Friday, June 24, 2011

Is College Worth It?


Faithful reader Steve Plouffe suggested I post a comment about college tuition costs:

I have a son who will be a junior at Wesleyan University. You have to be a pretty good student to gain acceptance at Wesleyan, according to the Wesleyan Argus:

...admission for the Class of 2014 was the most selective it has been in the University’s history. Out of 10,656 applicants, the University admitted 2,125, translating to a 20 percent admission rate. In contrast, the rate two years ago was 27 percent. The University hopes to enroll 745 students....

Still, Wesleyan is not cheap, and tuition costs keep rising. Tuition for the 2011-12 school year will rise by 3.8%, which is roughly in line with increases for prior years.

But, according to the New York Times, Wes is not alone in raising its tuition:

Tuition and fees at private nonprofit colleges and universities will increase by an average of 4.6 percent — about $1,228 — for the next academic year, according to the National Association of Independent Colleges and Universities. The average tuition increase was 4.5 percent last year and 4.3 percent the previous year, down from average annual increases of 6 percent in the decade before the economic downturn.

Private College Costs Rising 4.6 Percent - NYTimes.com

College education, it seems, is one of those rare commodities where demand rises along with cost. Like fine wine, the more something costs, the higher the cost of tuition the strong the demand for admittance.

But is it worth it?

Well, to my wife and I, this is a no-brainer: we were mostly concerned about getting our son into the best school possible, regardless of cost.

But not everyone agrees. Bill Gross of Pimco - arguably the best bond manager of our generation, and manager of the largest bond fund in the United States - writes about college tuitions in his most recent monthly newsletter.

And, to Mr. Gross, college is fast becoming somewhat of a scam:

Fact: College tuition has increased at a rate 6% higher than the general rate of inflation for the past 25 years, making it four times as expensive relative to other goods and services as it was in 1985. Subjective explanation: University administrators have a talent for increasing top line revenues via tuition, but lack the spine necessary to upgrade academic productivity. Professorial tenure and outdated curricula focusing on liberal arts instead of a more practical global agenda focusing on math and science are primary culprits....

Conclusion to ponder: American citizens and its universities have experienced an ivy-laden ivory tower for the past half century. Students, however, can no longer assume that a four year degree will be the golden ticket to a good job in a global economy that cares little for their social networking skills and more about what their labor is worth on the global marketplace.

http://www.pimco.com/EN/Insights/Pages/School-Daze-School-Daze-Good-Old-Golden-Rule-Days.aspx

I don't know when this cycle will change - I can remember the same complaints about tuition costs when I was going to Michigan in the 1970's - but it does seem logical that at some point there will be a point where students and their families will say: Enough.

Still, I think this point may be further away than perhaps Mr. Gross thinks. Once my son completes his four years at Wesleyan, I doubt that Mrs. RG and I will be as concerned about tuition cost as we are today.