Monday , 4 December 2023

Is A Student Loan A Good Idea? Which Degree Has the Highest ROI? Should A College Education Be Free?

…When discussing whether society should subsidize a person’s education, what matters is not the value of the education to the individual but the value of that education to society, and the best measure we have of the value to society of a person’s education is what society is willing to pay for the work that education enables the student to do.

Whether taking on a student loan is a good idea depends in large part on how much education increases the student’s value in the labor market.

  • It’s well worth taking out tens of thousands of dollars in loans to pay for a degree that increases a student’s expected lifetime earnings by millions of dollars but
  • taking out tens of thousands in loans to pay for a degree that increases a student’s expected lifetime earnings by the same tens of thousands or less is, financially, a terrible investment.

Conscientious students [should] do their due diligence before enrolling precisely because of the costs involved.

A Return on Investment? surveys reveal the undergraduate degrees that return the most and least in terms of career pay over a 45-year career…(Data sources:, Bureau of Labor Statistics.)

At first glance, a college degree appears well worth its cost BUT this ignores the alternative:

  • The average high school graduate earns half what the average college graduate earns and faces an unemployment rate that is nearly twice that of the average college graduate
  • BUT the average high school graduate starts a career four years sooner and doesn’t incur the average $88,000 cost of a four-year degree.
  • Adjusted for inflation, the average high school graduate earns more than $2 million over the course of a 49-year career.
  • In comparison to a high school diploma, [however,] many college majors begin to look like very poor investments. From a financial perspective, majors in photojournalism, musical theater, elementary education, voice, and piano performance actually leave students up to $500,000 worse off than if they hadn’t gone to college at all. From a financial perspective, those majors actually have a negative value.

Meanwhile, the career-long payoff from a plumber’s or electrician’s certification exceeds the career-long payoffs of many college majors, including elementary education, middle school education, graphic arts, interior design, and photojournalism. (Data sources:, Bureau of Labor Statistics.)

What/Who Is to Blame?

Interestingly, we’ve been here before. We are in the midst of a college loan bubble for almost all of the same reasons that, a decade ago, we found ourselves in the midst of a housing loan bubble. As bankers were partly to blame for the housing bubble, college presidents are partly to blame for the higher education version BUT the lion’s share of the blame falls on politicians once again…

  • In 2008, the federal government directed the Department of Education to act in the college loan market just as Fannie Mae and Freddie Mac had acted in the housing loan market.
  • The Department of Education guarantees student loans, effectively forcing taxpayers to guarantee those student loans…BUT college admissions offices are less concerned about whether students can succeed, either in college or after college, because the colleges, like the banks, are not on the hook for loans that can’t be repaid. If the student defaults, it’s the taxpayer, not the college, who is left holding the bag…

There Ain’t No Such Thing as a Free Education

Making college “free” will simply double-down on the very problem we already face. With “free” college,

  • not only will colleges not have to care whether students can repay their loans,
  • but the students themselves will also not have to care.
  • Meanwhile, taxpayers will be on the hook for the numerous imprudent decisions by both colleges and students. It will bring about the worst of all possible worlds.

It should come as little surprise that…what politicians hope is that no one will put the pieces together well enough to level the finger of blame right where it has always belonged [and,] if the current debate is any indication, they have succeeded in this beyond their wildest dreams. After all, no one is debating whether the government should get out of the higher education business completely. They are debating whether government should make college “free.”

Editor’s Note: The above excerpts* from the original article have been edited ([ ]) and abridged (…) for the sake of clarity and brevity. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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(*The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)