I Went to College and All I Got Was...

With student loan debt coming in second only to mortgage debt in terms of total U.S. consumer debt, the costs of college are not to be taken lightly. The numbers suggest that the return on investment for a college education is diminishing as the costs continue skyward.

A college degree is a valuable thing insofar as it serves as a signal to potential employers that the degree holder is a competent and capable potential employee, and based on the unemployment rate for all college graduates and recent college graduates – 3.8 percent and 6.8 percent respectively – it would seem that the college degree is holding its value quite well.

The quality of jobs being taken, however, must be brought to light. Research from Professor Richard Vedder of the Center for College Affordability and Productivity, and Professors Neeta Fogg and Paul Harrington of the Center for Labor Markets and Policy shows that the quality of jobs being attained by recent college graduates is not commensurate with their level of experience. Professor Vedder shows that many jobs that once required only a high school diploma now require a college degree. For example, Vedder points out that in 2010, 15 percent of taxi drivers in the U.S. held a college degree, up from less than 1 percent in 1970. Professor(s) Fogg and Harrington point out that the sharpest increase in underemployment – employment which does not require the skills, knowledge, or abilities gained through a college education, or which is less than full-time – came between 2007 and 2010. Graduates are finding work, but the evidence suggests that such work does not justify having gone to college.

The problem is twofold: 1. An influx of college grads into the job market has deflated the value of a college degree; and 2. the demand for jobs by graduates far outstrips the supply in the present economy.

Accordingly, college graduates are forced to take jobs for which they are grossly over-qualified in order to make ends meet, because the jobs more suitable for their level of knowledge and ability are in short supply. Professor(s) Fogg and Harrington report that the underemployment rate, as of 2010 was 39 percent for young people aged 20-24, and 30 percent for young people aged 25-29. These represent jumps of 9.3 percent and 6.4 percent, respectively, from 2000.

This underemployment phenomenon explains the rise in student debt delinquency in recent years. According to a February 2013 report from the New York Fed, the student debt delinquency rate in Q4 2012 was 11.7 percent. After factoring out cases of forbearance, deferment, etc., the delinquency rate jumps to a staggering 30 percent. If debt is going unpaid, it is likely because it cannot be paid. These are symptoms indicative of an unhealthy financial situation.

Perhaps these loans are in delinquency because people are earning less. Very little hay has been made over the trend in median household income since the recession. After the dot-com bubble burst in early 2000, median household income took a hit, but eventually erased it losses. As a result of the recession, however, median household income has been on a downward trajectory, reaching lows not seen since 1996. Christopher Shea of the Washington Post in a recent article called this drop a “recession-related hit” but perhaps it would be more accurately characterized as a “recession-related TKO.” Coupled with the fact that the average cost for single year of college as of 2011-12, according to data from the National Center for Education Statistics, was $15,605, it is increasingly clear that the cost for sending our children on to college is, in fact, a very real and ever-increasing burden.

The fact remains that there is a very real problem in higher education. The back-and-forth and finger pointing only distracts from the more important discussion at hand, which is how we can keep something as important as higher education accessible, in one form or another, to the average American.

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