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|Friday, April 04, 2014|
BY ERIC FRUITS
College is expensive and it’s getting more expensive every year. Over the past five years, according to the College Board, in-state tuition and fees at Oregon’s public universities has increased 30 percent, while private institutions have seen a 19 percent increase. Over the same period, average student debt in the U.S. has increased 31 percent to more than $27,000.
The rapidly rising cost of higher education has left even the smartest researchers and the wonkiest of wonks wondering what’s happening and where’s all that money going. More and more, prospective students—and their families—are asking: Is college worth the cost?
Over the past few years, the salary comparison website Payscale.com has collected salary data from its users and ranked U.S. colleges and universities based on which schools deliver the best bang for the buck, measured by Payscale’s calculation of the net return on investment (ROI). They measure ROI as the difference between a typical graduate’s earnings over 20 years and subtract out the cost of attending the school. The data are far from perfect, but there are enough data points to make some broad generalizations.
The figure above turns Payscale’s rankings into a scatterplot. The green dots represent in-state tuition and fees for Oregon public universities, excluding Portland State University. The red squares represent Oregon’s private colleges and universities.
Two things stand out:
While Payscale accounts for the variation in the time it takes a student to complete a degree across institutions, it misses some key costs of higher education. For example, the typical student graduates with about $27,000 of debt. Interest payments on this debt reduce take-home pay and reduce the return on investment for higher education. More importantly, Payscale misses the fact that, in most cases, full-time students give up full-time employment. In addition to spending money on tuition and fees, student are giving up money from four or more years of employment.
The figure above adds some very back-of-the-envelope estimates to account for interest payments on student debt and the opportunity cost giving up employment while in school. It assumes the average amount of debt and that a student would give up full time work at the federal minimum wage. Yes, I know that’s not very realistic, but it’s pretty conservative and you’ll get the idea.
As with the ROI scatterplot, the dots are all over the place. In fact, there is hardly any relationship between the opportunity cost of higher education and future earnings.
What is most striking, however, is how small the net benefits are—even for students paying in-state tuition. Students at Southern Oregon University and Western Oregon University just about break even on their college educations. If it took them a little longer than average to graduate, or if they incurred a bit more student debt, these students would have been better off skipping college altogether.
Keep in mind that the data presented here looks only at the “average” student. The benefits and costs of education are unique to every individual. Having the right test scores, choosing the right major, and having a supportive network of family and peers can make huge differences in the payoff to higher education.
Nevertheless, a look at previous Payscale studies shows that over the past few years, the return on investment in higher education is declining. Students seem to be paying more, but getting less. Research suggest new administrative positions—particularly in student services—have driven a 28 percent growth in the higher-ed work force from 2000 to 2012. At the same time, universities have shifted to a growing army of part-time instructors and full time faculty salaries have barely kept pace with inflation. The result is a set of institutions that have shifted their focus away from research, education, and training and more toward providing social services to employees and students.
Unfortunately, I don’t see this trend ending soon. It will take a major student debt crisis for policy makers and educational institutions to refocus their direction away from growing the university bureaucracy and back to providing an education that is valuable to students and employers.
Eric Fruits blogs on economics and finance for Oregon Business.
Tuesday, July 08, 2014
BY LINDA BAKER | OB EDITOR
The New Yorker recently published a sharply worded critique of “disruptive innovation,” one of the most widely cited theories in the business world today. The article raises questions about the descriptive value of disruption and innovation — whether the terms are mere buzzwords or actually explain today's extraordinarily complex and fast changing business environment.
Update: We caught up with Portland's Thomas Thurston, who shared his data driven take on the disruption controversy.
Monday, June 16, 2014
The Oregon economy could get a boost from a new trade agreement being negotiated between the U.S. and the European Union.
Tuesday, June 03, 2014
Citing the transition to catch shares management as a key to rebuilding stocks and reducing bycatch, 13 species caught by the West Coast trawl fishery today earned designation from the Marine Stewardship Council (MSC) as sustainable.
Thursday, June 05, 2014
BY HANNAH WALLACE | OB BLOGGER
What does it take to launch and run one of these mobile food businesses?
Monday, June 30, 2014
Oregon Business magazine won two silver awards for excellence in writing in the National American Society of Business Publication Editors Western region competition.
Thursday, June 26, 2014
BY ERIC FRUTS | OB BLOGGER
Last year, the housing market in Oregon—and the U.S. as a whole—was blasting off. The Case-Shiller index of home prices ended the year 13% higher than at the beginning of the year. But, was last year a blip, or a trend?
Thursday, July 10, 2014
BY TOM COX | OB BLOGGER
Tom Cox interviews Dr. Mark Goulston, author of Just Listen, Discover the Secret to Getting Through to Absolutely Anyone.
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Lane Powell Shareholder Susan K. Eggum has been elected as vice chair of programs and projects for the International Association of Defense Counsel’s (IADC’s) Employment Law Committee.
Geffen Mesher is saddened to announce the passing of long-time shareholder, Tom “Mike” Anderson, who died on July 10, 2014, from liver disease diagnosed after recent heart surgery. He was 55 years old.
Fifteen Lane Powell attorneys have been named 2014 “Oregon Super Lawyers,” and another five attorneys have been named as “Oregon Rising Stars” by Super Lawyers magazine.