The availability of taxpayer-funded and private student loans has allowed universities to raise prices to nosebleed levels. At the same time, administrators and other non-teaching staff have proliferated and the first ten million dollar salary for a football coach is under discussion.
Lost in translation is the benefit of these price increases to students, which in short are non-existent as shown by this St Louis Fed piece.
According to a 2009 study by economists John Bound, Michael Lovenheim, and Sarah Turner, college failure rates are close to 50 percent at four-year public colleges. In addition, as the rate of college enrollment has increased, completion rates have decreased. Generally, students who drop out of college tend to do so after two years, and the costs of failure can be very high. With the two years of tuition expenses and forgone earnings, college dropouts may see no return on their investment. Also, many dropouts fail to earn any skill premium because most specialized learning takes place in the later years of college. Therefore, failure risk warrants consideration and may be a prime reason many students choose not to attend college.
Even with a college degree, there is no guarantee regarding future earnings or employment. Attending college may or may not pay off as planned. A May 2011 New York Times article by Catherine Rampell reported that in 2009 slightly over half of college graduates under the age of 25 held jobs requiring a college degree. Moreover, 22 percent of this same group was not working at all, and the remaining 22 percent was underemployed, meaning they held jobs below their skill level.
So in other words if you are admitted to college there is a 50% chance you will flunk out, then if you don’t the odds of getting paid for your degree are slim. Of course this probably reflects the high proportion of degrees issued in fields for which employment is limited or non-existent, such as ethnic studies, political science, Renaissance poetry, fine art and so forth. The odds that you will earn enough money to repay your debt are not good, but of course the fastest-growing category of debt is student loans funded by the taxpayer. Who clearly isn’t going to see that money again. Meantime the highly-paid staff are living it up – administrators at UC are paid a couple of million a year.