In the previous post, I noted that 85% of parents strongly agreed that college was an investment in their child’s future, the highest in the last five years. Some will ask: Is such confidence justified? The answer seems to be yes: the earnings premium of having a college degree continues to rise. In 2013, the earnings premium in constant 2012 dollars was $17,500 versus $15,780 in 1995 and just $7,499 in 1965.
But here’s the troubling reality, and I think it’s driving some of the debate on the value of college. The wages for college grads have barely risen since 1986 (see below), even though the expense of college (what families and students have to pay, earn, or borrow) has clearly risen. What’s driving the rising earnings premium is the fact that HS graduate wages are in steep decline (as I’ve mentioned before, jobs that don’t require a degree of some sort are few and far between). That’s making lots of families/students wonder if there are less expensive ways to earn degrees (the cost-consciousness picked up in the 2013 Sallie Mae report) and putting financial pressure on colleges and universities (many of whom have a bleak financial outlook after a decade in which incoming revenue was flat).