
In economic terms, college seems to be a good choice. People who complete college tend to earn much more over a lifetime of work. And this is an often-repeated argument. Under the surface, though, this argument is lacking. How much of the increase is because the students went to college and how much is because they were the kind of students that would go to college (higher-income, conscientious, etc.)?
Some idealists may hold onto the idea that college is supposed to be about something nobler than earning more money. But the reality is that for most, that is the overarching motivation for college. So it’s on those grounds that we’ll try to answer the question: what is happening to college? Should it exist in its current form? What are the trends shaping college? What will it look like in the future?
Peter Thiel and the short-lived anti-college movement
College has had no more forceful or effective critic than Peter Thiel. He started his Thiel Fellowship in 2010 which awards students under 23 $100,000 to forego college and start a company instead.
Thiel’s critique focuses on the increasing costs and debts that college students take on in pursuit of a degree. Thiel isn’t opposed to colleges in total, but would like to see other options. See him in his own words:
The ‘anti-college’ wave seemed to have crested in 2011. Thiel participated in an Intelligence Squared debate in 2011 where he argued for the proposition that: “Too many kids go to college”.
In the same year, New York Magazine ran a story about the popularity of anti-college views:
The notion that a college degree is essentially worthless has become one of the year’s most fashionable ideasDaniel B. Smith, New York Magazine
Watch the Intelligence Squared debate here:
College enrollment is still high
Since 2011, total college enrollment has dropped by about 1 million students, from about 18 million to 17 million.
At first blush, it appears that the anti-college talk may have had an effect. On further inspection however, college is still the destination of choice for high school grads.
The percentage of high school grads who go on to college is now at its highest level ever of near 70%.
There was a run-up in the number of student’s enrolled at 2-year colleges during the recession and that number has since decreased. 4-year enrollment has leveled, but not decreased.
How do we square declining college enrollment with a high fraction of high-schoolers headed to college? The best estimates from NCES show that the number of high school graduates continues to increase.
One possibility is that non-traditional (older) students waited out the recession by enrolling in mostly 2-year colleges. As the economy improved, they left the 2-year institutions, which now have enrollment at their 2000 level.
Thus, despite the hype of the anti-college movement in 2011, there is no observable movement at the macro scale of high school grads away from college as the default next stage of life.
In addition to enrolling, more students are also finishing 4-year degrees. The number of bachelor’s degrees awarded has increased every year for each gender since at least 2002.
College costs begin to ease
Another aspect of college is the increasing costs and debt burden. Total college costs have increased by a lot, from $12,000 to $26,000 per year for 4-year institutions in real dollars.
Focusing on total cost can be misleading though. Net cost, which accounts for grants and scholarships, has not increased as much.
Total tuition and fees at public four-year schools have increased more quickly than room and board costs. On the other hand, grant aid has also increased substantially.
|Costs @ Pub 4yr|
|Tuition & Fees||$3,690||$10,270||+$6,580|
|Room & Board||$6,110||$11,130||+$5,020|
|Total Grant Aid & |
Strikingly, in the 2018-2019 school year, tuition and fees at public-four years is projected to decrease for the first time, ever.
This is largely because institutions have begun giving more aid, both need and merit-based.
Institutional and other grants are taking up a bigger share of college financial aid, while federal loans are decreasing–both in amount and share. This is an indication that colleges are beginning to be more price-competitive, by offering more price breaks.
The New York Fed has the most comprehensive data on student loan data, which it obtains through a partnership with Equifax. These data show that the average debt at school completion continues to rise steadily through 2016.
This data has a natural time lag compared to the yearly loan amount data above. As students who accumulated debt in the high loan period 2011-2014 continue to graduate, the debt of completers will be higher over the following 4-6 years.
However, as younger cohorts begin to graduate, average debt at completion should peak and then decrease. This process will take place between 2018-2020.
On the other hand, total student loan debt will probably continue to increase for the foreseeable future. The rate of increase will probably begin to slow noticeable around 2020.
Save money by going public, 2-year, living at home
With costs mounting, how can students who decide to go to college reduce their cost and debt burdens? Consider the following:
- Public schools have a much lower net cost, as long as you stay in state. In-state net TFRB at 4 year institutions is about $14,000 in comparison to private institutions which net about $27,000 (according to CollegeBoard) for a savings of $13,000. These values account for grant aid like scholarships.
- Two-year institutions have a much lower net cost than 4-year, with a net TFRB that is roughly $6,500 lower (according to CollegeBoard). Many four-year institutions accept transfer credit from 2-year institutions. Consider spending 1-2 years at a local 2-year institution to save money before transferring to a 4-year to finish a degree. If you decide to do this, contact counselors at both colleges to plan out how your credits will fit into a degree.
- Living with family can decrease total costs by about $10,000 dollars compared to other students according to the National Center for Education Statistics,.
Three types of college alternatives
College is increasing in cost and we’re still paying up. Here’s the $1.5 trillion question: why?
Obvious follow-up question: what are the alternatives?
Various online blogs have their suggestions: learn a sport, do stand-up comedy, start a company, etc. These options may be right for some people, but it takes exceptional people to turn those skills into a career. Here are some other alternatives:
One model that will gain scale is the no-tuition ’til you get hired model that Lambda School uses. Lambda School trains students in software over nine months online and then helps them find a job.
The school doesn’t charge tuition. Instead, students agree to pay 17% of their salary for two years once they find a job. This incentive structure encourages Lambda to find high-paying jobs for students, as opposed to regular colleges that get paid no matter what happens when their students finish.
College, but cheaper
Another alternative to college is, well, college, but cheaper. University of the People offers online degrees in business administration and charges $1,000 in tuition per year. It’s fully accredited and has a good reputation as far as I can tell.
My realistic college ‘alternative’: work part-time while completing a low-cost or tuition-free online degree. Any job is fine but one where you get to see the workings of a business, like a bookkeeper, legal assistant, or medical receptionist would be most beneficial.
Vacation with a purpose
Uncollege was started by one of the first Thiel fellows, Dale Stephens. Now known as Year On, it offers structured gap year experiences for high school graduates, composed of three parts: i) Travel & Volunteer Abroad, ii) Learn Habits & Skills in San Francisco and iii) Launch a Project of Your Own.
Notably, Year On is marketed as a complement rather than a college alternative. It’s also expensive, coming in at $24,000 plus living expenses for 32 weeks. Realistically, it’s a fun, social escape for students with means.
What worked for Dale won’t work for others. His ability and appetite for risk are uncommon.
This is why college will continue to be a primary choice. Most people are not big risk-takers, and don’t have the resources to sustain a failed company. College seems like a sure thing, whereas the alternatives seem risky.
This is also why the most realistic college alternatives are small tweaks to the existing college model, but decrease risk even more by costing less money.