The Cost of Education and a Crippled Generation

Dennis J. McWherter, Jr. bio photo By Dennis J. McWherter, Jr. Comment

People are always talking about it: €œstudent loans are too high,€ €œkids come out of school overqualified and without a job,€ etc. In short, we€™re all aware that there is a problem with the rising cost of education in our current time. That being said, I€™ve seen little by way of quantification of the issue, so I am going to attempt to both quantify and reason about this problem. It is€“ for many€“ one of the greatest plagues of our generation. That being said, this is not a rant about earlier generations (but I€™ll get to that). In fact, it is simply a realization of the problem with some loose suggestions on how we can begin to tackle the issue.

The Numbers

The first thing I want to go through is the numbers. I will use my Alma Mater as an example and then we will work our way out from there. I went to the University of Illinois at Urbana-Champaign for an undergraduate degree. Not including the extra engineering fees, room and board, etc. the base tuition and fees for an in-state resident at this public institution was $13,658 (2010-2011 academic year). Today, that number has already increased $15,602. That is roughly a 14.3% increase in 5 years. This is clearly significantly higher than inflation over the same period. Over the last 10 years (2004-2005 academic year to today), we have seen approximately a 96.4% increase in tuition. That is to say, it has nearly doubled; this seems to be a trend every ten years. Let€™s see what this graph looks like then:

Figure 1. Tuition + Fee rate changes over time.

It doesn€™t take a math major to realize that this is a scary graph. That curve is moving pretty fast (i.e. seemingly close to exponentially). That means since the 60€²s, tuition has doubled every 10 years. We just happen to be at the front of the problem. What I mean is that at this rate, we will have doubled yet again in 10 years and the problem will be far worse than it is for our time now.

Now when you add the cost of simply living in an area, this cost also goes up. If you live in the dorm (which you must in your first year), you can tack on a little more than $10,500 extra per year. Similarly, if you live on the cheap by renting an apartment that you only live in during the 9 months for school, you€™re probably looking at an at $6,600 per year (at a low $400/mo * 12mo/yr rent + $200/mo * 9mo/yr food). The reality is probably slightly higher than this. But as you can see, for an in-state student, tuition is clearly in the low-mid $20,000€²s/year just to attend this school. Over 4 years, this easily totals to more than $80,000; a small mortgage before even having a full-time job.

This is not just a problem with the University of Illinois. In fact, this issue is systemic throughout the US higher education system. According to the National Center for Education Statistics, the overall trends look something like this (in current dollars):


Figure 2. Plot of overall college tuition increases over time. Data provided by National Center for Education Statistics.

Though less pronounced than the previous trend for our look at a specific university, we see a near-doubling in each 10-year period with the exception of 1991-2001 (with an approximate increase of a mere 61%). Overall, the problem everyone is talking about appears to be real. The cost of education is growing€“ and fast.

The Other Numbers

So far we have belabored the point that the cost of education is rising quickly. Everyone already knew this in some sense, but I wanted to establish a base for discussion so we€™re all on the same page. If you still don€™t believe this is the case, there are many resources discussing this issue if you only look. That said, we haven€™t discussed the other side: people make higher salaries than they did 30, 20, or even 10 years ago, right? That must mean things are keeping up and the economic burden is the same, yes? Well, from what I can gather: not exactly. Again, let€™s look at the numbers rather than agreeing to the, €œit feels more burdensome than you make it sound€ philosophy.

According to the US census, median income of US workers over a similar period of time looks like this:

Figure 3. Median income of US worker holding bachelor€™s degree or higher in current USD. Data provided by US census.

This chart certainly shows that wages are not keeping up with the cost of tuition. In fact€“ though there is likely insufficient data to fully make this case€“ it appears that income increases are beginning to level off (i.e. they€™re increasing but at an ever-decreasing rate). Let€™s see if we can break this down to get a rough idea what has been happening. Below is a table created from the data I’ve referenced factoring the cost of education as a percentage of (gross) income:


Table 1. Percent of annual income for 4-year education per year. Dollar amounts are in €œcurrent USD€ with a 2-year discrepancy between the €œcurrent USD€ between tuition and income (so results may be slightly skewed).

This chart shows us that a disproportionate amount of our annual income will go to education. Furthermore, the salaries are from the census of all people (i.e. all generations) having a bachelor€™s degree or higher. This means that many of these people may be deep into their career making higher salaries while new grads are likely at or below the median in many cases (read: you [and your salary] don€™t typically peak at the beginning of your career).

Moreover, as you review these charts, its important to recognize that incomes are pre-tax and complete. That is, much of this money will be owed to the government (i.e. in 2011, single filers at the median were in the 28% federal tax bracket) and then you need to account for other necessary living expenses. If you spend the €œhousing rule of thumb€ 30% of your income on rent/mortgage, about 3% in food, about 3% in utilities, then you€™re left with a net disposable annual income of around $26,717.88 (assuming no other obligations like saving or auto payments/insurance and omitting state taxes).

While this is a crude model, it becomes apparent that even though your education may have cost you less than your annual income– after you factor in that you have to pay for life– you can€™t pay your debt off in a year or two… or three if you want to do anything other than pay on your student loans. Now consider that the vast majority of new college grads won€™t likely be making the median income and these numbers become even more dismal. As it stands, with our current numbers, it would still take someone nearly 3 years to pay off their debt if they did nothing but sleep, eat, and work; that is no life.

Even so, 3 years doesn€™t sound too bad, right? Agreed if the unemployment rate for new college grads wasn€™t so high and if most people even made the median annual income. Oh and if there really was no interest (as I omitted in my previous calculation). Since this is not the case, you begin to recognize the number of people who have the same kind of debt numbers (or much higher) with a substantially lower income. When your debt exceeds your annual income, 3 years turns into 30 or maybe even the rest of your life. Quite the burden.

This isn€™t a blame game

Time out. You are either part of this group of burdened debtors or not. Either way, at this point you may be trying to attribute fault to someone or some group. I want to take a quick break and remind you not to get emotional about this. It is unfortunate, but the truth is that the blame cannot be passed entirely on anyone. Though the numbers are pretty clear to get a rough idea as to what€™s going on, the societal and economic factors that have led to this result are far less black and white. No one wants their kids to struggle, but now it seems everyone€™s kids are struggling.

Similarly, as Figure 1 shows above, this exponential growth has been occurring every 10 years. Each generation has felt more pressure than the last in rising tuition costs. I argue that the reason our generation feels the sting most prominently at this point is because income was growing linearly while tuition costs have continued at a near-exponential rate. At this point we€™re starting to feel how fast exponential growth really is and this will only continue to worsen in the coming years. If this continues, 10 or 20 years from now our kids will tell us that we had it easy (and here we are griping today).

Now that we€™re ready to proceed just remember: we€™re not trying to pass the buck. It€™s up to us to fix this problem one way or the other, but we also have to rationally recognize the problem and figure out exactly what it is (though this post may or may not help that identification).

> And now, back to your regularly scheduled programming.

Problem Recap and Anecdotes

What is the problem again? The cost of education is growing rapidly while the monetary pay-off for receiving an education is decreasing. In many cases, it€™s causing a modern day serfdom (whatever that means). In my generation, it seems we were constantly told, €œgrow up, go to college, get a good job, live a good life.€ We heard and we followed through, but the reality for many is becoming, €œgrow up, go to college, beg for a job, if you get a job sell your soul to your company so you can pay the bank.€

As a result, this has far wider ramifications on our economy. In particular, many companies are looking to target the €œmillennials.€ Why is this? Traditionally, as people hit their 30€²s and are mid-career, they usually have the strongest spending power out of all the generations. That is, they€™re actively making income and actively spending. The unfortunate future very well could be that the millennials don€™t actually have this spending power that companies are betting on due to their higher debt-loads and lower relative incomes. If this turns out to be the case (which would be a joy if we could somehow avoid it), then the entire economy may take a hit soon.

Short-Term Solution

I don€™t usually like to propose many problems without offering some sort of solution. Though these may not be the best plans of attack, I will try to provide some ideas based on my limited life experiences.

First off, the best thing people can do to avoid student loan debt is to simply not go to college unless they have a good reason for it. If you don€™t need to take on debt and really want the experience then it€™s worth going. Similarly, if you require a degree to perform your job, then your hands are a bit tied (engineers, doctors, lawyers, etc.); at this point you should weigh your professional passions with the outcome of your expected quality of life.

On the other hand, if the previous two points do not describe your situation, then you should really be careful if you€™re going to be taking on debt to attend. If your debt is going to far exceed the income you can expect from earning a particular degree, you may want to reconsider your choice. Likewise, if you have no specific reason and you are attending college because €œit€™s what you€™re supposed to do,€ you should similarly avoid the situation.

This then begs the question, what do you do if you don€™t attend college? This is a greater societal problem, I think. At this day in age, our society does not place high value on the trades; this is a scary thought. It is immensely important that we have skilled people who understand how to perform the jobs of an electrician, plumber, HVAC, etc. Our entire society would collapse without these people (read: can you fix your running water when something is stuck in the pipes? I didn€™t think so). If you haven€™t explored the trades, you should consider them if you don€™t have a particular passion in mind that requires a college education.

The key thing to remember is that everyone provides value to society in one way or another. While engineers who invent new things and doctors who keep people and animals healthy require a college education, it€™s possible that plumbers who keep water running to your home and garbage men who keep your environment sanitary for your everyday life do not require such extensive schooling. Even so, it is hard to argue that the value of any one of those professions is greater than the other. If either of them is missing, our entire society as we know it begins to breakdown.

> NOTE: I want to stress that this is not an argument against attending college. On the contrary, this is about ensuring your motivations are well founded and that you have considered how to provide yourself with a prosperous future.

Long-Term Solution

This is a hard one and I honestly don€™t have a €œreal solution.€ Instead, I will use this opportunity to explore problems I have identified and things I think need to be solved before we reach a viable long-term solution as a whole society.

Cost reduction on education. We need to reduce education costs. This article does not explain why the value of education has increased so rapidly (so we won€™t talk about it), but we need to address those issues and find affordable alternatives to whatever is causing this explosion. With the internet and vast amounts of knowledge literally at our fingertips today, we should minimally seek accreditation alternatives for people capable of learning the material on their own without the instruction of a formal institution.

Remove €œivory tower€ mentality. Jobs which simply do not need a degree for the practitioner€™s success should not be guarded by an arbitrary ritual of going to college. Rather than judging people for their education, you should judge them on their capability to complete the work tasked to the position in which you€™re seeking to fill. Similarly, you should not arbitrarily price someone€™s salary based on having a certain level of education, but again, on the value they will add to your business (start initial offerings this way, but adjust as needed perhaps). This is a much larger societal change which will not be easily delivered.

Banks should protect their debtors (career plan required?). I know banks are these greedy institutions out to make money (or at least that’s what everyone would have us believe). That said, they really should be prudent when an 18 year old kid comes to them and requests $30,000 to go to school. They don€™t issue small business loans without a viable business plan and so they shouldn€™t accept student loan requests without a viable career plan. Of course no one has their life planned out at 18, but the bank can at least assess many things from this plan: the drive of the student, the likelihood that they€™ll be able to repay the loan, and, perhaps, the likelihood of the student completing his education and following through with the plan. This process should occur each time a student applies for a loan. This way when the now 19 year old has switched from being a music major to a computer science major, they can reassess his plan for success.


This issue is currently a hot topic in our society. In fact, most people are affected by it since it is likely that they find themselves in this situation or they know someone close who is (i.e. a child, perhaps?). Though many are talking about it, it feels as if there is not much real discussion on-going about improving the situation (at least in any sizable quorum). If there is, it seems to be well hidden from the everyday public who is most affected by it. Of course there are discussions in Washington, but politicians do a lot of talking and perform very few actions, so that’s not always very useful (/end cynicism).

There exist valiant efforts such as Kahn Academy and Coursera for those who are looking to learn (i.e. supposedly the primary reason for education). However, these solutions are incomplete. We have not quite made it to the point where knowledge is equivalent to a degree. In many cases, having a degree is more important to getting a job than possessing the relevant knowledge. This is clearly backwards. Until we can get passed these issues as a society, I fear we may be stuck for now and in 10 years, some other 20-something year old will write a similar blog discussing the same things.

As I said before, though it seems there is no large on-going discussion about the issue, many are already talking about it. Let’s turn those whispers into a full-blown dialog. If our generation turns out to be apathetic on this issue, we could doom our future.

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