How the government is devaluing higher education

College Tuition: More Campuses Freeze Or Cut Tuition As Backlash Continues

It never ceases to amaze me the stupidity of government when it comes to education. Well, other things too, but here I’m going to talk about education a little bit.


My area of expertise is finance, so I decided to take a look at education from a strictly financial point of view. Without going into details here, what I found (this really shouldn’t be surprising) is that on average, the cost of getting a 4 year degree is approximately equal to the present value of the future incremental earnings a college graduate can expect to receive over their working life. In finance terms, this means that the net present value of going to college is approximately zero.

Apparently, the government thinks that the net present value to society of a college education is still greater than the cost, since they are spending increasing amounts of taxpayer dollars to fund higher education.

But, let’s get realistic about this. If the government manages to keep tuition costs where they are, but insists on increasing taxpayer funding so that more people can afford to go to college, then the value to the individual of getting an education will decrease, since we’ll have an increasing supply of graduates where there is no corresponding increasing demand. Meaning, the future differential pay a degree holder can expect will be lower, so, the present value of getting that education is less, and prospective college students should then opt against going to college. Or… tuition will need to drop further.

The demand for higher education is already out of line with the demand for college graduates. Too many people want to go to college; indeed, they feel entitled to a college education, and then, on graduation, they feel entitled to a bigger paycheck.

The fact is, there are already a lot of people in college that really don’t belong in college at all. But the government wants everyone to go, even though there will be nowhere for those graduates to go when they graduate. Well, they could emigrate, I guess, but then, do we, as taxpayers, really want to fund students’ educations when the benefits of that education are going to be exported?

The point is, the government insists that we need more graduates. The answer, though, isn’t in quantity; it’s in quality. A degree used to mean something, but it’s really getting pointless, and likely to get worse.