A Slew of Studies, Summarized

Reports suggest: College is still worth it. The student loan debt problem isn't that bad. And federal financial aid drives tuition higher and should refocus on the neediest.

June 25, 2014

Hardly a day goes that doesn't bring the release of some analysis or another about higher education. But an unusually large number of reports and studies about college financial aid and finances were released Tuesday (or are being made public today). The following are brief summaries of them, with links for those who want to dig deeper.

The New York Federal Reserve: College Is Still Worth It. With jobless rates higher than normal and tuitions higher than ever before, critics are, in ever-greater numbers, questioning the value of going to college. Wading into that debate, the New York Fed makes the case that the benefits of college still outweigh the costs -- but the rationale isn't so much a ringing endorsement of higher education as a condemnation of what's happening elsewhere in the economy.

The wages of college graduates have indeed stagnated since the early 2000s, and fallen since the Great Recession of 2008. But because the fortunes of those without a college degree have declined much more sharply, the "college wage premium" -- the earnings advantage that degree holders have over those without one -- "has remained near its all-time high," the Fed's report states. The average return to a college degree -- bachelor's or associate -- is about 15 percent, "easily surpassing the threshold for a sound investment."

And while the average student's expenditures on college have also increased significantly, "rising college tuition has largely been offset by the declining opportunity cost of attending school, which, again, is driven by the falling wages of high school graduates." So because opting to stay in the work force rather than attend college has become less lucrative, college-goers give up comparatively less in lost wages even as tuitions have risen.

The report is careful to note that its analysis is true for college graduates on average, and it includes a table showing that the economic return varies significantly by major, led by engineering, math and computers, with education, agriculture, and leisure and hospitality trailing.

Center for College Affordability and Productivity: The Harmful Effects of Federal Student Aid. Richard Vedder, an emeritus professor of economics at Ohio University and director of the center, is a persistent critic of higher education and questioner of the enduring value of a college degree. In a report to be released today (and discussed at this event at the American Enterprise Institute), he and two co-authors argue that the federal financial aid programs have driven college prices higher, financially burdened many college-goers in ways that have affected their life choices, and harmed educational quality.

The paper also notes that the programs have increasingly moved away from their original purpose as a progressive system encouraging access for low-income students. (The report does not blame the aid programs for the ascendance of ISIS in Iraq, but that may just have been a space limitation.)

The center's solutions -- short of abolishing federal student aid programs, its preference "in a perfect world" -- involve scaling back the scope of the programs significantly and refocusing them on the neediest students.

Brookings Institution's Brown Center on Education Policy: What Student Loan Crisis? The Brookings paper, which generated a Twitterstorm of criticism on Tuesday (The Awl: "That Big Study About How the Student Debt Nightmare Is in Your Head? It's Garbage") after being profiled by David Leonhardt in The New York Times, does not deny that there is lots of student loan debt out there. But it does argue that much of the rhetoric about a student loan "crisis" exaggerates the extent of the problem. (They blame the news media for focusing excessively on outliers.)

Much of the increase in students' debt, the Brookings authors argue, can be attributed to Americans' increased pursuit of graduate education (which, yes, might be a concern in its own right), that incomes have on average risen enough to more than cover the increase in debt burden, and that the monthly payment levels of most student loan borrowers have held steady over two decades. 

Critiques in the blogosphere cite a set of methodological issues with the Brookings paper, including about the data set explored and how the researchers used it.

Higher education tax credits. A set of papers from several D.C.-based policy organizations explored how the federal tax code is used (and in some cases misused) to enable college going. They came from the Corporation for Enterprise Development and a cadre of think tanks and advocacy groups that call themselves the Coalition for Higher Education Tax Reform.


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