2010 May 23 Sunday
Poorer Kids Not Getting Good Return From College

Kevin Carey of Washington DC think tank Education Sector argues that a lot of kids aren't getting their money's worth from college educations.

What the encomiums to Pell failed to mention is that his grants have been, in all the ways that matter most, a failure. As any parent can tell you, colleges are increasingly unaffordable. Students are borrowing at record levels and loan default rates are rising. More and more low-income students are getting priced out of higher education altogether. The numbers are stark: When Pell grants were named for the senator in 1980, a typical public four-year university cost $2,551 annually. Pell Grants provided $1,750, almost 70 percent of the total. Even private colleges cost only about $5,600 back then. Low-income students could matriculate with little fear of financial hardship, as Pell intended. Over the next three decades, Congress poured vast sums into the program, increasing annual funding from $2 billion to nearly $20 billion. Yet today, Pell Grants cover only 33 percent of the cost of attending a public university. Why? Because prices have increased nearly 500 percent since 1980. Average private college costs, meanwhile, rose to over $34,000 per year.

Increased demand caused increased prices. Why keep your prices down if demand won't go down when you raise prices? The US government helped colleges and universities raise their prices.

If the US government really wanted to play a constructive role in higher education it would fund the creation of a series of tests of competency on a long list of objective scientific, mathematical, engineering, and technical skills. One should be able to go to a web site, sign up for a calculus test (or linear algebra or organic chemistry or basic accounting), take the test, and then see if one knows the subject well enough. If one passes then one should be able to sign up to take a proctored test in person so that your identity can be verified when you take the test. So then you take the test at a testing center (which could be a high school class room used for this at night or it could be a community college or university class room). Then you get certified as having passed this test. One should be able to earn the better part of a college degree just by taking tests. The ability to do this cheaply with standardized tests would enable students to avoid colleges that cost tens of thousands of dollars per year.

Too many of the students who go to college do not learn much. But he ignores the real reasons for this.

But the biggest problem with American higher education isnít that too many students canít afford to enroll. Itís that too many of the students who do enroll arenít learning very much and arenít earning degrees. For the average student, college isnít nearly as good a deal as colleges would have us believe.

One reason college isn't such a good deal is that lots of kids choose to study what interests them rather than what is economically valuable. While petroleum engineers start out at $86k per year out of college by contrast music majors start out at around $34k and fine arts and drama majors start out below $36k. Their mid-career salaries are only $20k higher.

He blames the poor performance of poor kids on low quality of instruction at lower tier colleges. This is nonsense.

Pell Grants do nothing to address that problem. Low-income students are increasingly forced to attend inexpensive but under-resourced, non-selective universities and community colleges, where student results are often astoundingly bad.

Student results are astoundingly bad because the students at lower tier colleges aren't that bright. Half the kids graduating from high school in 2010 are going to attend college this fall. Well, news flash for Kevin Carey: Less than half of all kids are college material.

I'll take white kids to make an example. Among whites average IQ is about 100. Well, it doesn't make sense for kids below 115 IQ to pursue the more difficult college subjects. But only about 16% of white kids have IQs above 115. If the upper 50% of white kids go to college then that means kids with 101 IQ are going to sit in courses where very complex subjects will be taught. They aren't going to understand. Some college subjects are of lower difficulty and there is room for some 110-115 IQ kids in some occupations that are taught in college. But that doesn't get us to near half of all kids going to college.

Lower tier colleges that find it hard to recruit bright students are tempted to lower standards in order to keep their classes and dorms full.

Update: One problem with my analysis: some kids drop out of high school. About 25% of whites drop out of high school. What's the average IQ of whites that graduate from high school? Suppose (though it seems unlikely) that exactly the bottom 25% in IQ drop out of high school. Then if 37.5% of all white 18 year-olds go to college (and I need a better source for a number specific to whites) then we are still reaching down below 110 IQ for white college students.

Update II: Why do some kids get a poor return on investment in higher education? Read about the Voldemort View: the View That Must Not Be Named.

Share |      By Randall Parker at 2010 May 23 03:00 PM  Education

Black Death said at May 23, 2010 4:39 PM:

So petroleum engineers make a lot more money than music and fine arts graduates? Hmmmmm... wonder why? Could it be that petroleum engineers actually do something, you know, useful? According to this website (http://contexts.org/socimages/2010/02/23/gender-change-and-starting-salaries-of-college-graduates/), the best paying jobs for new graduates are in engineering and health care. And I suspect that the difference is actually much larger than stated, because most of the BFA grads are waiting on tables or moving back home with Mom and Dad. So why doesn't everyone study petroleum engineering or something like it? Well, that stuff is soooo hard, with all those science, math and engineering courses, and all those nerdy engineering students who actually seem to like it. Better to study theater, where you can get a grade pretty much by just showing up and feeding back to the professor what he or she wants to hear. I mean, in science and math, the questions only have one right answer, and the professor doesn't care how you feel about the subject. Better to study music and hope you can get a catering job.

James Bowery said at May 23, 2010 5:34 PM:

Most of the guys I know who helped found the internet lost their houses in the last 10 years.

Forget engineering. It's a dead profession as long as foreign diploma mills satisfy CEOs of the US Fortune 1000.

Oh, and lots of luck with those global challenges ahead when ideology matters more than saving the planet to the Davos idiots.

Randall Parker said at May 23, 2010 7:44 PM:

Black Death,

That is a good link on starting salaries. Yes, the best paying jobs are in engineering. So why aren't all students studying for those high paying jobs? They want to study topics that are more fun and easier.


Forget engineering? Then what to study? It still pays much better than the vast majority of occupations.

Jerry Martinosn said at May 23, 2010 10:39 PM:


Most of the guys I know who helped found the internet are multi-millionaires. A few have elevators in their houses and hire famous rock bands to play at their birthday parties. In 2002 or 2003 it was pretty lean in the job market but this recession isn't so bad.

I haven't seen a huge difference with this H1B visa making much of a dent. A lot of the H1B's get PR and some of them start companies later in their career. I think H1B's depress wages for engineers if one sees it all as a zero sum game but it's not a zero sum game in the long run.

James Bowery said at May 24, 2010 7:16 AM:

Forget engineering? Then what to study?

That depends on which shockwave you want to ride. I think John Robb put it well:

You can stand alone and do nothing. Thereby suffering the predations of this new criminal class (these global guerrillas). You can join them and prey on your former compatriots, enriching yourself in the process. Or finally, you can build something new. A resilient community based on freedom, prosperity, and a new moral compact.

In no case does it make sense to to go into debt to the tune of a home mortgage for the supposed advantages of engineering schools over early and direct pursuit of catching your chosen shockwave to ride. Oh, excuse me, that wasn't fair. Student loans can't be compared to a home mortgage. You can't escape a bad education investment with chapter 7 bankruptcy anymore.

Even if you think its going to be business as usual, the kinds of guys Martinosn identifies with as exemplars have among their leading ranks Bill Gates, Steve Jobs and Steve Wozniak, none of which earned engineering degrees.

James Bowery said at May 24, 2010 7:59 AM:

If the US government really wanted to play a constructive role in higher education it would fund the creation of a series of tests of competency on a long list of objective scientific, mathematical, engineering, and technical skills.

And that's exactly what we were pursuing with the University of Illinois education department at the PLATO project (yes, Jerry, I did work directly with Ozzie and I don't call him one of the Internet's founders).

There is a very simple reason it didn't and indeed can never happen:

Rent seeking by academia.

James Bowery said at May 24, 2010 11:39 AM:

CNN/Fortune article on the meeting of Blair and Khosla at Khosla's venture startup to save the planet from Chindia's ever-increasing CO2 flatulence resulting from their "borrowing" technologies developed here.

I suggest Jerry get all of his successful and rightfully-rewarded multimillionaire buddies should plow their capital into Khosla's venture funds. I mean, let's face it... people complaining about "foreign diploma mills" are just full of sour grapes if not simply racist.

Jerry Martinson said at May 27, 2010 1:42 AM:


I'm not mocking you... or the concept that "foreign diploma mills" or "H1B immigration" can depress wages (at least as a short term job market effect). But to tell call engineering (and presumably any STEM field where most traditionally earn a bachelors to enter if I interpret you correctly) a "dead profession" as a result I think is wrong.

For example here's a quote I saw today in the news:
"The study by the National Association of Colleges and Employers found that 24 percent of 2010 college graduates who applied for a job have one waiting after graduation, up from 20 percent last year. But the average salary offered to graduates with a bachelor's degree has slipped 1.7 percent from last year, to $47,673.

Salaries for finance majors rose 1.6 percent, to $50,546, while those for liberal arts majors fell 8.9 percent, to $33,540. For graduates with computer-related degrees, salary offers rose 5.8 percent, to $58,746."

To me this indicates that the STEM fields are still more lucrative than non-STEM fields and are getting more lucrative not less.

While a surprisingly high % of the founders of the most lucrative high-tech companies never much or any formal education as you point out - most did. And nearly all of the non-founder first 20 employees of the most lucrative startups have high-tech degrees. If you were to apply a Black-Scholes kind of reasoning to the value of a STEM desgree, I think you'd find that it's pretty darn good.

One of the majors that really impresses me with return on investment is economics. What's striking to me is that those getting degrees in econ don't make very high starting salaries compared to the STEM fields but mid-career they make as much if not more as the STEM fields. This to me indicates that perhaps an education in economics has a durable value that isn't fully appreciated.

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