The Biden administration has recently floated the idea of instituting a program to pay back people's college debt. As a parent who has made significant sacrifices over the last couple years to avoid our college student having to take out any debt in her first two years of college, I have to admit this seems a little frustrating. I could have just borrowed that $10k and never had to pay it back!
But beyond my emotional reaction to the situation, the justice of funneling billions of dollars to pay off college graduates (traditionally among the wealthier half of Americans) seemed questionable to me. However, several people suggested that it is not in fact that case that college graduates make more than other Americans anymore, so I wanted to take a look at the facts.
At it happens, the Cooperative Election Study of 2020 provides data from a 61,000 person survey which asks questions about income, level of education, and student debut, so it's possible to see what the facts of the matter are.
First question: do Americans with college degrees make more money in general?
Yes, they do. 59% of people with only a high school degree have family incomes of $50k or less, compared to 42% of those with a two year degree and only 25% of those with a four year degree. 50% of those with a four year degree have a family income of $70k or more, while 28% of those with some college do and only 18% of those with only a high school degree. (The survey only has family income, not individual income, so I'm using the statistic which is available.
Is this only true for older people?
No. For people in their 20s, income is still higher for those with more education.
Same for Black Americans
Looking strictly at student debt, those with and without debt are fairly similar in income
There are some differences here. 50% of those with some college but no debt make less than $50k, while 55% of those with some college and debt make less than $50k. Only 23% of those who have a four year degree and no debt make less than $50k, while 33% of those have a four year degree and do have debt make less than $50k. Some of this, of course, is almost certainly cause and effect: those who make more money can pay their debt off faster. Additionally, people who come form wealthier families often go on to make more money themselfs.
However, those who go to take on debt to earn a four year degree are still more likely to make higher incomes than those who did not earn a degree but avoided debt. 41% of people in their 20s and 30s with debt and a four year degree make $70k or more, while only 13% of those with only a high school degree make more than $70k per year.
Overall, it does seem true that people with college degrees make more money, even if they take on debt to do so. This does not mean that everyone should follow that path. But overall, those with college degrees are likely to be more affluent than those without.
3 comments:
I teach high school and so have to field the "should I go to college question" a lot. The data you give here is certainly part of a response, but one complicating factor is the usual causal arrow one. Smart, motivated persons will be more likely both to make more money and go to college, so if a smart, motivated person comes to me asking whether he should go into the trades or take on the average amount of student debt for college, it's not clear what I should tell him.
I wonder if there is any way to decide between these hypotheses:
(a) The low-earning-just-high-school group is being dragged down by it's lack of a college degree.
(b) No, the group is dragged down by a large group of low-cognitive ability or low conscientiousness or high antisocial persons, who fail to earn high incomes for the same reason they fail to get into colleges.
I suppose it's some of both, but do you have any thoughts about what sort of data could point at a solution?
James,
I kept meaning to write a whole post in response to your comment, but since I still haven't done that a week later, I figured I shouldn't just leave it without response at all, since it's obviously a key question.
I think it's clearly some of both your hypotheses.
I guess a big thing that I'd see is that not having a college degree closes off a number of avenues (among them the kind of corporate jobs that I've always worked.) So long as you are pretty sure you won't want to go down those avenues, that's fine.
The kind of jobs that not having a college degree will make it a lot harder to get do pay a fair amount, but there are also jobs that pay well that don't require a college degree.
And there's a class element which is harder to quantify, but may or may not be important to people.
The tricky thing about this research is unobserved factors that might contribute to both educational attainment and later income (but not by means of the former). In other words, it's plausible that someone capable of graduating from university might also be capable of commanding a higher salary than others even if no one had a degree.
Educational economists have made a lot of pretty good attempts at controlling for pre-college factors, though, and still found a real financial return to higher education. This kind of research isn't as up to date as what you're looking at, but the finding is pretty consistent so I'd be surprised if anything has changed.
That said -- for this debate, college grads are generally better-off, even if there are other factors that also help them get there.
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