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“More graduates now run the risk of not earning enough to make their investment in college worthwhile”, new study reveals

Fonte/Source, Wall Street Journal,

A four-year college degree, we’re told repeatedly, is “a good investment.” After all, college grads earn about 50% more money than high school grads and are less likely to be unemployed.“ [T]he return to college remains high on average, regardless of one’s college major,” New York Federal Reserve Bank economists say. President Barack Obama says that college, or at least two years of it, ought to be universal.

But …

As with any investment, investing in a four-year college degree is risky. And many of the available estimates rely on best-case scenarios, assuming, for instance, that an entering student actually earns a degree. Applying what they call “more realistic assumptions,” a trio of economists now say many students, particularly men who don’t go to top-tier universities, “face an economic return to college that, while positive on average, can reasonably inspire caution among students and their parents.”

The economists–Alan Benson of the University of Minnesota, consultant Raimundo Krishna Esteva, and Frank Levy of MIT–closely examined tuition, borrowing, and administrative data from the more selective University of California system and the less selective California State University (CSU) system, along with census data.

Their calculations, for instance, factor in the substantial risk that an entering student will drop out or that he or she will take longer than four years (and thus pay more in tuition) to earn a degree, as well as the painful reality that tuition costs are rising while wages, even for college graduates, haven’t been. In the U-C system, the latest data show that 20% of students fail to get a bachelor’s of arts within six years. At California State, it’s 52%.

While college is still worth the money on average, they say that “more graduates now run the risk of not earning enough to make their investment in college worthwhile.” By their new estimates, a four-year degree was still a good investment for the typical student at the University of California and for women at California State, but for the typical male CSU student, they call a bachelor’s degree only  “a marginally good investment.”

And the investment overall is increasingly risky. In 2000 and earlier, there was a “miniscule possibility” that a freshman in either system would eventually have difficulty repaying a loan from his or her wages. By 2010, rising tuition and a deteriorating job market pushed the probability of repayment difficulties for students at the costlier University of California system to 7% for men and 15% for women, “large enough to pose a significant risk for families with limited resources.” For students at the cheaper California State system, debt risks remained minimal.

College, the economists conclude, is “a stepping stone, not a ticket, to the middle class.” Like any investment, it deserves scrutiny.

David Wessel is director of the Brookings Institution’s Hutchins Center on Fiscal & Monetary Policy and a contributing correspondent to The Wall Street Journal. He is on Twitter: @davidmwessel.

Fonte/Source, http://blogs.wsj.com/washwire/2015/01/28/how-college-has-become-a-riskier-investment/?utm_content=buffer8c94c&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

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