How's that urban studies degree working out for you?

This story comes from a comment on an article about which college majors do best in the job market. The writer has been gainfully employed for most of the time since she graduated college, but not in any jobs where she has used her degree. Her story sounds familiar.

I have a B.A. in Urban Studies (city planning). I graduated in 2003 (as a married mom of two, who was temporarily a stay at home mom, after working full time for years). I found another job a few months after my graduation, in the mortgage industry, making $30,000 a year. I left that job after a year and a half, when the bank went through massive downsizing, and announced that the entire division I worked in would be eliminated. I found another job as a research assistant with the national offices of a church, still not really using my degree, but making $35,000 a year.
I got laid off from that job in 2008, and was out of work for 5 months until I got a $10 a hour temp job with no benefits, with my local county. I worked in that job off and on for a year (got laid off once), until I found my current full-time job as an administrative assistant for a small nonprofit organization. I make a little less than $30,000 a year, still not using my degree. I would feel downright rich if I could find a job paying $50,000 a year.
I am convinced that college degrees have lost much of their value over the past decade, as employers have figured out that with the economy being so bad, college graduates will work for pennies, rather than go hungry.
My husband has a high school diploma, and works as a mechanical maintenance technician and welder for a factory, and makes significantly more money than I do. I have a brother who is a plumber, and owns his own small plumbing company, and who earns in the six figures.
I loved college, but nowadays I would recommend to any high school student who is considering a 4 year degree to instead either consider going into the trades or get an associates' degree in a high demand health field like nursing, and wait until when or even if the economy improves, and then go for the bachelor's degree.

Here's a graphic from the article, showing area studies as the lowest ranked college major.

Using rent money to pay for dream school

A recent Pew survey tells us this.

In the eyes of parents, being able to pay for their children’s college education is just as important as being able to own a home or live comfortably in retirement. 

Now I read this story about a mother who would have had to use the family's rent money to pay her daughter's enrollment deposit for a private college that costs about $40,000 yearly to attend.

This spring Natasha van Doren, the mother of a prospective Southern New Hampshire University student, wrote an e-mail to Paul LeBlanc, its president. Her daughter, Mariah Mann, had fallen in love with the campus, she wrote, but there was a problem: Money was tight, and if Ms. van Doren sent in the needed $500 deposit, she would have only enough left over to pay half of her monthly rent. Ms. van Doren and Mr. LeBlanc traded several e-mails....

In his conversation with the mother, Mr. LeBlanc raised a point colleges all over the country wrestle with: Sometimes there is no good way for families to afford sending their children to the college of their choice.

Mr. LeBlanc advised that Mariah should consider attending community college for two years and then transfer to SNHU.  Doing that, she could avoid graduating with $40,000 in student loan debt.  But her mother was not satisfied with his answer.

The mother’s response, which Mr. LeBlanc included on his blog, read: “Does this mean my appeal did nothing? I always hear schools say that there is always a way to pay for school....

But until now, the message she heard everywhere was that college was a good investment, one worth borrowing for. “It’s hard to be able to admit you can’t help your kid to do some basic thing that’s like some rite of passage,” she said.

As it turns out, Ms. van Doren's daughter will be attending Marlboro College in the fall.  She estimates that, after figuring in the total aid package offered, she will graduate with about $40,000 in debt.  The cost of attendance at Marlbora College is about $49,000.  Neither SNHU nor Marlboro are nationally ranked among the top 100 colleges and are not considered selective in their admissions.

According to USNWR, over 90% of SNHU students are sorority/fraternity members.

Good news on job prospects for MBA graduates

Amid today's dismal jobs report comes positive news about the job market for MBA graduates.

After two years of sharp declines in hiring, M.B.A. students are having more success landing jobs, and getting them earlier, than during the depths of the financial crisis....
While there remain some pockets of weakness in industries such as health care, hiring at many traditional career destinations for M.B.A. graduates, including finance and consulting, are nearing pre-recession levels. Hiring is up by double-digits at consulting firms such as Bain & Co. and Accenture PLC, compared with 2008 troughs. Similar gains are being seen at financial-services companies, including Goldman Sachs Group Inc. and Morgan Stanley.
Overall, 57% of full-time M.B.A. students in the U.S. had offers by mid-March, compared with 40% a year earlier, according to a Graduate Management Admission Council survey released last month of 905 companies and 127 business schools nationwide. And the improvement continues as the latest school year closes out.

Among the business schools reporting positive hiring results are Cornell, UVA and Michigan.

As more financial-services and consulting companies come back to campuses, competition for M.B.A. talent is also pushing salaries higher—though not quite in line with inflation. The average starting salary is expected to be to $91,433 this year, according to the GMAC survey.

This should be good news for all the parents paying for their children's MBA degrees.

College majors and job prospects

A COLLECTION OF ARTICLES ON THE MARKET VALUE OF VARIOUS COLLEGE MAJORS:

The College Majors That Do Best in the Job Market – NY Times, 5/19/11

The majors with the worst placement records were area studies (44.7 percent in degree-requiring jobs) and humanities (45.4 percent).

I had to look up the definition of "area studies", the college major that ranks lowest in terms of both percent of graduates in jobs that require college degrees and median salary earned by graduates.  I've heard parents say that they refuse to pay for their child to major in anything that includes the word "studies".  From the CollegeBoard:

Area studies majors study the histories, politics, economics, and cultures of various areas of the world. They usually focus on a specific area, but sometimes compare two or more areas.

What different college degrees are worth in two charts - Washington Post, 5/20/11

Are you going to college? Are you paying for someone to go to college? Then you might want to study this graph closely...

The implication is clear: If you’re going to college to get a job after college, you’re better off in a major that lends itself to an obvious job after college. Engineering, say, or teaching. A humanities or communications degree turns out to be a much tougher sell.

The “Careers” of College Graduates – Washington Monthly, 5/20/11

What Are You Going to Do With That? – Chronicle of Higher Education, 5/24/11

Earnings are analyzed for 171 majors.

"It does matter what you major in."
And the differences are striking: For workers whose highest degree is a bachelor's, median incomes ranged from $29,000 for counseling-psychology majors to $120,000 for petroleum-engineering majors. The data also revealed earnings differences within groups of similar majors. Within the category of business majors, for instance, business-economics majors had the highest median pay, $75,000....
Men outearn women in each group of majors, and nearly every individual major, in many cases significantly. For instance, men who majored in math earn a median of $75,000, while women earn a median of $54,000. Some of that can be explained by occupation, Mr. Carnevale said: Many of those women who major in math go on to be teachers. The only majors with which women earned more than men were visual and performing arts, physiology, and information sciences.

Median Earnings by Major and Subject Area – Chronicle of Higher Ed, 5/23/11 An interactive graph

The economic value of a bachelor’s degree varies by college major. New data from the U.S. Census Bureau show that median earnings run from $29,000 for counseling-psychology majors to $120,000 for petroleum-engineering majors. Even when majors are looked at by groups, such as business or health, there is variation in pay depending on the specific major.

College Students Deserve to Know What Degrees Will Pay – The Atlantic, 5/24/11

The typical lifetime earnings of engineering and computer science majors are 50 percent higher than those of humanities majors, according to an analysis by researchers at Georgetown University's Center on Education and the Workforce....

Most big, long-term investments -- a house, a security, a 401(k) plan -- come with more information than you can use. But a four-year degree, which is a $100,000 to $200,000 investment at many private and public schools, is a black hole of data.

It's becoming a black hole of cash, too. The price of a post-secondary education is rising even faster than health care costs. Four-year college student graduate with an average of $25,000 in loan debt ... and those are the success stories, since fewer than 60 percent of four-year college students graduate in six years, anyway.
Better data wouldn't cure education inflation, but it would be a good start. The government should require every college to post a standard fact sheet about its degrees, along the lines of Harvard University education economist Bridget Terry Long's paper. The fact sheet could include total cost of attendance (median and average), loan default rate by degree, six-year graduation rate, employment rate and median salary twelve months after graduation, and alumni satisfaction rate.

Art history graduate unable to find job moves back home

Days after I read it, my mind kept returning to this story about an art history major still unable to find a "decent" job three years after graduating from college.  2009 was a very tough year, especially if your major was art history.

Alone in the darkness, a sense of defeat courses through her body -- disappointment about her past and uncertainty about what lies ahead. This, she thinks to herself, is surely what failure feels like.

Six years ago, Malik fled this town for Syracuse University. Since graduating in 2009 with a bachelor's degree in art history, she has yet to find a decent job.

She hadn't planned on moving back home and, at the age of 23, never expected to return to her mother's house for an extended and open-ended period of time....

"At times, it really feels very personal, it really feels like I've failed," says Malik, standing in the kitchen of her mother's two-story stone house and recalling the eight weeks since she returned home....

After graduating from college, Malik moved to Boston. There, she worked as a nanny, sold books, and waited tables -- a series of dead-end jobs that didn't pay more than the minimum wage, didn't require a college degree, and weren't remotely related to what she wanted to do for the rest of her life.
Two months ago, she ran out of money and drove home from Boston to Lansdale, a middle-class suburb north of Philadelphia, her car brimming with the contents of post-college life: canned food, twinkle lights, potted plants. 

In the video accompanying the story, Sabrina sheds some light on how she arrived at her predicament:

"I imagined I would graduate with my degree, and how hard I worked and the contacts I had, I imagined I would end up in a museum or a gallery.  That has definitely been adjusted as it becomes clear that there are people who have masters above me who are looking for that same job and I have to adjust those expectations because of it."

Why this naivete?  Were art history majors finding good any jobs in their field before the 2009 recession hit?

She's hardly alone. Malik is part of a generation of 20-somethings that's experiencing what it's like to graduate from college, move back in with your parents, and then get stuck there. Though estimates vary, a recent study by Twentysomething Inc., a consulting firm specializing in marketing to young adults, predicted that of the 2 million graduates in the class of 2011, 85 percent will return home because they can't secure jobs that might give them more choices and more control over their lives....

According to the U.S. Bureau of Labor Statistics, the jobless rate for younger workers with a college degree has more than doubled since the recession began four years ago -- from 3.5 percent in April of 2007 to 6.4 percent in April of this year.

For college graduates under the age of 25, finding stable work is a particular challenge. According to Andrew Sum, an economist at Northeastern University, about half, or 3.2 million, are "underutilized"  -- meaning they're unemployed, working part-time, or working a job outside of the college labor market, such as bartending or waiting tables.

Sabrina's mother paid $100,000 from savings and $20,000 from a loan to to send her daughter to Syracuse University.  Today, it's the mother who is making the loan payments while Sabrina struggles to pay on her $2,000 credit card debt.

Parents exert a powerful shaping force on their children's decisions to go to college, as well as which college to attend. In addition, they are often caught up in the emotional rush that a college education entails, further complicating an issue that has already become a financial minefield for the middle class.

"All along, I was going to make it work," explains Marilyn. "If I had to take out loans, I was going to do that."

Once Sabrina and Omar were admitted into the colleges of their dreams, Marilyn saw it as her personal responsibility to make sure they could attend -- even when it meant taking out additional loans in order to finance it. And while Marilyn says she doesn't regret her investment, she assumed that a $120,000 degree would at least translate into a decent-paying job for her daughter.

"One thing that terrifies parents more than budget deficits or a weak economy is job security for their kids. They're afraid they won't be able to pass along their middle class status to the next generation," says Anthony P. Carnevale, who directs Georgetown University's Center on Education and the Workforce. "In raising a child in America, the fear of failing is just enormous. Sending your kid to college used to pretty much guarantee their future success. It no longer necessarily works that way."

From a recent post: 

The vast majority of parents expect that their children will pursue a college education. Among those with one or more children under age 18, 94% expect at least one of their children will go to college.

More parents help pay for MBAs

Economic uncertainty, younger students going to business school instead of finding employment and the spiraling cost of tuition all seem to be factors in this change.

From 2003 to 2007, the number of prospective students who said they expect their parents to help them pay for business school doubled, and was approaching 40 percent in 2010, according to a 2011 survey by the Graduate Management Admission Council....

"Any time there is economic uncertainty like there is now, there is a general reluctance to borrow," Chitty says. "Borrowing from Mom and Dad is going to seem a lot safer than borrowing from the government and taking on a loan which likely can't be discharged in bankruptcy and can follow you for the rest of your life."...

Driving the need for parental aid is an uptick in the business school pipeline of younger students, especially those in the 24-years-and-under age bracket, says Michelle Sparkman-Renz, GMAC's director of research communications....
U.S. students are less dependent on parental support than their European and Asian counterparts, but those under 24 still expect to finance about 20 percent of their degree with help from family. Students from ages 24 to 30 intend to have parents pay for about 10 percent of their tuition, GMAC says...

The spiraling cost of tuition is one of the reasons students may be relying more on parents to pay for business school, says Dan Thibeault, president and co-founder of Graduate Leverage, a student loan consolidation and debt management company in Waltham, Mass. Of the MBA students he works with, about 15 percent to 20 percent have $150,000 worth of debt when they graduate, he says.
"That was unheard-of five or six years ago. Maybe a student in a four-year dental program would borrow that much, but for a student to come out of a two-year MBA program with that much debt is almost shocking," he says. "It may lead a sympathetic parent to say, 'Wow, that is a suffocating amount of debt. I have to get involved.' " 

Source:  Bloomberg Businessweek

Fewer employers offer tuition reimbursement

College students hoping to receive graduate school tuition reimbursement from their future employers should take note of these trends.

More business students receive employer tuition assistance, but fewer employers offer the benefit and fewer still will pick up the whole tab.... 

Today's working MBA hopefuls are facing more rigorous selection criteria and tougher odds than the generation before them when it comes to getting an employer to pay their way through school. Research suggests employers have found new ways to make the most of their graduate tuition investments, and avoid being burned by fickle employees who accept the money and leave anyway.
A growing number of prospective students are without the benefit at all. In 2010, 56 percent of employers offered graduate school assistance, down from 69 percent in 2003, according to annual benefits data collected by the Society for Human Resource Management (SHRM). The group's data show an average steady decline in offerings of about 2 percent a year. For companies with 500 employees or more, 75 percent offered the benefit in 2010, down from 80 percent in 2007.
Meanwhile, use of such programs more than doubled between 1992 and 2007, according to a 2010 joint study by SHRM and the National Association of Independent Colleges and Universities (NAICU), with the biggest boost among employees seeking graduate degrees. Thirty-six percent of employees reporting tuition reimbursements in 2007 said they were pursuing a master's degree, vs. 21 percent in 1992. Business was the top area of study reported in the survey, which included management, accounting, finance, marketing, and business administration degrees....

One reason tuition reimbursement is on the decline is that employers no longer expect a return on their educational investment. Cappelli says few employers viewed tuition sponsorship as a program where they would see an actual return on their investment following a student's graduation. 

Source:  Bloomberg Businessweek

Where will "credential inflation" take us?

...large numbers of college students are studying little and learning almost nothing of lasting benefit...

Although large numbers of college graduates are perilously weak in basic skills, there continues to be a significant earnings disparity between graduates and non-graduates.  George Leef  points out that job opportunities for non-credentialed employees have been dramatically diminishing over the years.

Many firms now require that applicants have college degrees, even for work that calls for nothing more than basic trainability.

But how's that working out for employers?  "Credential inflation" means the human resources receptionist must have a college degree, whether it's in communications, marketing or any other number of majors that typically maintain painfully low standards for graduation.  Companies are paying a premium for a credential that in many cases is providing relatively little value.

With the much ballyhooed "education bubble" upon us, causing the cost of a college education to reach stratospheric heights, will employers began a shift to bypass the standard credentials that have been devalued by higher education's focus on social rather than academic learning?  Will they attempt to find new ways to judge potential workers?  While I'm not predicting this will happen soon, I can envision a future where motivated, intelligent young people will be able to take advantage of online learning and other affordable options to gain credentials that will attract attention from innovative companies.  Companies may find that bypassing the inflated credentialing system can be a good way to shake things up as they attempt to survive and even thrive in our changing economy.

Salman Khan's words come to mind.

To the point about replacing universities, I don’t think it’s going to happen any time soon.  But I think it’s an interesting idea and to think about that you have to realize that a university is about two things - it’s a credential and it’s learning.  I think Khan Academy is going to be able to really change how the learning part is done in a pretty significant way.  The credentialing part, getting your degree from Stanford or Harvard, that’ll probably be there for a little while.  I think if you fast forward ten years from now I mean it’s not going g to happen overnight   I mean this is social change happening. 10 years, 20 years, I think an employer would rather see your log from a site like Khan Academy where it doesn’t just get a 3.2 GPA in psychology it gets what you did , when you did it, how well you did it, how well were you able to help your peers, how consistently did you work,  wow, this guy worked 3 hours every day for 20 years on this stuff, this is a persistent kind of guy that I want working for me and we’ll be able to give people that type of analytics.  I think that can be a more powerful transcript than just a high level degree right now.

Found at Instapundit

In reducing merit aid, Brandeis University is also improving yield

It is always in a university's best interest to improve its yield rate, defined as the percentage of admitted students who actually enroll.  A high yield rate not only makes for a more efficient admissions process, it also indirectly helps a college's ranking.  Although the USNWR rankings do not measure yield directly, they do factor in acceptance rate, which is inversely proportional to yield.  The more students accept a school's offer, the fewer offers it has to extend.  Acceptance rates are important and widely used in judging a school's selectivity.

From the Brandeis student newspaper:

According to Vice President of Enrollment Keenyn McFarlane, the number of merit scholarships offered to students has been gradually reduced in recent years and will be further reduced for the Class of 2015. The further reductions are due to the fact that many students offered merit aid in recent years declined attend the University.
According to McFarlane, the reduction of merit-based aid has been "ongoing" for "several years." McFarlane said that after reviewing the incoming class each year, the administrators in Enrollment found that they were more "effective" in being able to fund students when money was given in the form of need-based financial aid rather than merit scholarships since the number of students who received merit-based aid and matriculated into Brandeis has declined by 78 percent since 2006. McFarlane said the University also has a higher yield rate of matriculation when need-based aid is given rather than merit scholarships. The number of merit aid offered to accepted students has declined by 16 percent since 2006....
McFarlane said that giving money in the form of financial aid need rather than merit scholarships would be more in line with the "social justice philosophy" of Brandeis. "We want to be giving out money to those who need it," he said....
Additionally, McFarlane also said that he does not believe that the elimination of merit scholarships will affect the competitiveness of students applying to and attending Brandeis. McFarlane said that although the number of students with merit scholarships has declined, the performance of accepted students has not. According to statistics from the Office of Enrollment, the average SAT scores of students accepted in to Brandeis has remained near 1400 on a 1600 scale. The average SAT scores of students who have matriculated have remained in the mid-1300s.

I don't think this online college degree stuff is going away

If you think online degrees will remain just a niche, consider the time when Borders and E.F. Hutton were touting their superior in-person experiences.

I noticed this writer first began to think about the higher education bubble when he started looking at colleges with his high school junior son.  Yup, I know the feeling.

There's a market-disrupting force at play in higher education that isn't so prevalent in housing: information technology. Specifically, readily available, much-lower-cost, Web-based alternatives to the standard fare. The Web's potential to let customers bypass the bricks-and-mortar status quo applies just as much to higher education as it does to book selling or stock trading.

Yes, a big part of the college value proposition is the on-campus experience -- the social as well as academic engagement, frat parties as well as chemistry labs. But for those who just want the knowledge, skills, and diploma, it's only a matter of time before online and other unconventional learning tracks become the norm rather than the exception. If you think online degrees and courses will remain just a niche or are a passing fancy, consider the time when Borders and E.F. Hutton were touting their superior in-person experiences. College courses and degree programs delivered mostly online are cheaper, more convenient, and often more specialized than traditional programs, even if they don't (yet) bestow the same prestige.
 
Established universities are starting to step up. For example, a colleague of mine is now earning a master's degree in media management through the prestigious University of Missouri-Columbia school of journalism. The coursework, which spans about 36 semester hours, includes a discussion component analogous to class participation. Students do have to take a professional seminar on campus for three days, and they must defend their thesis in person, typically requiring a half-day on campus. Otherwise, it's all online. And she's doing it while holding down a full-time job.

Paying for college is top priority for parents

Is College Worth It? Pew Survey:

In the eyes of parents, being able to pay for their children’s college education is just as important as being able to own a home or live comfortably in retirement. And it’s more important than being able to leave an inheritance to their children....

A parent’s own educational background does not have a significant impact on the importance they place on being able to provide for their children’s educational needs. Parents who never attended college are just as likely as those who earned a four-year college degree to say being able to pay for their children’s college education is extremely important.

The vast majority of parents expect that their children will pursue a college education. Among those with one or more children under age 18, 94% expect at least one of their children will go to college. There are no significant differences across racial or ethnic groups—white, black and Hispanic parents are equally likely to think their children will go to college. In addition, there is very little variance across income groups. While 99% of parents with annual household incomes of $75,000 or higher think their children will go to college, 93% of those with incomes between $30,000 and $74,999 say the same, as do 91% of those making less than $30,000 a year. Again, parents’ own educational experience does not seem to influence the aspirations they have for their children. Parents who did not graduate from college (93%) are just as likely as college graduates (97%) to say their children will go to college.

The most surprising part of these results was that parents across the board have high expectations that their children will attend college.  However, these expectations are unrealistic according to the ACT study that found only 24% of high school graduates are prepared to do college-level work.  Colleges are adjusting, with 36% of first-year students taking at least one remedial class.  Meanwhile, high student loan default rates and graduation rates of under 50% suggest going to college is not the right path for everyone.

In a future post I'll address the issue of how many parents have actually started saving for college. 

(Cross posted at Kitchen Table Math )

Should taxpayers only fund college loans to academically proficient students?

This idea is attractive, although I can see where many would consider it heartless and unfair.  It's clear that many universities will not impose standards requiring their students to be college-ready, so perhaps the federal government could help by placing restrictions on the money it lends.  It could potentially raise academic standards and save some people from themselves.  The student loan rate is up to 40% among some two-year colleges, and student loans cannot be discharged in bankruptcy.

What the Department of Education does now is to give loans to every college student who demonstrates financial need without examining evidence of academic ability and other criteria of credit-worthiness.

Our current situation reminds me of the problems associated with the federal loan home loan programs that contributed to the housing crisis, where credit standards were lowered so that loans could be given to people who otherwise could not afford home ownership.

In Minding the Campus, Jackson Toby asks us to consider this proposal. 

Insert a risk-assessment component into all future student loans that includes past academic performance in order to maximize the likelihood of loan repayment and minimize defaults that add to the national debt.

'Public anxiety over college costs is at an all-time high.'

The Chronicle of Higher Education:  Public anxiety over college costs is at an all-time high. And low-income college graduates or those burdened by student-loan debt are questioning the value of their degrees, or saying the cost of college has delayed other life decisions....

Indeed, the general public is fairly shouting its concern about college costs in a companion survey of 2,142 Americans, ages 18 and older, by the Pew Research Center. Three-quarters of those polled said college was out of reach for most people. Twenty-five years ago, six in 10 Americans felt that way, according to a survey by the Council for Advancement and Support of Education.
The squeeze is real. College costs have been on the rise, increasing 50 percent over the last decade, Mr. Shi said. By contrast, family incomes actually fell between 2000 and 2009. Ask young adults why they're not enrolled in college or don't have a bachelor's degree, and the overwhelming response in the Pew survey: money....
The belief that college has become prohibitively expensive is shared across class and race lines, among Americans of all income levels, by those who went to college and those who didn't—by everyone, it seems, except college presidents.
Forty-two percent of university leaders, in fact, say most Americans are able to pay for a college degree, according to the Pew Research Center/Chronicle survey.
Why is there such a divergence of opinion between presidents and the public? For one, there's a certain amount of variance among college leaders, with those who typically serve low-income students more concerned about sticker shock. Nearly two-thirds of community-college presidents, for instance, called tuition unmanageable.
Some educators blame the gap on the failure of college officials to make the case about the whys of higher-education pricing. Students and parents, they argue, have a poor understanding of such practices as tuition discounting and don't fully appreciate the costs that go into a college degree, expenses that include faculty salaries and health insurance, remedial-writing labs, even climbing walls. "If they want to buy a Mercedes-Benz," said Stephen J. Trachtenberg, a former president of George Washington University, "we need to say why it costs more than a cheaper vehicle."

For some, a college degree is a 'bad bargain'

Some people are looking at the ROI (Return on Investment) of a college degree, and questioning its value.

Among the warning signs, a quarter of college graduates who earn less than $50,000 a year now say their degree was a bad bargain. A number of presidents say they have begun to see a trend of "trading down," of price-sensitive students and parents opting for more affordable institutions, such as community colleges or local public universities. They worry: Could some of those students opt out of higher education altogether?

Many jobs require college degrees simply because employers have decided a degree serves as a useful marker for a certain level of discipline and intelligence.  With the widespread belief that college academic standards have declined and with the price of college becoming increasingly unaffordable, will that change?

But whether ponying up for a degree leads to a fat paycheck seems to be a little unclear, at least to the average American. While a plurality of those surveyed maintained that the main purpose of college is to learn specific skills and knowledge for the workplace, a third of college graduates said their current job doesn't require a degree. Asked what it takes to succeed in the work world, respondents ranked a college education below a good work ethic, getting along with others, and skills acquired on the job.

Student loan default rates increase dramatically after first two years of payment period

The Chronicle of Education on student loan default rates:

 [T]he government's official "cohort-default rate," which measures the percentage of borrowers who default in the first two years of repayment and is used to penalize colleges with high rates, downplays the long-term cost of defaults, capturing only a sliver of the loans that eventually lapse.

...default rates continue to climb years after borrowers have left college, particularly among students who attended two-year and for-profit colleges.

This comes from an article almost a year old, but the issue of accurately measuring student loan default rates  is still timely.  In addition to the general public interest in knowing this information, new DOE rules effective next year will make colleges ineligible for federal student aid if their default rate is 30 percent or greater for three consecutive years (currently 25 percent or greater for two years) or 40 percent in a single year.  There have been indications that colleges are "managing" their default rates to mask problems.

Extending the time frame from two to three years caused default rates to increase significantly.

Increases in Cohort Default Rates (2-year vs 3-year window)

Year	2-Year Rate	3-Year Rate	Increase in Default Rates
FY 2004	5.1%	8.6%	69%
FY 2005	4.6%	8.4%	83%
FY 2006	5.2%	9.2%	78%
FY 2007	6.7%	11.8%	76%

The default rate almost doubles at the 15-year period.

Increase in Cohort Default Rates (2-year vs 15-year window)

FY1995 2-Year Rate	FY1995 15-Year Rate	Increase in Default Rates
10.4%	19.5%	88%

Default rates for different types of schools:

15-Year Lifetime Default Rates for FY1995
College Type	15-Year Default Rate	Percent of Defaulted Loans	Percent of Loans in Repayment
Foreign 2-Year	20.7%	0.0%	0.0%
Foreign 4-Year	15.1%	0.1%	0.1%
Non-Profit 2-Year	29.3%	1.2%	0.8%
Non-Profit 4-Year	13.6%	21.4%	30.6%
For-Profit 2-Year	40.0%	16.8%	8.1%
For-Profit 4-Year	30.4%	9.0%	5.7%
Public 2-Year	31.3%	12.6%	7.8%
Public 4-Year	15.1%	32.4%	41.8%
Unknown 4-Year	5.0%	0.0%	0.0%
Consolidation Loans	25.8%	6.5%	4.9%
Overall	19.5%	100.0%	100.0%

Default rate data is from FinAid.
FY = fiscal year in which loan repayment began

If my children were seriously considering business as a college major . . .

Some questions have been raised here recently about the value of a business degree.  However, if my children were seriously considering business majors for their undergraduate studies, I would look at the Bloomberg Businessweek rankings for help in selecting a college.  It looks as if it offers helpful information.

As part of Bloomberg Businessweek's annual ranking of the top undergraduate business programs, senior business students from the 139 participating schools were asked to assign letter grades—from A to F—indicating how well their business programs teach 14 specialty areas: quantitative methods, operations management, ethics, sustainability, calculus, microeconomics, macroeconomics, accounting, financial management, marketing management, business law, and corporate strategy, as well as entrepreneurship and international business, which were added this year. Based on those grades, scores were calculated for each of the ranked schools in each specialty area. 

1 in 5 high school seniors applied to Harvard

Amazing

The numbers are from last year, but should be similar for this year.  Harvard offers generous financial aid to low- to upper middle-income families, providing incentive for many students to reach for the brass ring of a Harvard degree.

From the Harvard website:

Our current financial aid policy has dramatically reduced the amount families with incomes below $180,000 are expected to pay, and parents of families with incomes below $60,000 are not expected to contribute at all to college costs. We no longer consider home equity as a resource in our determination of a family contribution, and students are not expected to take out loans, which have been replaced by need-based Harvard scholarship. This program has reduced the cost to middle income families making the price of a Harvard education for students on financial aid comparable to the cost of in-state tuition and fees at the nation’s leading public universities. For a more detailed explanation of our program, please click here.

Will Khan Academy help make higher education more affordable?

Dramatic changes are needed to reign in the escalating costs of a college education.  Our current situation is simply unsustainable, with tuition increasing nearly four times the rate of inflation over the last 25 years. In this Forbes video, Khan Academy founder Salman Khan expresses confidence that his efforts are rapidly changing the learning part of a college education, and will affect the credentialing part within a relatively short time frame.  While it's impossible to know exactly how higher education will change in the next 20 years, Khan's vision seems quite probable to me, with the potential to offer desperately needed financial relief for families in the coming years.

Khan speaks about hands-on learning and the importance of teachers, as well as the future of universities:

About two minutes into this short video, Khan says the following:

To the point about replacing universities, I don’t think it’s going to happen any time soon.  But I think it’s an interesting idea and to think about that you have to realize that a university is about two things - it’s a credential and it’s learning.  I think Khan Academy is going to be able to really change how the learning part is done in a pretty significant way.  The credentialing part, getting your degree from Stanford or Harvard, that’ll probably be there for a little while.  I think if you fast forward ten years from now I mean it’s not going g to happen overnight   I mean this is social change happening. 10 years, 20 years, I think an employer would rather see your log from a site like Khan Academy where it doesn’t just get a 3.2 GPA in psychology it gets what you did , when you did it, how well you did it, how well were you able to help your peers, how consistently did you work,  wow, this guy worked 3 hours every day for 20 years on this stuff, this is a persistent kind of guy that I want working for me and we’ll be able to give people that type of analytics.  I think that can be a more powerful transcript than just a high level degree right now.

Is college debt worth it?

“In the coming years, a lot of people will still be paying off their student loans when it’s time for their kids to go to college,” said Mark Kantrowitz, the publisher of FinAid.org and Fastweb.com, who has compiled the estimates of student debt, including federal and private loans.

Now, that's scary.

Some education policy experts say the mounting debt has broad implications for the current generation of students.
“If you have a lot of people finishing or leaving school with a lot of debt, their choices may be very different than the generation before them,” said Lauren Asher, president of the Institute for Student Access and Success. “Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”

This is Joanne Jacobs' concern:

I don’t worry about students who can get into elite colleges. They’ll get an education — and a high-class brand. It’s the students borrowing for non-elite private colleges who are at risk of going into debt for a brand of marginal value. Will they get an education? Depends on the student.

While students in elite colleges will receive an education, I'm not completely convinced it will be a great one.  However, at least they will receive a high-class brand.

http://www.nytimes.com/2011/04/12/education/12college.html