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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.
Wednesday, November 26, 2014
BY NISHANT BHAJARIA | OP-ED CONTRIBUTOR
By now, anyone who knows about it has a position on President Obama’s executive order on immigration. The executive order is the outcome of failed attempts at getting a bill through the normal legislative process. Both Obama and his predecessor came close, but not close enough since the process broke down multiple times.
Friday, December 12, 2014
BY LINDA BAKER
Studying ground-running birds, a group that ranks among nature's speediest and most agile bipedal runners, to build a faster robot.
Tuesday, December 02, 2014
BY LINDA BAKER
A conversation with attorney Erich Merrill about the latest way to raise money from large groups of people.
Saturday, December 13, 2014
Checking in with the managing director of Arnerich Massena.
Thursday, December 11, 2014
There’s a fascinating article in the December issue of the Harvard Business Review about a profound power shift taking place in business and society. It’s a long read, but the gist revolves around the tension between “old power” and “new power” as a driver of transformation. Here’s an excerpt:
The authors, Henry Timms and Jeremy Heimans, don’t necessarily favor one form of power over another but merely outline how power is transitioning, and how companies can take advantage of these changes to strengthen their positions in the marketplace.
Our Powerbook issue might be viewed as a case study in the new-power transition. This annual book of lists provides information on leading businesses, nonprofits and universities in the state. Most of the featured companies are entrenched power players now pursuing more flexible and less hierarchical approaches to doing business. Law firms, for example, are adopting new technologies and fee structures to make legal services more accessible and affordable.
This month we also take a look at a controversial new U.S. Securities and Exchange Commission rule requiring public companies to disclose the median pay of workers, as well as the ratio between CEO and median-worker pay.
Part of the 2010 Dodd-Frank financial reform law, the rule will compel public companies to be more open about employee compensation, with the assumption that greater transparency will improve corporate performance and, perhaps, help address one of the major challenges of our time: income inequality.
New power is not only about strategy and tactics, the Harvard Business Review authors say. “The ultimate questions are ethical. The big question is whether new power can genuinely serve the common good and confront society’s most intractable problems.”
That sounds like a call to arms. Or a New Year’s resolution. Old power or new, the goals are the same: to be a force for positive change in the world. Happy 2015!
Sunday, December 07, 2014
BY LINDA BAKER
On Friday, Uber switched on an app — and with one push of the button torpedoed Portland’s famed public process.
Wednesday, October 22, 2014
BY AMY MILSHTEIN
Meetings get a bad rap. A few local companies make them count.
|A Complex Portrait: Immigration, Jobs and the Economy|
|Woman of Steel|
|Kill the Meeting|
Port of Morrow's business-ready attitude has a surprising global impact.
Through its support of the arts, the Cultural Trust is strengthening the business community.
Heed the morals of these seminal holiday stories in your everyday life.
Amy will practice in the firm's Business, Real Estate, and Tax practice groups.