College Degrees Overvalued?

Are college degrees overvalued? According to researches with PayScale, the answer is yes, at least for the average student and relative to what most of us were promised by our high school counselors. Rather than the oft quoted return on investment (ROI) of around $1 million over 30 years, PayScale estimates that number to be less than $400,000. Indeed, some schools such as MIT have much higher ROIs, $1.7 million in MIT's case. As might be expected, traditional liberal arts schools lag behind--art, history, and education simply don't pay as well as engineering, the sciences, and mathematics.

I am amused by the common complaint by those schools with lower ROIs that their estimate would be much higher if PayScale would have accounted for financial aid. Firstly, it likely doesn't make much of a difference and certainly did not in the case of Philadelphia University (218,000 vs. 276,000--a gain, but still well below the average). More importantly, though, those grants and subsidized loans are not free. That money could have been used elsewhere where it may have garnered a greater return. Subtracting the financial aid awards from the cost of the education would be to ignore a substantial part of the cost and bias the estimates in favor of higher ROI.

By the way, Richard Vedder is quoted in the article linked above, explaining that the ROI for the college education in general is falling over time due to the increase in supply of people with college degrees.