Many people around the country are questioning the value of a college education nowadays due to unemployment persistently hovering between 8 and 9 percent nationally. It is natural for the students and parents who are spending their hard-earned money on a college degree to question its value when many are not seeing an immediate return on their investment.
Overall, the general public seems to be at odds in this ongoing debate. The Pew Research Center found this year that 75 percent of the public wondered if the cost of a college education was worth it. That same poll, however, showed that 86 percent of college graduates believed their college education was a good investment for them.
In the long run, returns on a college education remain significant and have not changed for many years. On average, people with an undergraduate college degree earn more than $1 million more over their lifespan than those without one. Some people, though, have pointed out that these estimates are based on historical trends and such trends do not a future make. For instance, for many years a house was considered a good investment, but recently that has not been the case.
The fact of the matter is that investment in human capital, such as an education, is a different kind of investment than consumer goods, like a home. We buy refrigerators, automobiles and houses to improve the quality of our lives, but we should not consider them as investments. In fact, if houses in general had been considered a consumer product rather than an investment from 2002-2008, the housing bubble we experienced might not have occurred.
Let me explain. Clearly, no one anticipates a car or a dishwasher to accrue in value over the years. Many individuals, though, have anticipated that housing prices would increase forever because the overall demand for it has continued to rise since the end of World War II. Over the long-run, though, the price for housing has fluctuated. In fact, housing bubbles can be traced back to the early 1700s when over-speculation on housing in European capitals such as London and Paris led to a financial panic that eventually spread to the United States.
Unlike automobiles and houses though, an education is a much more marketable product. A highly educated individual is a more productive worker and tends to produce greater returns over time than does an investment in consumer goods. Those returns accrue to the individual by way of higher salaries.
Of course not all college degrees have the same rate of return. Returns on degrees in the health sciences, as well as the sciences and engineering, are significantly higher than they are for majors such as counseling, psychology, and English. Today, a petroleum engineer can expect to earn $120,000 a year. A counseling or psychology graduate can expect to earn about $29,000 a year.
Regardless of the major, students should not be left on their own when it comes to making an investment in themselves. Colleges and universities should also assume some of the risk that the students and families undertake. Over the years, Misericordia University has found that students who engage in internships and mentoring relationships develop marketable personal skills above and beyond the technical expertise and the general knowledge they acquire from a college education, which in turn gives them a much better chance of finding a good job.
That is why these specific skills that enhance employability of all majors at Misericordia are offered through the Insalaco Center for Career Development.
Misericordia students who participate in the Insalaco Center’s well-structured and rigorous programs and maintain a 3.0 grade point average can take advantage of the University’s Guaranteed Placement Program (GPP). Simply stated, the GPP guarantees students a paid internship in their field of study if they are not able to find employment or are not enrolled in graduate school six months after graduation. The six-month paid internship almost always leads to a job.
Higher education is not an inexpensive undertaking. Students and families often find themselves in debt after graduation. Misericordia University has the least expensive tuition of any traditional, private four-year institution in the region, but we also believe that risk-sharing is important, hence our Guaranteed Placement Program.
Signs of relief from the nation’s worst recession since the 1930s are on the horizon, but nobody should believe that the difficult economic circumstances we face will be gone tomorrow. The best way to cushion the impact of a poor labor market on the individual is with a college education. The college itself should accept some responsibility for providing that cushion. The Guaranteed Placement Program does just that.
Michael A. MacDowell is president of Misericordia University in Dallas, Pa., where he occasionally teaches economics.