Why Care About College ROI? 3 Words: Student Loan Debt

Earlier this year, President Obama sent a handwritten apology to University of Texas art historian Ann Collins Johns, after saying in a speech that students could "make a lot more, potentially, with skilled manufacturing or the trades than they might with an art history degree." While it's true that the value of education goes far beyond employment, in an era when 71 percent of college seniors carry student loan debt, with an average of $29,400 per borrower, it's impossible to talk about higher education without bringing up the potential return on investment that specific majors and schools offer.


(Photo Credit: Tax Credits/Flickr)

"No expenditure in the United States has increased more over the last several decades than tuition," said Greg Gottesman, Managing Director of the Madrona Venture Group, in a 2013 Ted Talk. "...This rise in the cost of going to college could perhaps be justified if higher wages for college graduates compensated for the corresponding increase. But that simply isn't the case. While tuition at public, four-year universities has risen 72 percent since 2000, wages for those graduates have actually declined in real terms."

Worse, 35 percent of those under the age of 30 are "seriously delinquent" in repaying their loans, which means that they haven't made a payment in 90 days or longer.

Gottesman says that policy changes, including the Health Care and Education Reconciliation Act, which limits student loan payments to 10 percent of the borrower's income, could make a difference for students. He also suggests allowing students to wipe out their student loan debt in bankruptcy, something that he feels might force lenders to be choosier -- but could also result in more students not being able to go to college, or being encouraged by financial institutions to go into high-ROI majors. (And you thought the pressure from Mom and Dad was bad enough.)

Another option is to make education cheaper by employing technology to offer more online courses, something that could lower costs and improve graduation rates, but potentially at the cost of faculty jobs and in some fields, less individualized instruction.

Finally, of course, students should arm themselves with information, whether they want to study art history or computer science. PayScale's College ROI report lets students research their situation, down to the major, school, and financial aid, and determine which choices will maximize their chances of getting the education they want at a reasonable return on their investment. 

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1 Comment

  1. 1 Marie Landleven 24 Apr
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