College is a financial risk, says Temple economist

An economics professor analyzed the financial risks associated with college.

Students who spend $50,000 each year to attend college have a little more than a 50 percent chance to earn more than the high school graduates throughout their lifetimes, according to a Temple University economist’s report.

Douglas Webber, an economics professor and director of the department’s undergraduate studies, wrote “Is College Worth It? Going Beyond Averages,” for the left-leaning think tank Third Way. The report examines the financial risks and rewards associated with attending a four-year college, in terms of individual lifetime earnings.

Webber said going to college is risky.

“College is, on average, an investment,” Webber said. “The returns to college for the average person are very big, and it is very likely that it’s going to pay off over a lifetime. But, like any kind of return on investment, it’s not a sure thing.”

Webber analyzed data from the American Community Survey, the National Survey of College Graduates and the National Longitudinal Survey of Youth to reach his conclusions.

His findings corroborated the well-documented “Sheepskin Effect,” which suggests that the financial value of college concentrates on the degree itself rather than time spent in school. 

Four in 10 students never graduate college, according to the report, and the lifetime earnings for non-graduates are only narrowly higher than those who never attended college, Webber said.

Sociology professor Joshua Klugman, who teaches “The Sociology of Higher Education,”  said graduation rates are critical for working-class students. 

“A huge concern is that a lot of the big state public universities are just not set up to facilitate a working-class kid’s chances of even getting that degree,” Klugman said. “Temple has tried to take some steps, like Fly in Four, but that’s probably not sufficient and we need to step up our game.”

Temple reported a six-year graduation rate of 71 percent, which is 11 points higher than the National Center for Education Statistics’ national average for 2017. Temple’s average tuition and room and board costs are $28,232 for in-state students and $39,992 for out-of-state students, according to the U.S. News & World Report.

Webber said it’s important to examine costs, graduation rates and support systems at each school before making a college decision. 

But there is also non-monetary value in getting a degree, Klugman said. 

“There’s a whole constellation of meanings that students attribute to going to college, and finances are probably more predominant,” Klugman said. “For working-class students, they have other meaning that they attribute to it as well.”

Webber said his report focuses on financial returns, and does not address important factors in making decisions about college, like career happiness. 

“If I were income maximizing, I wouldn’t have gotten a Ph.D. and wouldn’t be working at Temple,” Webber said. “But I love my job. And that matters quite a bit.”

Once a student settles on a college and is intent on graduating, deciding on a major is the next most important factor in determining lifetime earnings, according to Webber’s report.

There is a potential $2 million difference in lifetime earnings between top-earning majors and bottom-earning majors, Webber’s report noted. 

“Students should not make their decision about what to major in entirely based on earnings,” Webber said. “I would say it shouldn’t even be in the top three characteristics. But, it should be part of the equation because it’s so important.”

Top-earning majors include STEM fields like chemical engineering and computer science, while most of the lowest-earning majors, like studio arts and theology, fall under arts and humanities, according to data published on Webber’s personal website.  

Max Klemmer, a junior journalism major, said the President’s Scholar Award from Temple made it possible for him to attend, but he still wrestles with the final choice he made.

“One school I applied to was [New York University], and they gave me a scholarship, but I still would have been paying a lot of money,” Klemmer said. “Sometimes I consider, ‘Maybe I should have gone there and just gone into debt.’”

“I would have graduated from a more prestigious school and probably made better connections,” he added.

Ross Weisman, a 2018 media studies and production alumnus, began working as a social media director in September. He said that the value of college is equal parts the degree itself and the connections and skills acquired in school. 

“The value of college has definitely changed,” Weisman said. “I don’t think it’s as much, ‘You go to college, you’re going to get a great job.’ …So I think college is worth it, but at the same time, if you are struggling with money, and you just want to work for a couple years and come back to it, I know a bunch of people that have done it, and it ends up working out for them.” 

“A big part is getting out of your head that you get into college at 18, you graduate at 22,” he added. “And…if you deviate from that, you’re not going to be successful.”

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