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.

15 thoughts on “Are “too many” people going to college?

  1. What is the ROI of increasing knowledge and the richness of human experience? Who cares?

  2. This issue is concerned on the investment of human capital, including quality and quantity, how to balance

  3. Another dimension to this question is income inequality. Of course there are many determinants of country-level inequality, but one is likely to be the “race between education and technology”. To summarise, if education influences the supply of skilled labour relative to unskilled, then less education could eventually lead to greater income disparity between skilled and unskilled labour. This dimension is unfortunately particularly relevant in the US given its high level of income inequality relative to other developed countries.