Are “too many” people going to college?

I hear this question a lot. Lisa Barrow and Ofer Malamud have a new article in the Annual Review of Economics. Worth reading, but here are some of the high level points:
  • On average, college is a good investment. The internal rate of return is large. None of their estimates is less than 5%, and many are much higher.
  • This means that college education is (gasp!) individually rational, and borrowing at low rates to fund education is a good idea for the average student. Probably most.
  • The most substantial variation in rates of return is across college majors, ranging from 5.5% (for men who are education majors) to 16.4% (for women who are computer and information science majors).
  • Individual characteristics don’t change the expected returns a great deal, though the returns are lower for women and minorities.
  • We should probably be more concerned about debt loads on the small minority who make a poor decision, or have bad luck, than the average student who will pay these loans off just fine.