Nevertheless, the recent burgeoning of university costs is having a noticeable effect on American society and the economy. Most significant is that the number of people seeking a college education has peaked, even though it is an investment that typically pays for itself. In 2013 there were 7.92 million students under the age of 24 enrolled in four-year colleges. Although this is more than 40% higher than the number 20 years ago, the peak was two years earlier. In the US, where the population continues to grow, since the wage gap between college and high-school graduates is increasing, there should also be an increase in the number of students going to college. This was true until recently. The halt of this trend suggests that more people are giving up going to college because of the high cost.
In addition, the inflation of tuition costs has occurred during a period of financial crises and slow economic recovery, which appears to lower the rate of return from an investment in a college education. In the current difficult labor market, there has been an increase in the number of college graduates working in jobs that do not require a four-year university education, and real wages for college graduates have fallen by nearly 3% compared to 10 years ago. Still the wage gap has continued to increase, because the working environment for high-school graduates is even more oppressive, with real wages dropping by more than 7%. In the US today, going to college is not so much about recouping the original investment as it is an investment to forestall the reduction in real wages.
There appears to be an increase in the number of colleges and areas of study for which the profit from a college education has become extremely low, or even negative. If we define this “profit” as the difference between a college graduate’s earnings for 20 years after graduation minus the cost of the education, and the earnings of a person who did not attend college, analysis shows that the “profit” from an engineering degree, regardless of the university, is nearly USD 500,000. If the degree is from a school like the University of California, Berkeley, this “profit” approaches USD 1.1 million. In contrast, for liberal arts majors this “profit” was negative for more than 10% of the subjects surveyed. This should not be misinterpreted. The value of a college education is not determined by the size of this “profit” calculation. To a student, however, the “profit” offered by a university or area of study is an important decision factor. For students burdened by large student loan debts, there is a natural tendency to focus on this “profit,” since they will have to pay back these debts once they graduate. As a result, fewer students choose universities or majors which have low or negative “profit” projections. This, in turn, hurts the operation of the school, leading to fears that there will be a loss of diversity in the range of schools and majors offered in the US This is a vicious cycle that is exacerbated by the inflation of tuition costs.
It is feared that the growing cost of higher education will feed the growing gap that is already a serious problem in American society. There are many universities at which students from lower-income families are charged extremely low tuition fees, such as Harvard University, for example, which has enhanced their scholarship programs to attract talented students, regardless of their income level. However, even at these universities, the tuition burden on students from middle-class families tends to be especially heavy, and it is not uncommon for students to choose to attend the state university with the lighter expense burden, even after being accepted to a more prestigious school. Children from wealthy families are not required to make this kind of choice, benefiting from large amounts of money invested in their education from a young age, making it easier to enter the famous universities. Moreover, many parents in these wealthy families are graduates of these famous universities; and in many cases there are legacy systems that give preference to the children of alumni during the admission process.
In the US, there is a dislike for rigid class distinctions. By continuing to offer ample opportunity to anyone with talent and a willingness to work hard, the country has maintained its vitality and the position as a world leader over a long period of time. In this respect, the inflated cost of a college education is a big problem that may lead to the many talented individuals becoming buried in disadvantaged environments, contributing to a further solidification of the division between classes. In recent years there has been a proliferation of on-line courses with low fees, and some signs of change, such as President Obama’s proposal of free tuition at two-year state colleges; but, there is no progress on reforms to improve the transparency of the basic management of the universities that are the source of the inflated tuition fees. I have great respect for the ability of American society to transform itself, but I sense that this long-term issue of upwardly spiraling tuition costs creates a serious risk of a loss of vitality in the US.