A pair of recent studies reaffirm the value of a college education – both to the individual graduate and to states that maintain strong financial support for higher education.

In an update to a 2014 study, Jaison R. Abel and Richard Deitz of the Federal Reserve Bank of New York found that while rising tuition has slightly eroded the return on investment for a bachelor’s degree, college remains a good investment for most people.

The average graduate with just a bachelor’s degree earned about $78,000 in recent years, compared to $45,000 for the average worker with only a high school diploma, they found.

“At nearly 14 percent, the return to college easily exceeds various investment benchmarks, such as the long-term return on stocks (7 percent) or bonds (3 percent),” Abel and Deitz wrote in a Fed blog.

“While the rising cost of college may be troubling, it has not yet changed the basic calculus as to whether earning a college degree is worth it. The benefits still outweigh the costs, at least for most people.”¹

FOR THOSE WHO CARE about the workforce of the future, the second study, published by the National Bureau of Economic Research, has disturbing implications given state disinvestment in public universities since the Great Recession.²

The study, by economists and researchers at the University of Virginia, University of Michigan, University of California, San Diego and the Urban Institute, found states that cut appropriations for higher education see declines in the numbers of bachelor’s and doctoral degrees awarded.

The researchers compared states like Michigan, Wisconsin and Pennsylvania, which reduced higher-education appropriations significantly over 25 years, with states such as Texas and New York that did not reduce funding significantly. 

They found that a 10 percent decrease in state appropriations over time at a public research university leads to a 3.6 percent decrease in bachelor’s degrees and a 7.2 percent decrease in PhDs awarded.

“A big highlight that is consistent with other research … is that money matters,” Sarah Turner, a professor of economics and education at Virginia and one of the study’s authors, told Inside Higher Ed.

“Spending of public universities’ state appropriations impacts degree attainment both at the undergraduate level and at the doctorate level at research universities, and enrollment more broadly at the non-research public universities,” Turner said.

Research universities tended to increase tuition or fundraising or recruit more out-of-state students to offset the loss of state funds, the study found. Non-research public universities struggled considerably more to replace lost funds.³

So if North Carolina is serious about meeting its new attainment goal of 2 million North Carolinians with a degree or high-quality certificate by 2030, it needs to:

• Return state spending per student to pre-recession levels;
• Continue to smooth transfers from community colleges to universities;
• Continue to keep tuition low;
• Keep a careful eye on student debt – though North Carolina once took pride in low student debt, debt levels among the state’s public university graduates are now approaching the national average;
• And keep salaries for its university and community-college faculty competitive.⁴

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¹ https://libertystreeteconomics.newyorkfed.org/2019/06/despite-rising-costs-college-is-still-a-good-investment.html. 
² https://hew.aveltsagency.com/2019/06/wws-public-universities/. 
³ https://www.insidehighered.com/news/2019/06/18/study-finds-falling-appropriations-will-negatively-affect-degrees-awarded-public.
⁴https://hew.aveltsagency.com/2019/06/wws-public-universities/; https://hew.aveltsagency.com/2019/06/wws-community-colleges/.