Average College Student, Average Loan

There are two kinds of news stories about student loans. One group of stories emphasize the huge total of student loans. Calculations from the New York Fed for the end of 2011 find: \” The outstanding student loan balance now stands at about $870 billion, surpassing the total credit card balance ($693 billion) and the total auto loan balance ($730 billion).\” The Student Debt Loan Clock, which for illustrative purposes continually updates the total student loan debt outstanding, is on the verge of crossing $1 trillion.

The second group of stories emphasize the problems of particular students who have large loans and great difficulties in paying them back. For example, this New York Times story tells of a New York University graduate (class of 2005) who took out more than $100,000 in loans while completing an interdisciplinary major in religious and women\’s studies. By 2010, she was earning $22/hour working as a photographer\’s assistant–and going to night school so that she could defer the loan payments.

However, neither counting the great mass of student loans nor revisiting the extreme cases of those who have overborrowed offers much guidance for average students wondering whether they should take out the average loan. Sometimes student loans pay off; sometimes not. What facts and concerns should the average student thinking about such loans be keeping in mind?  Christopher Avery and Sarah Turner tackle this question in \”Student Loans: Do College Students Borrow Too Much—Or Not Enough?\” in the Winter 2012 issue of my own Journal of Economic Perspectives. Here are some of the issues raised in their discussion:

Most students are borrowing amounts that are within standard loan guidelines
\”Leaving aside extreme cases, are student borrowing levels assumed by the majority of undergraduate students consistent with their capacity to repay these loans? There is little evidence to suggest that the average burden of loan repayment relative to income has increased in recent years. The most commonly referenced benchmark is that a repayment to gross income ratio of 8 percent, which is derived broadly from mortgage underwriting, is “manageable” while other analysis such as a 2003 GAO study set the benchmark at 10 percent. To put this in perspective, an individual with $20,000 in student loans could expect a monthly payment of about $212, assuming a ten-year repayment period. In order for this payment to accrue to 10 percent of income, the student would need an annual income of about $25,456, which is certainly within the range of expected early-career wages for college graduates. Overall, the mean ratio of student loan payments to income among borrowers has held steady at between 9 and 11 percent, even as loan levels have increased over time …\”

My own guess is that part of what is happening here is that larger loan burdens are being offset by lower interest rates, so the overall ratio of loan payments to income has risen by less than one might otherwise expect. 

The median level of student borrowing isn\’t excessively high.
\”Borrowing among students at the median is relatively modest: zero for students beginning at
community colleges, $6,000 for students at four-year public colleges, and $11,500 for students at private nonprofit colleges. Even at the 90th percentile, student borrowing does not exceed $40,000 outside of the for-profit sector. Examples of students who complete their undergraduate degree with more than $100,000 in debt are clearly rare: outside of the for-profit sector, less than 0.5 percent of students who received BA degrees within six years had accumulated more than $100,000 in student debt. The 90th percentile of degree recipients starting at for-profits have $100,000 in debt; so a nontrivial number of students at for-profits accumulate this much debt, but the situation is still far from the norm.\”

Students thinking about loans should also think seriously about their risk of not finishing a degree–especially at for-profit and less selective institutions.
\”Only 55 percent of dependent students who anticipate completing a BA degree actually do so within six years of graduating high school, while more than one-third of them do not complete any postsecondary degree within six years. Similarly, more than half of dependent students who anticipate completing an associate’s degree do not do so within six years of graduating high school … [A]among students beginning at four-year colleges, private for-profit colleges have dramatically lower average graduation rates (16 percent) for dependent students than do public (63 percent) or private not-for-profit (68 percent) colleges. In addition, there is substantial variation in graduation rates within each
college category, with more-selective colleges typically having higher graduation rates.\”
What are the average employment and wage prospects for your planned major?

Students considering loans should think about the typical employment and pay prospects for that major. 
I do think that many students agonize a little too much over their major, while not agonizing enough over the extent to which they are building a skill set. That said, different majors have different payoffs.
Avery and Turner offer some evidence on this point, and in this post of January 11, 2012, I discuss some basic evidence on \”For What Majors Does College Pay Off?\” In that post, I summarized it this way: \”[W]hen looking at unemployment rates, along with the architects, those who  majored in humanities or in in the arts have relatively high rates, while those who had majored in health and education had relatively low unemployment rates. When it comes to income, the highest income levels are for those who majored engineering, computer science/mathematics, life sciences, social sciences, and business. The lower income went to those majoring in arts, education, and psychology/social work.

Students considering loans should consider that any major leads to a widely dispersed range of employment and pay outcomes.
When you look at pay out of college, there is considerable inequality–and the range of inequality has been generally increasing over the last couple of decades. Thus, the median pay is a better guide to expectations than the average. Especially if you have been a middle-range or lower-middle-range student all through high school, it would be unwise to assume that you are likely to be at the top of the income range after graduation.

Students should look to their high school experience for some guidance as to how they will fare in college. 

About 60% of high school students go on to college. For the purposes of a quick-and-dirty estimate, let\’s say that it\’s the top 60% by academic qualifications. Thus, if you are at, say, the 70th percentile of your high school class, you are in the middle of those going on to college. Given that many of those who go on to college don\’t finish a degree, being at the 70th percentile of your high school class may mean that you can expect to be ranked in the bottom quarter of those who complete a college degree. Sure, some students will improve dramatically from high school to college, but it\’s a statistical fact that half of college graduates will be below the median, and one-fourth will be in the bottom quarter, and especially if you are advising a large number of high school students, it\’s unrealistic to tell each of them that that they can all end up in the upper part of the college distribution.

Some students borrow too little: for example, they don\’t take advantage of the the subsidy implicit in the student loans for which they are eligible, or they run large credit-card debts when it would be much cheaper to use student loans to borrow.
\”[O]ne in six full-time students at four-year institutions who are eligible for student loans do not take up such loans—thus forgoing the subsidy … Another possible sign of the underuse of student loans is that a number of students are carrying more-expensive credit card debt when they could instead be borrowing through student loans. Among students who entered college in 2004, 25.5 percent of those who were still enrolled in 2006 and 37.7 percent of those who were still enrolled in 2009 reported that they had credit card debt. But between one-third and one-half of these students (45.6 percent of students with credit card debt in 2006 and 38.5 percent of students with credit card debt in 2009) had
not borrowed from the Stafford loan program. Carrying credit card debt without maximizing Stafford borrowing burdens students with unnecessarily inflated interest rates—a choice that can interfere with a student’s ability to finish a degree.\” In addition, there are a number of students working more than 20 hours per week, and at least some of them might have a better chance of finishing their degree if they borrowed more and didn\’t try to work many hours.

Clearly, some of this advice would, if taken seriously, discourage some students from taking out loans to attend college. Given the price of higher education, I think that hard choice needs to be faced. Several decades ago, it was a low-risk option to spend a few years working part-time and attending a big public university: if it didn\’t end up in a degree, at least you didn\’t rack up much or perhaps anything at all in loans and you could learn something and have a good time and grow up a little along the way. But at current prices, that part-time job won\’t pay the higher education bills at most institutions. Sending a message that all students should try a few years of college, even if it requires taking on tens of thousands of dollars in loans, is borderline irresponsible.

Before students take on a heavy weight of loan burdens that could loom over their financial life for several decades, they need to confront some legitimate questions:

  • Are you attending a college–especially a for-profit–with a high drop-out rate?
  • Are you planning on a major (or a set of classes that will build real skills) so that you have good employment prospects?
  • How strong is your personal motivation for attending classes and finishing a degree?
  • Does your high school class ranking give you reason to believe that you have the ability to succeed?
  • If your higher education experience doesn\’t turn out as you hope, and you don\’t finish the degree, or you don\’t end up with a job that pays substantially less with the median in your field, will you feel OK with the loans you have taken out?
  • Are you taking out an average amount of loans, so that you will be committing no more than about 10% of your income to repaying them? 

Given the growing wage gap between those with a college degree and those without, it will make economic sense for lots of students to borrow, especially at today\’s rock-bottom interest rates. But with student loans, we\’re talking about young adults often in their late teens and early 20s making financial decisions that could be with them for decades to come. It\’s a transaction that should be made with caution and consideration.

Public Higher Education Gets Less State and Local Support

The association of State Higher Education Executive Officers has published their report on \”State Higher Education Finance FY 2011.\” The basic story is rising enrollments in public institutions of higher education, but falling per-student support.

The blue bars in the figure show educational appropriations for public higher education [per full-time equivalent student, adjusted for inflation. The support starts relatively high at $8,156 per student in 1987), sags in the early 1990s to $7,054 in 1993, rises again in the late 1990s and early 2000s as high as $8,316 in 2001, drops off in to $6,875 in 2005, rises to $7,488 in 2008, and now has dropped off to $6,290 in 2011.

Meanwhile, tuition revenue per full-time student is gradually rising. Overall, it rises from $2,422 in 1986 to $4,774 in 2011.

And over these 25 years, the number of full-time equivalent students in public higher education has risen from about 7 million back in 1986 to almost 12 million in 2011.

Put these together, and here\’s tuition as a share of public education total revenue, rising from 23.2% back in 1986 to 43.3% at present.

This pattern may be here to stay. As the report states: \”In the past decade these two recessions and the larger macro-economic challenges facing the United States have created what some are calling the “new normal” for state funding for public higher education and other public services. In the “new normal” retirement and health care costs simultaneously drive up the cost of higher education, and compete with education for limited public resources. The “new normal” no longer expects to see a recovery of state support for higher education such as occurred repeatedly in the last half of the 20th century. The “new normal” expects students and their families to continue to make increasingly greater financial sacrifices in order to complete a postsecondary education. The “new normal” expects schools and colleges to find ways of increasing productivity and absorb ever-larger budget cuts, while increasing degree production without, we hope, compromising quality.\”

I would add only a couple of thoughts:

1) Almost everyone believes, or claims to believe, that the economic future of the United States is intertwined with building greater human capital. But that isn\’t reflected in our spending choices. I\’d be the first to say that spending isn\’t everything–but it\’s something! Here\’s a post from July 19, 2011, on \”How the U.S. Has Come Back to the Pack in Higher Education.\” The U.S. used to be the world leader in share of population going to higher education, but no longer.

2) The main budgetary mechanism for encouraging additional higher education is using student loans. This avoids adding to direct spending for higher education, but places a greater share of the risk of not completing a degree, or not having the degree lead to a well-paid job, on the student. Also, public higher education isn\’t expanding fast enough to absorb those who want to try college, so many of those who receive these loans are headed to the for-profit educational system. Here\’s a February 23, 2012, post on \”For-Profit Higher Education.\”

For-Profit Higher Education

It has been common for some years for politicians and educators to vow that America will greatly increase the proportion of students attending college. For example, in a speech to Congress on February 24, 2009, President Obama said: \”I ask every American to commit to at least one year or more of higher education or career training.  This can be community college or a four-year school; vocational training or an apprenticeship.  But whatever the training may be, every American will need to get more than a high school diploma.  And dropping out of high school is no longer an option.  It’s not just quitting on yourself, it’s quitting on your country – and this country needs and values the talents of every American.  That is why we will provide the support necessary for you to complete college and meet a new goal:  by 2020, America will once again have the highest proportion of college graduates in the world.\”

But how will the United States structure and pay for this expanded college attendance? For example, one policy approach would be to plan for dramatic expansion of enrollment in existing state colleges and universities, but with very tight state budgets, this isn\’t happening to any great extent. Instead, the answer that seems to be evolving, without ever really being enunciated and debated, is that the federal government will finance a dramatic expansion of higher education through an expansion of student loans, and because of limits on the number of slots at existing public colleges and universities, many students will take those loans to the for-profit higher education sector. In the Winter 2012 issue of my own Journal of Economic Perspectives, freely available on-line courtesy of the American Economic Association, Deming, David J., Claudia Goldin, and Lawrence F. Katz discuss the tradeoffs of this choice in \”The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?\”

As the authors point out, the time since 2000 is \”a period when enrollment in the for-profit sector tripled while enrollment for the rest of higher education increased by just 22 percent. The solid dark line shows
that the fraction of fall enrollments accounted for by the for-profits increased from 4.3 percent in 2000 to 10.7 percent in 2009.\” They point out that \”al
most 90 percent of the increase in for-profit enrollments during the last decade occurred because of the expansion of for-profit chains,\” where a \”chain\” is defined as an institution that operates across states or has more than five branches within a state.\” 

Along with the flexibility to expand enrollments, for-profit higher education has shown considerable flexibility in teaching groups not well-served by traditional higher education. \”African Americans
account for 13 percent of all students in higher education, but they are 22 percent of those in the for-profit sector. Hispanics are 11.5 percent of all students but are 15 percent of those in the for-profit sector. Women are 65 percent of those in the for-profit sector. For-profit students are older: about 65 percent are 25 years and older, whereas just 31 percent of those at four-year public colleges are, and 40 percent of those at two-year colleges are.\” In addition, for-profits are typically non-selective institutions, requiring only a high school diploma or a GED certificate.

For-profit institutions also have been quite flexible in providing the kinds of career-oriented classes that many students want: \”For-profit programs typically are not meant to prepare students to continue to another form of higher education, as is the case with most community colleges. Rather, the for-profits almost always offer training for a vocation or trade…. Although 5 percent of all BAs are granted by for-profit institutions, 12 percent of all BAs in business, management, and marketing are. Other large for-profit  BA programs are in communications (52 percent of all BAs in communications are granted by for-profits), computer and information sciences (27 percent), and personal and culinary services (42 percent). … Among AA degrees just two program groups—business, management, and marketing, and the health professions—account for 52 percent of all degrees. In the BA group, the business program produces almost 50 percent of the total. Among certificates granted in the Title IV for-profit sector, health professions and personal and culinary services account for 78 percent of certificate completers.\”

Of course, there is controversy over for-profit higher education. The big firms that dominate the sector are, well, for-profit, and they tend to pay their executives well and their faculty not-so-well. A high proportion of students at for-profit institutions are financing their studies with debt, and if they don\’t complete the degree–which can be a big problem at some for-profit institutions–the students are still on the hook for that debt. Total student debt now exceeds the total amount of credit card debt, and will soon top $1 trillion. In their well-balanced essay, Deming, Goldin, and Katz discuss these issues.

But to repeat my earlier point, we have apparently made a social decision that a combination of student loans and for-profit institutions is the primary method by which the United States will raise college admissions. I would like to see a competitive response to the for-profits from public-sector non-profit higher education. I\’d love to see the public sector aggressively increasing non-selective enrollments, offering on-line classes and flexible meeting times for nontraditional college students, using technology and nontenured lecturers aggressively to hold down costs, and expanding certificate and degree programs with a focus on what is demanded in the market. This kind of institutional change is undoubtedly difficult.  But with a few local exceptions, the public higher education sector is reacting too much much like Kodak when that company was first confronted with low-cost competition for film and then with the change to digital photography–and the firm was too slow to adapt. 

I know that for-profit higher education has its warts and flaws. But so far, the not-for-profit higher education sector has not shown that it is serious about being flexible or entrepreneurial in way that can meet the goal of expanding college enrollment.


Grade Inflation and Choice of Major

Like so many other bad habits, grade inflation is lots of fun until someone gets hurt. Students are happy with higher grades. Faculty are happy not quarreling with students about grades.

When I refer to someone getting hurt by grade inflation, I\’m not talking about the sanctity of the academic grading process, which is a mildly farcical concept to begin with and at any rate too abstract for me. I\’m also not referring to how it gets harder for law and business schools to sort out applicants when so many students have high grades. In the great list of social problems, the difficulties of law and B-school admissions offices don\’t rank very high.

To me, the real and practical problem of grade inflation is that it causes students to alter their choices, away from fields with tougher grading, like the sciences and economics, and toward fields with easier grading.
A couple of recent high-profile newspaper stories have highlighted that college and university courses in the \”STEM\” areas of science, technology, engineering and mathematics tend to have lower average grades than courses in humanities, which is one factor that discourages students from pursuing those fields. Here\’s an overview of those stories, and then some connections to more academic treatments of the topic from my own Journal of Economic Perspectives.

A New York Times story on November 4, by Christopher Drew, was titled, \”Why Science Majors Change Their Minds (It’s Just So Darn Hard).\”  Drew writes: \”Studies have found that roughly 40 percent of students planning engineering and science majors end up switching to other subjects or failing to get any degree. That increases to as much as 60 percent when pre-medical students, who typically have the strongest SAT scores and high school science preparation, are included, according to new data from the University of California at Los Angeles. That is twice the combined attrition rate of all other majors.\”

Part of the reason is that most of the STEM fields start off with a couple of years of tough, dry, abstract courses, for which many students are not academically or emotionally prepared. Another reason is that the grading in these courses is tougher than in non-STEM fields. Drew describes some of the evidence: \”After studying nearly a decade of transcripts at one college, Kevin Rask, then a professor at Wake Forest University, concluded last year that the grades in the introductory math and science classes were among the lowest on campus. The chemistry department gave the lowest grades over all, averaging 2.78 out of 4, followed by mathematics at 2.90. Education, language and English courses had the highest averages, ranging from 3.33 to 3.36. Ben Ost, a doctoral student at Cornell, found in a similar study that STEM students are both “pulled away” by high grades in their courses in other fields and “pushed out” by lower grades in their majors.\”

(For those who want the underlying research, the Rask paper is available here, and the Ost paper is available 

On November 9, the Wall Street Journal had a story called \”Generation Jobless: Students Pick Easier Majors Despite Less Pay,\” written by Joe Light and Rachel Emma Silverman.

\”Although the number of college graduates increased about 29% between 2001 and 2009, the number graduating with engineering degrees only increased 19%, according to the most recent statistics from the U.S. Dept. of Education. The number with computer and information-sciences degrees decreased 14%.\” Again, part of the problem is insufficient preparation before college for the STEM classes, and part is the discouragement of getting lower grades than those in non-STEM fields. Also, even with lower grades, the STEM majors are more work: \”In a recent study, sociologists Richard Arum of New York University and Josipa Roksa of the University of Virginia found that the average U.S. student in their sample spent only about 12 to 13 hours a week studying, about half the time spent by students in 1960. They found that math and science—though not engineering—students study on average about three hours more per week than their non-science-major counterparts.\”

(For those who want to go for original sources, Arum and Roksa discuss the several thousand students that they surveyed over several years in their 2011 book Academically Adrift: Limited Learning on College Campuses. When they make comparisons back to how much students studied in 1960s, they are drawing on work by Philip Babcock and Mindy Marks. For a readable overview of that work, see their August 2010 essay on \”Leisure College, USA: The Decline in Student Study Time,\”  written as an Education Policy brief for the American Enterprise Institute. For the technical academic version of their work, see their essay in the May 2011 Review of Economics and Statistics (Vol. 93, No. 2, Pages 468-478), \”The Falling Time Cost of College: Evidence from Half a Century of Time Use Data.\”

As noted, there are lots of reasons why students don\’t persevere in STEM courses: inadequate preparation at the high school level, students who have unrealistic expectations or don\’t want to commit the time to studying, or that the courses are just hard. It\’s of course possible to address these issues, but difficult. However, if one of the issues discouraging students from taking STEM courses is that grade inflation is happening faster in the humanities, then surely, this cause at least is fixable? In my own Journal of Economic Perspectives, which is freely available from the current issue going back to the late 1990s courtesy of the American Economic Association, several authors have taken a stab at quantifying the differences in grades across majors and what difference it makes to course choice.

The first such paper we published was back in the Winter 1991 issue. It was by Richard Sabot and John Wakemann-Linn, and called \”Grade Inflation and Course Choice.\” It\’s too far back to be freely available on-line, but it\’s available through JSTOR. The complaints in that article sound quite familiar. They write:

\”The number of students graduating from American colleges and universities who had majored in the sciences declined from 1970-71 to1984-85, both as a proportion of the steadily growing total and in
absolute terms. … Students make their course choices in response to a powerful set of incentives: grades. These incentives have been systematically distorted by the grade inflation of the past 25 years. As a consequence of inflation, many universities have split into high- and low-grading departments. Economics, along with Chemistry and Math, tends to be low-grading. Art, English, Philosophy, Psychology, and Political Science tend to be high-grading.\” They present more evidence on grade inflation and course choice from Amherst College, Duke University, Hamilton College, Haverford College, Pomona College, the University
of Michigan, the University of North Carolina and the University of Wisconsin, and more detailed analysis from their own Williams College. As they write: \”This sample is admittedly small, but was selected so as to include private and state schools, large universities and small colleges, and Eastern, Southern, Midwestern and Western schools.\”

Based on more detailed statistical analysis from Williams College, where they have access to more detailed data, they write: \”Our simulation indicated that if Economics 101 grades were distributed as they are in English 101, the number of students taking one or more courses beyond the introductory course in Economics would increase by 11.9 percent. Conversely, if grades in English 101 were distributed as they are in Economics 101, the simulation indicated that the number of students taking one or more courses beyond the introductory course in English would decline by 14.4 percent. The results of applying this method to-the Math department, which had the lowest mean grade and the highest dispersion of grades, are more striking. If the Math department adopted in its introductory course the English 101 grading distribution, our simulation indicated an 80.2 percent increase in the number of students taking at least one additional Math course! Alternatively, if the English department adopted the Math grade distribution, there would be a decline of 47 percent in the number of students taking one or more courses beyond the introductory course in English.\”

We took another swing at the issue of grades and course choice with a couple of articles in our Summer 2009 issue. Alexandra C. Achen and Paul N. Courant asked \”What Are Grades Made Of?\” They argue: \”Grades are an element of an intra-university economy that determines, among other things, enrollments and the sizes of departments. … Departments generally would prefer small classes populated by excellent and highly motivated students. The dean, meanwhile, would like to see departments supply some target quantity of credit hours—the more the better, other things equal—and will penalize departments that don’t do enough teaching. In this framework, grades are one mechanism that departments can use to influence the number of students who will take a given class.\”

Focusing on 25 years of grade data from the University of Michigan, they find:  \”First, the distribution of grades is likely to be lower where courses are required, and where there are agreed-upon and readily assessed criteria—right or wrong answers—for grading. By contrast, departments that evaluate student performance using interpretative methods will tend to have higher grades, because using these methods increases the personal cost to instructors of assigning and defending low grades. Second, upper-division classes are likely to have higher grades than lower-division classes, both because students have selected into the upper-division courses where their performance is likely to be stronger and because faculty want to support (and may even like) their student majors. Third, grades can be used in conjunction with other tools to attract students to departments that have low enrollments and to deter students from courses of study that are congested. We find some evidence in support of each of these patterns. As it happens, the consequence of the preceding tendencies is that, indeed, the sciences (mostly) grade harder than the humanities. …\”
\”We argue that differential grading standards have potentially serious negative consequences for the ideal of liberal education. At the same time, we conclude that any discussion of a policy response to grade inflation must begin by recognizing that American colleges and universities are now in at least the fifth decade of well-documented grade inflation and differences in grading norms by field. Current grading behavior must and will be interpreted in the context of current norms and expectations about grades, not according to some dimly imagined (anyone who actually remembers it is retired) age of uniform standards across departments. Proposals that attempt to alter grading behavior will face the costs of acting against prevailing customs and expectations, whether in altering pre-existing patterns of grades across departments within a college or university or in attempting to alter grades in one institution while recognizing that other universities may
not change.\”
In that same issue, Talia Bar, Vrinda Kadiyali, and Asaf Zussman discuss one proposal to alter the incentives for grade inflation about \”Grade Information and Grade Inflation: The Cornell Experiment.\” They report that in \”April 1996, the [Cornell] Faculty Senate voted to adopt a new grade reporting policy which had two parts: 1) the publication of course median grades on the Internet; and 2) the reporting of course median grades in students’ transcripts. … Curbing grade inflation was not explicitly stated as a goalof this policy. Instead, the stated rationale was that “students will get a more
 accurate idea of their performance, and they will be assured that users of the transcript will also have this knowledge.\”

To given a sense of the institutional obstacles here, they report that while median grades were publicly available on-line in 1998, at the time the article was written this information did not yet appear on actual student transcripts. As they point out, making this information available may have the undesired effect of encouraging students even  more to take courses with easier grades! They also argue that the propensity to take easier-grading courses will be greater for lower-ability students. Thus, student will tend to sort themselves into higher-ability students in tougher-grading classes, and lower-ability students in easier-grading classes. Indeed, they estimate that nearly half of the grade inflation for Cornell as a whole, in the years after median grades were posted on the web, was attributable to students sorting themselves out in this way.

In short, grade inflation in the humanities has been contributing to college students moving away from science, technology, engineering, and math fields, as well as economics, for the last half century. It\’s time for the pendulum to start swinging back. A gentle starting point would be to making the distribution of grades by institution and by academic department (or for small departments, perhaps grouping a few departments together) publicly available, and perhaps even to add this information to student transcripts. If that answer isn\’t institutionally acceptable, I\’m open to alternatives.

How the U.S. Has Come Back to the Pack in Higher Education

In posts over the last few days, I\’ve showed the basic patterns of U.S. income inequality over the last century, and showed how patterns of supply and demand for skilled labor can explain the movements of inequality of incomes.

If one accepts the argument that the supply of skilled workers in the U.S. hasn\’t been keeping up with demand in recent decades, and further accepts the argument that a skilled workforce is essential to future growth in a nation\’s standard of living, it\’s troubling to observe that the America\’s long-standing advantage in sending more of its people on to higher education is evaporating. For example, in a report out last month from the Georgetown University Center on Education and the Workforce, Anthony P. Carnevale and Stephen J. Rose write: \”A clear trend has emerged: The United States is losing ground in postsecondary education relative to our competitors. … The significance of these rankings goes beyond mere bragging rights—increasing our supply of skilled labor is central to the vitality of the U.S. economy.\”

Carnevale and Rose illustrate the point with two figures. The first one shows the share of those in the age 25-64 age bracket who have college degrees (including both two-year and four-year degrees). The U.S. ranks near the top, with Japan and Canada. But if one looks at another figure, this time showing only those in the younger 25-34 age bracket, one sees that the U.S. advantage in college attainment is concentrated in older age groups. The U.S. is only middle-of-the-pack in attainment of college degrees among high-income countries.

In the Summer 2008 issue of my own Journal of Economic Perspectives, Elizabeth Cascio, Damon Clark, and Nora Gordon make a similar point in \”Education and the Age Profile of Literacy into Adulthood.\” They write: \”For most of the twentieth century, the United States led the developed world in participation and completion of higher education. … In recent years, however, other high-income countries—many of which established comprehensive secondary schooling in decades prior—have substantially expanded access to university education. In fact, many countries that significantly lagged the United States in university graduation only a decade ago—Finland, Sweden, and the United Kingdom among others— now have comparable
if not higher graduation rates.\”

They offer a table showing that in 1970, the U.S. led most countries of the world in (four-year) university graduation rates, and often by a lot. By 2004, lots of other high-income countries had closed the gap.

Carnevale and Rose point out that on current trends, the number of U.S. workers with a post-secondary education will rise by 8 million by 2025, and argue that the U.S. should set a goal of adding an additional 12 million workers with post-secondary education over that time. The goal seems worthy enough, but the devil is in the details. After all, the true challenge isn\’t to hand out an extra 12 million college diplomas, but to raise the education level of high school students so that more of them are ready to attend college, and to reform higher education to get costs under control and assure that it is adding to the skill sets of students, broadly understood.

There\’s a lot of cynicism these days about U.S. higher education, about whether the ever-rising costs are worth the benefits. I live and work in higher education, and there is plenty of room for reform. But whatever one\’s doubts about the current state of U.S. higher education, watching the U.S. lose its historical advantage over other high-income countries in terms of what share of the population gets a college degree is deeply troubling.