What Is It Worth?

Thu, 09/29/2011 - 12:02pm
MICHAEL P. COLLINS, Author, Saving American Manufacturing

By MICHAEL P. COLLINS, Author, Saving American Manufacturing

Mike Collins ImageFor the last 40 years, the mantra has been: “If you want to get ahead, just go to college.” It is partially based on the widely published assumption that those who do get a college degree will make 84 percent more than high school graduates in their careers. But the economy has changed radically in the last 40 years, and universities have not kept up with the times.


This has become a serious problem.

The second problem: If you go to college, which major will give you the best chance of getting a job with a wage to support a family? It probably doesn’t matter when students remain single, but as soon as they get married and have children, they will need higher wages and benefits. Another question to ask: When you choose a major, how much money should you borrow to graduate in the major?

I have written about problems of student debt and majors many times, but up until recently, there were no data to connect wages to majors to student loans. Then, a Census study from 2009 came out with data that connected wages and majors. It was the first time the Census asked people about their undergraduate majors, enabling researchers to tie in salary data.  


This article focuses on young people who are in college, or about to graduate and find a job. So, I will use the lower wages on the scale, which the study identifies as the 25th percentile, as a representation of entry-level wages.



One of the authors of the study, Anthony Carnevalle, states the obvious, “We don’t have a system in the U.S. where we align what you take with career prospects. Nobody ever tells you when you go to college what happened to the other people who took it before you.”


The Horrors of Student Debt


  1. The loan can be turned over to a collection agency.
  2. Student loans are generally not dischargeable with bankruptcy (with a few exceptions).
  3. The federal government can garnish your wages — private lenders must first get a court order.
  4. The federal or state government can take your tax refunds.

A good example is a student in Springfield, IL who borrowed $4,000 at 5.5 percent interest rate. Three years later, her debt was $7,000 because she couldn’t make the full payment, and accrued fees and interest.

A story that will make my point about student debt vs. starting wages is Joe who graduated with a chiropractic degree and $80,000 in student loan debt. In starting his practice, he only earned about $1,000 per month and was unable to make payments on the debt.

When his income increased, he asked if he could start paying on his loan again, but the lender said he had to pay back his loan in full. His chiropractic license was denied and then he had no way of working in his field, so he quit making payments.

When the collection agency finally started chasing him, his debt rose to $365,000.

These horror stories may be less than 10 percent of the loan collective, but the penalties for non-payment or reduced payment are very real threats. They clearly make the point that changes are needed. Here are a few suggestions:

  1. Universities need to accept their moral responsibility to inform all potential students about the entry-level wages of recent graduates in each major.
  2. Universities should also reveal the average student debt for each major to give the student a better idea of costs vs. benefits.
  3. There is movement in the Federal Education Department to re-evaluate what can be loaned per major. Instead of just loaning anybody the amount the university demands to stay in school, the lender will examine the major and the ability to pay the loan back. I think this is a great idea because students should be prevented from naively getting over their heads in debt for a major with low earning power.



The bottom line is that more and more students have to borrow money to go to college, and universities have a moral obligation to the new students and their parents to reveal the realities of entry-level wages per major and their relationship to student debt — from the first day of school. We are now transitioning to a service economy in which good paying jobs require either advanced degrees or a major that teaches employable skills.

The university system is not recognizing that the middle class in America is going through an economic transition where both wages and living standards are going down. When confronted with this macroeconomic fact, and the problems of student loans and majors with low starting wages, they generally clutch the cross of an excellent liberal arts education to their chests and announce that they are dedicated to a college education, not training. 

The fact is, though, that the economy is changing and everyone has to change with it (including universities). Like it or not, few people will be able to afford a general degree that does not lead to a decent paying job or that saddles the student with long-term debt. Whether they can see it coming or not, the university system is on a collision course with the realities of the new economy.



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