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August 11th, 2015
Playing College Basketball Will Make You 6 Inches Taller. Go to the Pros and you'll add another 2 inches. Would you believe me? The average male high school basketball player is 5 foot 11 inches. College players are 6-5 while pros are 2 inches taller than that. Get accepted to Kentucky, last year's NCAA champions and be almost 6' 8" .
Do you spot the flaw in the logic? Playing basketball didn't make these kids taller. They were tall before they went to college. Being tall helps players excel in basketball. Consequently college and pro teams focus recruitment on taller players. Statisticians call this selection bias when group participants are not random, but selected due to other factors. When comparing groups the participants must be random otherwise conclusions could be very misleading.
This same flawed logic is commonly used to promote the financial merits of increasingly costly college attendance. The National Center for Education Stats reports the median salary for 25-34 year old high school graduates is $30,000 while college graduates is $46,900. Reporters, politicians, and academics routinely tout that a college education is worth $1 million more than high school alone. Presidential candidate Hillary Clinton preaches the million dollar more mantra along with many Republican contenders.
As with the basketball example above the logic is flawed due to the selection bias. Who attends college? People who are more intelligent, more motivated, more focused, with greater family, social and financial support than their peers. They possess these characteristics before they attend higher education and it's likely why they were accepted. College doesn't instill more intelligence or motivation just like playing basketball doesn't increase height. These attributes were already in the individuals and will benefit them in whatever life path they choose.
Examining the numbers more comprehensively reveals that the true value of a college education for the average student is approaching zero. First of all, the $1 million number wildly overstates the true difference in lifetime earnings between the colleged and uncolleged. The actual difference is under $240,000 according to US Census data. Now subtract from that number the cost of college and the lost wages while attending college when one could be working. In 2008, using $29,916 as the 4 year total cost of tuition and books minus missed wage the net present value shows a difference of $121,000 according to National Association of State Universities and Land-Grant Colleges.(See page 85).
College costs have exploded since 2008 so attending college for under $30,000 and graduating in 4 years is unlikely. The average student takes 5.2 years to graduate. College debt is increasing so interest costs must also be factored in. Student loan debt now is at $1.3 trillion and increasing at $31 billion per year.Increasingly modern colleges are offering a lavish lifestyle rivaling expensive resorts and the costs that accompany it. Finally there's aforementioned selection bias. College bound kids would out-earn high schoolers with or without college attendance, thus assigning the entire difference between the earnings of a 12th grader and a bachelor's degree outweighs college and is a classic example of a selection bias.
It gets worse because never factored in the analysis is the 20% of students that dropout. This unfortunate group incurs some of the costs, but not the diploma which would up career options. Not including some negative value for this group is like removing all of the losing stock bets from a portfolio's before calculating the investment return.
Back in 2005, my foundation's analysis calculated the median return for a public university is 4% and a private is 2%. My analysis suffered the same flaws of the selection bias by assigning the entire earnings differential to college graduation and skipping the drop-out group. Those factors plus college costs doubling and flat earnings growth over the last 10 years, puts the median value of college at zero or perhaps less for the average student.
It's disheartening to have the illusion of college dashed because it's as close to believing in magic as our society gets. The notion that there's sacred halls warehousing secret knowledge that if one gains entrance to will lead to prosperity is alluring. However it's an expensive myth shackling our kids with massive cost or debt to start their lives which would be better spent elsewhere. It's time to take an objective look at the financial benefit of college and encourage students to explore alternate ways to get educated that foster job skills.