Over the past year I've invited some of the fiercest critics of higher education finance onto the radio to discuss the problems with college. Numerous authors have minutely detailed the dangers to college consumers: the price tag is too high; the lending is too lax; the product is too low-quality; the socialization process is too coarsening; the parents are kept too much in the dark; the earning advantages are too aggressively touted; the alternatives are too cheap.
And yet, when I asked these critics whether it was worth it any longer, some of the harshest of them still piously genuflected to the college altar and rebutted the idea that higher education had entered a bubble phase. What greater sentiment indicator could there be? It reminded me of one of those third-world dictatorships where even the opposition candidates effusively praise the virtues of the glorious leader against whom they run.
But the financial data are making a college education tougher and tougher to defend. If we were to follow the lead of college marketing departments and treat tuition as an investment, what price-earnings ratio--or P/E--would we assign to it? Unlike a traditional stock, both the price and the earnings are fairly opaque (a warning signal in and of itself), but let's make some ballpark assumptions. A typical private school charges about $25,000 per year; the typical public school about half to a quarter of that, depending on residence.
On average it takes six years to finish college nowadays. That's because students increasingly are dropping classes late in the term in order to avoid failing grades--dropping out of a class does not mean they avoid tuition costs on the class. So, hard cost for a college degree is roughly $150,000 for a private school and a little less than $50,000 for public (depending on residency discounts).
Whole thing here.