Why College Isn't for Everyone

By Richard Vedder on April 09, 2012

A person who compares the annual earnings of college and high school graduates would no doubt conclude that higher education is a good investment—the present value of the college earnings premium (the better part of $1 million) seemingly far outdistances college costs, yielding a high rate of return. But for many, attending college is unequivocally not the right decision on purely economic grounds.

First of all, college graduates on average are smarter and have better work habits than high school graduates. Those who graduated from college were better students in high school, for example. Thus, at least a portion of the earnings premium associated with college has nothing to do with college per se, but rather with other traits.

Second, a goodly proportion (more than 40 percent) of those attending four-year colleges full-time fail to graduate, even within six years. At some colleges, the dropout rate is strikingly higher. While college students sometimes still gain marketable skills from partial attendance, others end up taking jobs that are often given to high school graduates, making little more money but having college debts and some lost earnings accrued while unsuccessfully pursing a degree.

Third, not everyone is average. A non-swimmer trying to cross a stream that on average is three feet deep might drown because part of the stream is seven feet in depth. The same kind of thing sometimes happens to college graduates too entranced by statistics on averages. Earnings vary considerably between the graduates of different schools, and within schools, earnings differ a great deal between majors. Accounting, computer science, and engineering majors, for example, almost always make more than those majoring in education, social work, or ethnic studies.

Fourth, the number of new college graduates far exceeds the growth in the number of technical, managerial, and professional jobs where graduates traditionally have gravitated. As a consequence, we have a new phenomenon: underemployed college graduates doing jobs historically performed by those with much less education. We have, for example, more than 100,000 janitors with college degrees, and 16,000 degree-holding parking lot attendants.

Does this mean no one should go to college? Of course not. First of all, college is more than training for a career, and many might benefit from the social and non-purely academic aspects of advanced schooling, even if the rate of return on college as a financial investment is low. Second, high school students with certain attributes are far less likely to drop out of school, and are likely to equal or excel the average statistics.

Students who do well in high school and on college entrance exams are much more likely to graduate. Those going to private schools may pay more in tuition, but they also have lower dropout rates. Those majoring in some subjects, such as education or one of the humanities, can sometimes improve their job situation by double majoring or earning a minor in, say, economics.

As a general rule, I would say graduates in the top quarter of their class at a high-quality high school should go on to a four-year degree program, while those in the bottom quarter of their class at a high school with a mediocre educational reputation should not (opting instead for alternative methods of credentialing and training).

Those in between should consider perhaps doing a two-year program and then transferring to a four-year school. There are, of course, exceptions to this rule, but it is important for us to keep in mind that college is not for everyone.


Richard Vedder directs the Center for College Affordability and Productivity and teaches economic at Ohio University

http://www.businessweek.com/articles/2012-04-09/why-college-isnt-for-everyone

Two out of five Americans with federal student debt can't make monthly payments and either defer, default or are delinquent

By Ben Steverman - Oct 22, 2011

Student Loan Debt Leads to Confusion, Protests and Defaults

Photograph by Stan Honda/AFP/Getty Images

Source: Photograph by Stan Honda/AFP/Getty Images

William Prince, of Rosenberg, Texas, knows just how inescapable student loans can be. The 52-year-old father of two started paying off $51,000 in college debt 15 years ago and now owes $57,000. "I don't expect to pay these loans off in my lifetime," he says. Prince, a criminal justice major who works in private security, had to defer payments during three bouts of unemployment, and the accumulated interest left him deeper in debt.
Americans now owe about $950 billion in student loans —more than their total credit-card debt. The weight of those IOUs is a frequent refrain for Occupy Wall Street protestors and their online supporters. On the "We Are the 99 Percent" Tumblr blog, which features hundreds of pictures of people holding handwritten signs describing their desperate financial situations, student loan concerns exceed those about children, unemployment, and health care, according to an analysis by Mike Konczal, a fellow with the nonprofit Roosevelt Institute.
Desperation may have something to do with that outcry. Two out of five Americans with federal student debt can't make monthly payments and either defer, default or are delinquent, according to Mark Kantrowitz, publisher of Fastweb.com, a free scholarship-matching service, and FinAid.org, a source of student financial aid information. Although the laws are gradually changing, student debtors' odds are still grim. The best means they have of one day growing free of those debts is to know the system.

Eroded Borrowers' Rights

There are very few ways to reduce or renegotiate education debt; unlike credit-card debt, few can do this via bankruptcy. "There has been a steady erosion in rights for student loan borrowers," says Deanne Loonin, an attorney at the National Consumer Law Center. Activists and some congressional Democrats argue that Congress should again allow borrowers to discharge student debts in normal bankruptcy — a right lost in a 2005 law. They also ask for better supervision and limits on debt collection. Such improvements could be years away, if they ever take place.
For federally backed loans, the situation is better, though still far from perfect. The government can seize wages, tax refunds, earned income tax credits and even Social Security. One of Loonin’s clients, an 84-year-old man, once took out a student loan for a relative; the payments now amount to about 40 percent of his Social Security checks, leaving him with a bit more than $750 each month.
The federal government is taking steps that could make the debt burden more manageable. A provision in the 2010 health-care reform law pushed private lenders out of the business of issuing federally guaranteed loans. The 2010 Dodd-Frank financial reform law puts the new Consumer Financial Protection Board in charge of collecting better data and regulating private student lenders. The new agency also is planning to launch an online tool — a "student debt assistant"— to help debtors learn more about their options.

Income-Based Repayment

One option introduced in 2009 is income-based repayment. It allows borrowers to repay federal loans as a percentage of the prior year's adjusted gross income, capped at 15 percent. (If a borrower's circumstance changes from the prior year, he or she can request recalculation.) Under so-called IBR, all federal loans are forgiven after 25 years — 10 years for those in nonprofit or public service jobs. A 2010 change in the law means that for borrowing that begins in 2014, payments are capped at 10 percent of income and all debts are forgiven after 20 years.
Because no payments are required on income below 150 percent of the poverty line, income-based repayment is helpful for such borrowers as 28-year-old Jennifer Sandella. She earns so little that she doesn’t need to pay anything on her $45,000 in graduate school loans. For a single person, 150 percent of the poverty line is $16,335; for a family of three, it's $27,795.
Two years after the program was introduced, few borrowers know about IBR. Only about 1 percent of federal borrowers —out of the 10 percent who could benefit — are enrolled, Kantrowitz estimates. The U.S. Department of Education has been offering information about IBR on its website, through customer-service representatives, and to students when they exit school. It now plans to contact current borrowers to inform them about the program, says spokeswoman Sara Gast.
The program has drawbacks. Persons with private loans, such as Prince, aren’t eligible. And any unpaid interest is added to debt until loans are eventually forgiven. "I'm still accruing interest at a phenomenal rate," Sandella says. If she never manages to pay her loans off and her debt is forgiven after the 25-year mark, the amount forgiven will be taxed as income, perhaps triggering a big bill from the IRS.

Few Options for Private Borrowers

Those with private loans have little leverage when negotiating with their lenders. Student loans can be forgiven in bankruptcy only if debtors take lenders to court and prove an “undue hardship” — a legal step taken by merely 0.1 percent of eligible debtors. Of those, about half got relief, according to a 2011 analysis by Harvard Law student Jason Iuliano. The Consumer Bankers Association, which represents private lenders, said in a statement: “Banks work with borrowers experiencing financial hardship on private student loans” by, for example, allowing borrowers to temporarily suspend payments.
The best way to avoid being trapped by debt is to restrain it from the start. Students need to "shop around for schools to limit how much they need to borrow,” says Lauren Asher, president of the Institute for College Access & Success, a nonprofit advocacy organization that runs the Project on Student Debt. Regulators and colleges could do much more to steer young students toward more manageable debt loads, she says. “Inadequate information and aggressive marketing tactics can have an effect on people,” Asher adds, noting that many students take on private loans even though they are eligible for less-risky federal loans. Dependent students can borrow up to $5,500 in federal loans as college freshmen, while their parents can borrow up to the total cost of attendance, minus other aid.
Colleges are required to provide counseling to student borrowers when they exit school. They "are always looking for ways to do it better," says Terry Hartle, senior vice president for government and public affairs at the American Council on Education. But it's not clear how much of that counseling sinks in. Says Hartle: "I'm afraid an awful lot of college students only learn how much they've borrowed when they begin repayment."

http://www.bloomberg.com/news/2011-10-21/student-loan-debt-leads-to-confusion-protests-and-many-defaults.html

Applying to US colleges

Star Education Fair
Sunday October 10, 2010

Applying to US colleges

By TAN SHIOW CHIN
educate@thestar.com.my

The application process to American universities requires much research, preparation and hard work.

IT IS not an easy process to apply to a university in the United States.

For one thing, there is no centralised admissions agency like our UPU (Universities Admission Unit) or the United Kingdom’s UCAS (Universities and Colleges Admissions Service).
JOHN: Do a self-assessment and identify your passions and goals.

For another, applicants have to take specific tests like the SAT (Scholastic Aptitude Test), TOEFL (Test of English as a Foreign Language) and GRE (Graduate Record Examination), on their own as part of the entry requirements for undergraduate and postgraduate degrees.

Each US university — or college, as they are called there — also has its own application fee, and requires essays on certain topics as part of the admissions process.

While the Malaysian-American Commission on Educational Exchange (Macee) in Kuala Lumpur does offer educational counselling services to those intending to apply for US universities, much of the process relies on the applicant’s own initiative, research and organisational skills.

In a recent workshop called “Navigating Your Way through the University Selection Process” at the commission, Macee Educational Advising Centre coordinator Doreen John advised applicants to determine their priorities.

“Who are you? What do you want to study? Do a self-assessment and identify your passions and goals.

“Think about your personality. Are you a reserved person? Which, for example, might make it difficult for you to connect with people on a large campus. Or are you an extrovert, who mixes around easily?” she asked the audience.

John pointed out that one big advantage of the US tertiary system is that students have to take subjects unrelated to their major across different faculties.

“If you’re not sure what you want to do, it’s okay, because you have to take courses from different departments, as well as your own department.

“So you have the opportunity to explore what you want to major in.”

She added that the system enables students to obtain a more well-rounded education.

Factors like accreditation, recognition by professional bodies, location, climate, cost of living and competitiveness also need to be considered by students when selecting the colleges to apply to.

In terms of ranking and competitiveness, John advised: “You may get into MIT (Massachusetts Institute of Technology) or Stanford (University), but will you do well there?

“Think about yourself — you want to have a good education, but not a nervous breakdown!”

She shared that the type of college life one has will vary depending on campus size, from the close-knit communities of about 700-1,000 students to the large campuses of around 55,000 people.

After taking all these factors into consideration, students should have a shortlist of about five to 10 institutions to apply to.

In a later workshop called “Rock-Hard Apps: Building Solid Applications to US Universities”, John said that there were three important sections in the application package.

They are: the application form, which is usually submitted online through the university website; hard copy documents, including educational transcripts and recommendation letters; and test scores like the SAT and TOEFL that are sent straight to the various institutions by the agencies that conduct them.

“Take note of the deadlines, that’s very important!” she reminded the audience, adding that there are different deadlines for different parts of the package.

She was joined at the workshop by American expatriate Jay Getz, whose younger son recently applied for US universities, as well as international admissions officers from Bryant University, Rhode Island, and Messiah College, Pennsylvania, who were in town for an education fair.

Getz ran through the application procedures using the Common Application form, which is used by 414 universities in the US for undergraduate admissions.

He said that although the thousands of other institutions in the US have their own individual application forms and processes, most would have similar requirements to the Common Application.

This includes information about the applicant’s personal and family details, academics, extra-curricular activities, as well as essays by the applicant.

“Two questions that often come up in the application are: what can you contribute to the university as an individual, and what can this university do for you?” said Getz.

John F. Eriksen from Bryant University also advised the audience: “The essays are the time to talk about something other than the numbers (test scores and academic results).

“Show your passion, or that you are trying to find one.

“Even if you have a diverse group of interests and are not an expert in any, it can show that you like to take risks and try new things.

“Your application is not the time to be humble. We want to see that you are involved and participate in the community around you.”

He added that the essays are also judged for the applicant’s writing skills.

Cindy Blount from Messiah College added that the essays really have to be well-written.

“Not only should you spell check it, you should have at least three people read through it for content, grammar and spelling — preferably, people who know you well and can tell if the essay reflects you as a person.”

She added that common mistakes include writing the wrong college name and writing something that is not consistent with the rest of the application.

She also reminded students that they need to send a hard copy of their documents to the institutions they are applying to, even if they have already emailed in soft copies of the documents.

“And send them via FedEx or DHL or any courier service that can track your package. Local mail may not always be the most reliable (method),” she said.

Getz also advised applicants to have an application matrix where they can list down important information related to their applications.

“You can make up your own, using Microsoft Excel or any spreadsheet programme.

“This is to help you keep track of all the things you need to do in the applications process.”

Among information that should be included in the matrix are the various deadlines for the application package, the items that need to be submitted for the application, and a contact in the admissions office to follow up on the application.

As he said early in his presentation: “Luck is opportunity and preparation.”


http://thestar.com.my/education/story.asp?file=/2010/10/10/education/7136299&sec=education

'You can beat the stock market!' Invest in a college degree

'You can beat the stock market!' Invest in a college degree

By Casey Selix | Published Thu, Jun 10 2010 9:01 am

Narayana Kocherlakota

My headline is not a subject line from a junk email.
It’s lifted from the commencement speech of Narayana Kocherlakota, the newly minted president (since last October) of the Federal Reserve Bank in Minneapolis.

Kocherlakota delivered a pep talk and a bit of an investment strategy session in May to graduates of the University of Minnesota’s College of Liberal Arts.

Kocherlakota, a former chairman of the U’s Department of Economics, said the annual rate of return on a college degree is better than the stock market’s.

"What is the expected return on investing in a college education — that is, what will you get back in terms of increased wages per dollar that you invested? Recent studies estimate that finishing college over high school delivers a return of somewhere between 8 percent and 10 percent per year. Is this a big number? Well, historically, the rate of return on the stock market is around 6-7 percent per year. So, by investing in a college education, you can beat the stock market! That’s especially true because the return to a college education is much less risky."

If I had been a parent or grad sitting in that audience, I’d have wondered: If that’s true, why’s it so difficult to find a job after plunking down $40,000 or so in tuition?

Kocherlakota anticipates the reactions from the fresh crop of critical thinkers and their parents.

'Complicating factor'

"Now, there is a complicating factor to this somewhat rosy scenario that’s probably occurred to all of you: We are coming out of one of the worst economic downturns since the Great Depression. Jobs are not in abundance."

Then he recalls the job market upon his graduation in 1983, "when the unemployment rate was actually even higher than it is today."

"Now it is true that when I graduated, the slack job market put downward pressure on all wages, including those of college grads. However, over time, the wages of these June 1983 grads did rise, and the negative effects of the recession were largely lost. Even in a tough job market, my cohort found that college remained a good investment."

If any critical thinkers still feel skeptical, Kocherlakota’s speech is available on the Federal Reserve Bank’s website and it includes a footnote citing the source of his investment information — a National Bureau of Economic Research working paper titled "Earnings functions, rates of return, and treatment effects: The Mincer equation and beyond."

While I was in the cyber-neighborhood, I couldn’t resist checking out the president’s online bio. He was born in Maryland. His degrees came from Princeton and the University of Chicago. He’s the 12th president in the history of the Minneapolis Federal Reserve Bank.

But one of the niftiest features is in a summary on another page — an audio pronunciation of Narayana Kocherlakota.

Trust me. This is exceptionally helpful info for anyone who has to interview Nair-ah-yah-nah Koach-er-lah-ko-tah or introduce him to a crowd.

http://www.minnpost.com/nextdegree/2010/06/10/18805/you_can_beat_the_stock_market_invest_in_a_college_degree

Is it better to have a degree and no job, or no university place?

March 17, 2010

Is it better to have a degree and no job, or no university place? It's not a good time to be a student - or to want to be one.....

It sometimes feels like only a wunderkind has a chance....

Eleanor Rushton, who has all the requisite As and A*s writes below about life as a graduate in these difficult times. It's a depressing, moving piece, and makes me glad that I'm no longer 22 (like her), or 17, 18, 19, 20, or 21 for that matter. Despite my advancing years (no zimmer frame as yet, thank goodness), and despite sometimes wishing to be younger, it can't be great to be leaving school or university now. The jobs aren't there, and neither, sadly, are the university places.

Over the next few years, universities are going to have to change. They're being forced to by the recession, and the huge demand for places. Too many talented students are not being offered a university place at all. Won't something have to give?

So what's it like to graduate now? It's not a good time to be a student, is it? And it's not a good time to want to be one, either....

Eleanor (whom you can see in the picture) graduated from New College, Oxford last year with a degree in English. Here's her personal view of the times we are in.

"The difficulty of finding new work in the recession is well documented.  ‘Finding new work’ implicates those who are already in the job market; the casualties of mass job-cuts and redundancy. The situation looks even bleaker for those without much on their CVs yet.  Graduates, fresh from university and raring to kick-start their careers, are finding that jobs are simply not there for them. 

I graduated in June ’09 and only a small handful of my friends have managed to secure employment, at least in their chosen fields. A huge number have opted for post-graduate study instead. This is not due to rejuvenated interest in academia so much as the desire to avoid the black hole of unemployment for as long as possible. The academic field is one where they have proven themselves, at least a bit, while few have much to distinguish them from the legions of other degree-holders flooding the job market.

The average student, who has moved straight from school to university, will not have much solid work experience and many who do ,have impressive weeks here and there will be lacking in employment experience. It sometimes feels like only a wunderkind, who managed to juggle their Oxbridge degree with running a successful internet company, interning at the UN and helping on the Obama campaign has a chance. 

Post-graduate study is not an option for everyone however. Quite apart from required academic credentials, the expense of courses means they are only feasible for those who gain funding, be it from public bodies or parents eager (and able) to help.  Many are having gap-years in order to raise the funds for a post-grad course and some of my highest-flying friends have applied to overseas universities. Given the free flights, holidays-cum-open-days and generous salaries on offer, I do not blame them!

There is also another bomb set to explode this year.  It now looks as though thousands of would-be students will not even have university, let alone post-graduate study, to help them ride out the recession. 

The Times reported today that ‘analysis shows that at least 50,000 more sixth-formers with good grades will fail to get on a course this autumn compared with last year’.  Since top-up fees came in, the benefits of going to university have had to be weighed against the massive debts it will incur: my own personal total is gaining on £21,000.

In 2010 this decision will be taken out of the hands of many. Forced cuts in numbers, and in whole courses, have erased thousands of potential places. I was tucked safely away at university for the first year of the recession and, even in this dire job market, at least I can blame any gaps in my CV on the fact that I graduated when I did. For the thousands of seventeen and eighteen year-olds who cannot hide out for a few years, ‘pre-packaged’ options are scarce. 

Overshadowing all this is the problem of degrees now being worth less anyway, due to sheer numbers, lower entrance requirements and ‘soft’ courses.Post-grad courses are becoming tools to help us stand out in the crowd, which could well result in a similar devaluation. This qualification inflation might actually mean that waiting to go to university, as UCAS chief executive Mary Curnock Cook has suggested, could start to mark you out again. 

University cannot be, this year at least, the go-to option that it certainly was for me. Is it better to have a degree, that still does not bag you a job, or no university place?  It is hard to say what the ideal situation is for anyone of my age but it is clear that we are all going to have to think of some weird and wonderful ways to set ourselves apart, degree or no degree."

Read School Gate:

Is it still worth going to university? Join the debate

Is there any point doing an arts degree? Join the debate

The nightmare of graduation in 2009

The story behind the rise in year's university applications

http://timesonline.typepad.com/schoolgate/2010/03/is-it-better-to-have-a-degree-and-no-job-or-no-university-place-its-not-a-good-time-to-be-a-student-.html

World's Best Universities: Top 400

February 25, 2010

http://www.usnews.com/articles/education/worlds-best-universities/2010/02/25/worlds-best-universities-top-400.html?PageNr=1

Rank					Overall Score
1	Harvard UniversityUnited States				100.0
Academic Peer Review Score100	Employer Review Score100	Student to Faculty Score98	International Faculty Score85	International Students Score78	Citations per Faculty Score100
2	University of CambridgeUnited Kingdom				99.6
Academic Peer Review Score100	Employer Review Score100	Student to Faculty Score100	International Faculty Score98	International Students Score96	Citations per Faculty Score89
3	Yale UniversityUnited States				99.1
Academic Peer Review Score100	Employer Review Score99	Student to Faculty Score100	International Faculty Score85	International Students Score77	Citations per Faculty Score94
4	UCL (University College London)United Kingdom				99.0
Academic Peer Review Score98	Employer Review Score99	Student to Faculty Score100	International Faculty Score96	International Students Score99	Citations per Faculty Score90
5	Imperial College LondonUnited Kingdom				97.8
Academic Peer Review Score100	Employer Review Score100	Student to Faculty Score100	International Faculty Score98	International Students Score100	Citations per Faculty Score80
5	University of OxfordUnited Kingdom				97.8
Academic Peer Review Score100	Employer Review Score100	Student to Faculty Score100	International Faculty Score96	International Students Score97	Citations per Faculty Score80
7	University of ChicagoUnited States				96.8
Academic Peer Review Score100	Employer Review Score99	Student to Faculty Score97	International Faculty Score77	International Students Score83	Citations per Faculty Score88
8	Princeton UniversityUnited States				96.6
Academic Peer Review Score100	Employer Review Score96	Student to Faculty Score82	International Faculty Score89	International Students Score81	Citations per Faculty Score100
9	Massachusetts Institute of Technology (MIT)United States				96.1
Academic Peer Review Score100	Employer Review Score100	Student to Faculty Score89	International Faculty Score31	International Students Score95	Citations per Faculty Score100
10	California Institute of Technology (Caltech)United States				95.9
Academic Peer Review Score99	Employer Review Score72	Student to Faculty Score87	International Faculty Score100	International Students Score89	Citations per Faculty Score100