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Rethinking College as an Investment

The debate about a four-year college degree as a good investment invariably comes down to its financial merits. Since this is the way the issue is depicted, I'm going to restrict my comments to this one aspect alone, although I'd argue that there are other reasons for a bachelor's degree.

By now everyone is familiar with the claim that holders of the coveted degree make more over their lifetimes than holders of a high school diploma. But a new report by the Brookings Center on Children and Families finds that the financial payoff is restricted to graduates of highly selective institutions who major in certain fields ("College is a bad financial bet for some, study says," Los Angeles Times, May 9).

The conclusion confirms what I've long believed. Although there will always be exceptions, graduates with STEM degrees from elite schools will find better paying jobs more quickly than those with liberal arts degrees from minimally selective schools. The real news is that there is a lifetime earnings premium of more than $620,000 between the two types of institutions. Even more surprising is that 170 of the 853 schools studied showed a negative return on investment. These facts have direct implications for the economy as well as for graduates ("Student Debt Slows Growth as Young Spend Less," The New York Times, May 11).

I'm not suggesting that students pass on college unless they get accepted at a marquee-name. It's altogether possible to go to a third-tier school and still have a successful career. The choice of a major and the effort expended can overcome brand lackluster. But students and their parents need to be prepared for disappointment in today's highly competitive environment. As the Brookings report noted, the lifetime earnings of an education or arts major are lower on average than the earnings of a high school graduate.

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