Higher Education: A Deflating Bubble?

Paula Tkac & Michael Chriszt:

There are at least two sides to every debate, but it's becoming clearer by the day that the debate over the cost of higher education is being won by people like University of Tennessee law professor Glenn Reynolds.

A frequent writer and lecturer, and even more frequent blogger, Reynolds visited the Atlanta Fed recently to share his views with local community leaders. He reported that total student loan debt now stands at over $1 trillion--more than total credit card debt and auto loan debt combined. As these charts from the New York Fed show, the increase in total student debt over the past eight years is a result of greater numbers of students and families taking on educational debt as well as higher debt balances per student.

One can argue that this trend is not necessarily a bad thing. Education is an investment in human capital, and if those newly acquired skills are valued highly by employers, then going to college can be a positive net present value project, even with debt financing.

And wage data reveal that these skills are indeed valuable. As this Cleveland Fed article and chart show, the median wage for a worker with a bachelor's degree was about 30 percent higher than that of a worker with only a high school diploma in the late 1970s and grew to more than 60 percent higher by the early 2000s. However, the data also show that over the last decade the value of a college degree measured by wages has stagnated.

Posted by Jim Zellmer at April 17, 2013 1:31 AM
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