Is college still worth the cost? Usually

It’s a distortion that’s oft-repeated, and refuses to die: Legions of college grads working long hours as baristas, their expensive degrees wasted after not finding a job in their chosen fields.

While such anecdotes are compelling, the evidence points to the contrary: College in Michigan still grades out as a sound financial investment for most students in both the short and long term. Projections of lifetime earnings say that holds true even as people across the state express anxiety about rising student debt and tuition costs. There also remains a correlation between states with a higher share of college graduates and higher household incomes – an equation that leaves Michigan behind a majority of states.

In 2014, Michigan college graduates over age 25 had median earnings of $49,839 - 86 percent higher than the median wage for a high school graduate ($26,835) and 56 percent higher than someone with some college or an associate degree ($31,865).

Over time, this earnings gap grows – even though median income for Michigan college grads is still 10.6 percent below 2005 levels, when a college graduate earned the equivalent of $55,738 in 2015 dollars. That’s because the drop for high school grads was even steeper, falling 15.3 percent over that time. And for those with some college, median wages fell 18 percent.

Put another way, a Michigan high school graduate in 2005 earned 57 cents on the dollar compared with a college graduate. That fell to 54 cents on the dollar by 2015.

“If I were to summarize, for the vast majority of people a college degree will be a worthwhile investment over a lifetime,” said Brad Hershbein, an analyst at the W.E. Upjohn Institute for Employment Research in Kalamazoo, which analyzes workplace data in Michigan. “It may not be as good as it was 15 years ago, but it's still a good one.”

Hershbein did note a significant caveat: Not all college majors are created equal.

A 2014 national study of lifetime earnings in 80 college majors found that median earnings by college graduates are higher in every major over lifetime earnings of those with a high school degree. But there were a handful of majors that earned less than the median earnings of those with an associate degree -- and not much more than a high school graduate. They include drama and theater arts, elementary education, early childhood education and theology.

Hershbein -- who co-authored the study for the Hamilton Project, an initiative of the Brookings Institution -- said it’s a financial calculation that students who go into those lower-paying fields should make with eyes wide open.

“Money is clearly not the only thing that matters or should matter,” he said. “But if you are taking out a $40,000 or $50,000 loan, it’s going to be a challenge to pay that back. You have to make sure you enjoy it a lot.

“The 99th percentile for earnings in theater arts do well, because they are working in Hollywood. The vast majority don’t get that lucky.”

But for the most part, these are the exceptions that prove the rule.

While the Great Recession of 2008 buffeted Michigan workers across the education strata, those with a college degree were better equipped to weather the storm. In 2015, 2.6 percent of those with a bachelor's degree or higher in Michigan were unemployed, compared with 5.6 percent of those with some college, 8.6 percent of high school graduates and 14 percent of high school dropouts.

In 2015, Business Leaders for Michigan, a business growth advocacy organization, released a report which found the state would need to double the percentage of college grads by 2020 to produce a competitive economy. With 31.5 percent of residents age 25 to 34 with a college degree in 2014, Michigan ranked 27th in the nation.

By comparison, another Midwest state, Minnesota – with nearly 40 percent of those 25 to 34 with a college degree – ranked 8th. Minnesota's per capita income in 2015 stood at $33,425, which ranked 12th, 20 percent higher than Michigan's per capita of $27,865, which ranked 26th. Massachusetts, which led in the share of those 25 to 34 with college degrees at 51 percent, ranked second in per capita income at $38,130.

Doug Rothwell, president and CEO of Business Leaders for Michigan, said it's no coincidence that states with a greater share of college graduates also have higher incomes. “It's a reason why we have to make raising education levels a highest priority for the state,” Rothwell said.

“This really is not rocket science. It's pretty straightforward stuff. It seems like we have to keep talking about it over and over again to get people to see how important it is.”

Loan debt gives pause

But it's also true that state cuts to higher education have led to efforts by Michigan’s public universities to raise tuition to make up the difference – saddling students with rising debt loads.

The result has been a state teeming with exasperated students and families. More than 80 percent of participants in The Center for Michigan’s Community Conversations last year said a college degree or vocational training is important or very important to prosper in the modern economy. But a majority surveyed – about 55 percent – questioned whether families can afford higher education, and even whether the expense was worth it. Participants laid blame on both Lansing and the schools (though slightly more on Lansing) for the burden these costs place on families.

In 1990, Michigan gave just over $1 billion to state universities. If state spending on higher education had simply kept pace with inflation through 2014, universities would have received $1.92 billion. Instead, colleges got $1.26 billion - a third less.

In the 2006-07 school year, the first year for which data is available, the net cost of attending a Michigan public university consumed 17.4 percent of Michigan median household income – the ninth-highest burden in the nation. By 2011-12, the annual net cost had risen to 23.1 percent of median household income – third highest in the country.

A 2015 report by the Institute for College Access & Success, a nonprofit that advocates for more affordable college education, found the average debt of a Michigan college graduate in 2014 was $29,450. In 2005, the average debt was $22,456, adjusted to 2014 dollars - a 31-percent jump in one decade.

How far past high school?

That trend has churned a debate over whether the cost of a four-year degree is still worth it, even as advocates for more comprehensive vocational training in Michigan say that jobs in the skilled trades that can support a middle class life still go begging.

A scan of Pure Michigan Talent Connect, the state's job post site, reveals hundreds of openings for welders, fabricators, electricians and machine operators at wages that range from $12 to $20 an hour and up; some work experience or post-high school training is required in many cases, but not a four-year degree.

For those who do not opt for college, those can be worthy career options. But when the cost of college is weighed against lifetime earnings, many experts say, that cost is still more likely to pay for itself.

“It's the best investment you can make,” said Lou Glazer, president and co-founder of Michigan Future Inc., a nonprofit Ann Arbor-based economic research organization

“It's just like open and shut. Without student debt, with student debt, it's the best investment you can make. It's better than stocks, better than bonds.”

Glazer points to a 2011 study by the Hamilton Project that examined return on investment in a college degree over a 40-year age span. It assumed a cost of about $100,000 for a four-year college degree. It factored in lost wages for the four years of attending college, but did not count room and board, since that expense is incurred whether in college or not.

The study put the average annual return for college at 15.2 percent, compared with the 6.8 percent average return for the stock market over the previous 60 years, 2.9 percent for corporate bonds and 2.3 percent for gold. That was based on projections that an average college grad will earn $570,000 more than a high school graduate over a lifetime.

The long view on earnings

A closer at Michigan reveals a parallel gap in career earnings by education.

Analysis of U.S. Census data in Michigan for age, earnings and education level from 2005 to 2014 by the Upjohn Institute projected median 40-year career earnings of just under $1.2 million for those with a four-year college degree in today’s dollars.

That compares with about $830,000 for those with an associate degree, $700,000 for those with some college but no associate degree, $540,000 for a high school graduate, and just under $390,000 for a high school dropout.

That means the typical college graduate projects to earn about 2.2 times that of a high school graduate over a career. Workers with a professional degree (that is, a graduate degree following four years of college) have projected median earnings of $2.2 million – four times that of a high school graduate.

Hershbein, of Upjohn, stressed the findings do not mean a college education always means higher earnings. Nor does it condemn all high school grads to a lifetime of meager earnings. It's all about the probability of success, he said, “it’s not a guarantee.”

Indeed, the top 10 percent of high school grads can do quite well, projecting to earn about $1.2 million in lifetime earnings, the same as the median college grad. according to an Upjohn analysis. Conversely, those in the bottom 10 percent with a four-year college degree earned $290,000, a bit more than half the median earnings for high school graduates.

“It's too broad a generalization to say everyone should go to college,” Hershbein said.

“I would not agree that everyone needs a four-year degree to have a middle-class life. But just about everyone is going to need some kind of education beyond high school to secure a middle-class life.”

Majors matter

Who does best among college grads?

Those in management, a category that encompasses about 200,000 of the state's work force of 4.1 million, with median annual earnings of about $94,000. Within the group are some 8,000 CEOs with median earnings of just under $165,000. By and large, these are jobs that require at minimum a four-year college degree.

Engineers – another category that requires a four-year degree – also do well. Median annual earnings ranged from about $82,000 for chemical engineers to $89,000 for computer hardware engineers to more than $106,000 for nuclear engineers, a specialized group of just under 500 workers.

Then there are the low paying careers that require a college degree.

Community and social service occupations – about 58,000 jobs – had a median annual earnings of $43,000. That includes about $37,000 a year for substance abuse and mental health counselors and just over $40,000 for family therapists.

Near the bottom of Michigan’s wage scale are some 370,000 food preparation and food service workers, with median annual earnings of less than $20,000 – no college degree required. The category includes bartenders, cooks, waitresses and dishwashers.

True, thousands of blue-collar workers without college degrees can do well in a variety of occupations. Some 12,000 tool-and-die makers had median incomes of more than $51,000 a year, 18,000 electricians had median earnings of about $59,000 and some 10,000 plumbers, steamfitters and pipefitters had median earnings of more than $56,000. Some 250 boilermakers had median annual earnings of nearly $70,000.

It should be noted these are occupations that require considerable specialized training and certificates beyond a simple high school degree.

University return on investment

Those Michigan colleges and universities that produce the highest return on investment have strong programs linked to top-paying professions: in fields like science, technology, engineering and math.

In a 2016 comparison of college cost and mid-career earnings, Kettering University in Flint ranked as top ROI school in Michigan. The private university specializes in engineering, computer science and other technical fields.

Kettering graduates had a 20-year ROI of $785,000. Michigan Technological University – also known for its STEM course offerings – placed second, with a 20-year ROI of $670,000, just ahead of the University of Michigan, with a 20-year ROI of $667,000.

Still, there are those like Detroit resident Annie Derbabian, 29, who chose a different route, switching halfway through college from a major in chemistry to journalism. It's a choice she now regrets, as newspapers across the state have made drastic staffing cuts in recent years.

“I probably should have stuck with chemistry,” she said.

The 2013 graduate of Wayne State University, unable to land a decent-paying job in her career field, now works full time as a bartender. It pays the bills, which includes about $50,000 in student loans.

Derbabian, who worked in the past as a pharmacy technician, is planning to renew her certificate in that specialty with the hope of finding work in a hospital. She might return to college, perhaps in biotechnology.
Through it all, she said she is confident her education will pay off in the long run.

“One hundred percent,” she said. “I've always been a very positive person. As long as my bills are paid and I'm learning new things, I'm good.”

The graduate

Glazer of Michigan Future said it's not uncommon – especially in today's economy – for college graduates to shuffle around in lower-paying jobs for a few years before they find their career footing.

He recites the story of an Ivy League graduate named Sally Cameron, featured in a 1982 Washington Post article as a sort of poster child for the underemployed college graduate. It seems that Cameron, with a degree in management from Smith College, couldn't find anything in her field. She was working as a bartender.

The New Republic magazine tracked Cameron down in 2011, and found that she was a senior manager under contract for an international consulting company with the United States Agency for International Development, the agency primarily responsible for administering civilian foreign aid.

“The thing that we've been saying over and over about the value of a four-year degree is that it's not just the first job,” Glazer said. “Most people assume that if you making $30,000 in your first job, that's what you will be making over a 40-year career. That's just wrong.”

Tom Moran, a resident of the northern Lower Peninsula, never made it past high school.

A 1978 graduate of Onaway High School, about 40 miles southeast of the Mackinac Bridge, he launched a one-man welding business out of a small rental shop in town. He started out welding bicycles, lawnmowers, broken mufflers, often for $10 or $20 a job. Just about everything he knows about welding or metal fabrication or business, he taught himself.

He would be the exception to the rule about education and income.

Today, he's the founder and CEO of Moran Iron Works, a firm that employs about 100 workers and specializes in mammoth, custom-fabrication projects. That includes 500-ton ocean barges, a $50 million contract to build flue gas ductwork for Consumers Energy’s coal-fired electric plant in Ottawa County and a $3.8 million contract to construct a new ferry for Shepler's Mackinac Island service.

Moran, 56, is not one to put down the value of a college education.

But he added: “There is a saying in business that the A students are employed by the B students and the B students are employed by the C students. What that says is that academics aren't everything.”

Outside of any book learning, Moran attributes his rise in business to a couple qualities: “Persistence and determination. I really think those are the big ones.

“I visualized everything. I could visualize it, from putting the first dollar into the checking account to millions. I've been able to visualize all of that, whether it was getting from point A to point B or what the first decade would take or what the second decade would take.”

He said he still has a lot of friends from high school, many of whom have only high school degrees yet are making $100,000 or more.

“But they are spending the money to put three or four kids through college,” he said. “Because they think that's important.”

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Thu, 09/15/2016 - 10:57am
Only thing proven in this article is that just having a college degree doesn't prove intelligence. One more time folks ... CORREALATION DOESN'T PROVE CAUSATION! Clearly authors and contributors don't understand this basic rule of logic. I grew up in New York and Connecticut, they are very wealthy states. Higher family wealth = higher likelihood of kids going to college, even if parents didn't go to college. Higher family wealth, fair or not, also correlates with kids getting higher income jobs in the future. College degree holders generally have higher aspirational mindsets and come from aspirational cultures and in general correlate with higher cognitive ability, (or at least used to), but you can't say degrees cause them! The only things that can be said are that college degrees help some/many people, but whether this is because of the knowledge gained or the expectations placed or misplaced on the degree holder can be debated. Stating that just generating more degrees is a silver bullet for Michigan's economy as implied in this article is just embarrassing.
David Waymire
Thu, 09/15/2016 - 1:08pm
Go back to 1980. Mass and Mi had the same income and about the same college attainment. Mass chose to invest in education and cities (remember Taxachusetts). Mi decided it was a factory state, and cut taxes. Mass made the right call. A smart person with no degree today is called "unemployed." Here's my question. Will you tell your smart kid to skip college? Nope. Neither will anyone else who has the means to send their kid to college.
Thu, 09/15/2016 - 2:00pm
David, I'm glad you bring up Massachusetts, to make my point. First of all the cost of living in MA is a 20% to 40% (Boston Metro area) PLUS difference vs. MI, so in comparing spending and Income between the two, most if not all the differences you point out disappear. Secondly, culturally and demographically there is no comparing the two places. Like comparing Ann Arbor and St Ignace and money isn't going to money the bubble that much! You are, and you know it, wrong to claim smart people without degrees are unemployed,it's a tough labor market out there ask any company. I am not arguing that your kid or my kid should or shouldn't go to college, that depends on them and their abilities and interests. I am arguing that the idea here of herding (and paying for) huge numbers of kids into college in the hopes of turning around MI's economy is an absurd and stupid idea. Thanks.
David Waymire
Thu, 09/15/2016 - 5:17pm
And I'll just say any state with a low college attainment level is a poor state. The data at the top of the story shows the top side...the bottom is exactly the same, poor states have low college attainment. There is a much better link between college grads and prosperity than low taxes and prosperity (where there is virtually no correlation). And let's not forget, those who are living in those places where housing is of high demand (and that's what cost of living is mostly...the cost of housing) are buying a neighborhood far, far richer in the experiences they want than those who live where the cost of living is low. Try to find a museum, a place where quality music is played regularly, where the restaurants are top notch in a place where the cost of living is low compared to Ann Arbor. Nobody is suggesting we "herd" kids into college. What I am saying is that our policies of the last 15 years of making college more expensive by cutting taxes is reducing opportunity for those families with low or middle incomes to see college as the future. And, frankly, every kid who should go to college-- has the degree and aptitude -- but does not is reducing the prosperity of our state. We need to encourage more kids to go to college. Our current policy is to discourage even those who are qualified from attending. Or worse, encouraging the best and brightest to go to another state, where they are more likely to stay and grow the economy there.
Thu, 09/15/2016 - 6:48pm
David, My first point still remains, that children from wealthier and aspirational families go to college more often giving those wealthier states higher attainment stats is a far more accurate picture than saying that producing many college degrees causes states to become wealthy and prosperous. The premise of the article is based on poor unsupported logic. Nor do I like your contention that every kid that could go, but doesn't go to college hurts the state in its future prosperity. I'd trade you a plumber/mechanic/electrician etc. for a degreed social worker every time! Do you really want the electrician wiring your home to be moron? I'd forgive this as unintended degree snobbery. Finally you saying that our state's lower support for higher Ed support is really stopping anyone who is really determined to pursue a degree is another stretch. With CCs and local U's along with a smattering of Pell grants, other scholarships, part time jobs and savings with student loans as a fall back - even at the $30k you guys keep moaning about, I don't see this as a huge obstacle if the degree really brings the value you hope it does. (For the record I and my kids did 2 years at CC before going to a U for another 2. and don't think it hurt anything.) Granted the person who spends 6 years at a full U getting a worthless unused or non marketable degree has a problem beyond just being foolish. Thanks.
Thu, 09/15/2016 - 6:03pm
Having a degree proves desire and persistence, talent is not enough. An engineering degree is probably the best example of this. There are many very capable people that talk about it and even try it, but when it comes to doing the necessary work they try a different degree program. There oh so many more that have been discouraged from even trying being told science and math are too hard, when in reality all it takes is doing the homework everyday. If you have ever had the opportunity to work with engineers, STEM degreed people, the only difference is that they have a bit more specialized knowledge [that other people are willing to pay more for].
Thu, 09/15/2016 - 11:04am
Article puts too much emphasis on average returns to college education (remember the statistician drowning in a river only 3 feet deep -- on average) and not enough on the second part which is crucial: getting a curriculum with marketable skills. That does not mean 4 years of accounting but a broad based liberal arts curriculum plus 50% accounting and finance related courses, or engineering, or science. Actually, the PRIVATE providers of student loans seem to know something about future earnings power and clearly discriminate against "Basket Weaving 1, 2 and Advanced BW."
Thu, 09/15/2016 - 12:08pm
Although I've been known to say "College is a scam", I recognize the importance of education beyond High School and this article confirms the value. The trick is to maximize the ROI by evaluating a school as if it is an investment: tuition rates, other fees, graduation requirements, marketability after graduation. It may be the best "investment" is to pursue education slowly - while earning a decent wage in a job that doesn't require a degree.
Thu, 09/15/2016 - 6:05pm
“This really is not rocket science. It's pretty straightforward stuff. It seems like we have to keep talking about it over and over again to get people to see how important it is.” Mr. Rothwell Maybe it is ‘rocket science ‘and people should listen to Albert Einstein, ‘Insanity: doing the same thing over and over again and expecting different results.’ Could it be that all this talk should be framed so those who we want to see go on to earn their degrees are listening, because by all appearances what has been/is being said or at least how it is being said doesn’t seem to changing results.
Thu, 09/15/2016 - 7:09pm
All the above chatter has its place but until the public colleges in Michigan begin to realize that their real mission is to educate everyone who wishes to be educated. That their mission as a public college isn't to have a glorious appearing edifice plus administrational head count and salaries not under reasonable cost containment controls. Public colleges in Michigan need to finally realize that their mission isn't to compete with privately funded colleges who have a different mission that isn't constrained by expenses. In other words public colleges depend on taxpayers who have expectations that their college degree is substantially less costly than a private school.
John Q. Public
Thu, 09/15/2016 - 11:28pm
Generally, companies won't consider people without degrees for higher-paid jobs in those companies. They will hire a lazy idiot with a degree before they will hire a hard-working genius without one. So, from an individual standpoint it makes sense to get a degree if you want a high-paying job. From a societal perspective, it makes more sense to encourage companies to institute hiring practices which favor smart people, regardless of whether they have college degrees. For whatever reasons, we refuse to do that so we have an "educated" workforce which isn't getting the job done. "Then there are the low paying careers that require a college degree." Careers don't require college degrees. Neither do jobs. Only hiring managers do that. For science-based positions, that's necessary, but for a great many other jobs, it's silly. Banks and insurance companies insist on degrees for positions that require no more financial acumen and training than what is required to balance a checkbook. The solution for individuals is to get a degree. The solution for our economy is to change the criteria we use to hire people.