the root of the crisis in higher education (and the evidence that investment in universities may amount to a bubble) comes down to the fact that additional value has not been created to match this extra spending. Indeed, evidence from declines in the quality of students and graduates suggests that a degree may now mean less than it once did.
For example, a federal survey showed that the literacy of college-educated citizens declined between 1992 and 2003. Only a quarter were deemed proficient, defined as “using printed and written information to function in society, to achieve one’s goals and to develop one’s knowledge and potential”. Almost a third of students these days do not take any courses that involve more than 40 pages of reading over an entire term. Moreover, students are spending measurably less time studying and more on recreation. “Workload management”, however, is studied with enthusiasm—students share online tips about “blow off” classes (those which can be avoided with no damage to grades) and which teachers are the easiest-going.
Yet neither the lack of investment in teaching nor the deficit of attention appears to have had a negative impact on grades. A remarkable 43% of all grades at four-year universities are As, an increase of 28 percentage points since 1960. Grade point averages rose from about 2.52 in the 1950s to 3.11 in 2006.
At this point a sceptic could argue that none of this matters much, since students are paid a handsome premium for their degree and on the whole earn back their investment over a lifetime. While this is still broadly true, there are a number of important caveats. One is that it is easily possible to overspend on one’s education: just ask the hundreds of thousands of law graduates who have not found work as lawyers. And this premium is of little comfort to the 9.1% of borrowers who in 2011 had defaulted on their federal student loans within two years of graduating. There are 200 colleges and universities where the three-year default rate is 30% or more.
Another issue is that the salary gap between those with only a high-school diploma and those with a university degree is created by the plummeting value of the diploma, rather than by soaring graduate salaries. After adjusting for inflation, graduates earned no more in 2007 than they did in 1979. Young graduates facing a decline in earnings over the past decade (16% for women, 19% for men), and a lot more debt, are unlikely to feel particularly cheered by the argument that, over a lifetime, they would be even worse off without a degree than with one.
