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- [00:00]
A
Dealer's choice, or I guess I don't know if I'm the dealer or you are the dealer, but would you rather start by talking about the value of a college education or Trump versus Harvard?
- [00:11]
B
I would rather talk about the value of a college education, but I am always happy to get into Trump versus Harvard as well.
- [00:17]
A
Okay. All right, let's do it. Hello, and welcome to the GD Politics Podcast. I'm Galen Drake. As students begin to head back to school, American higher education is in its most fraught position in recent memory. Most prominent amongst the challenges is President Trump's pressure campaign against elite universities. There have been federal funding freezes linked to accusations that schools haven't done enough to stem antisemitism and remove race considerations from admissions. There have also been cuts to scientific research, roadblocks for international student visas, and new limits on federal student loans. There are also broader concerns about higher education that predate Trump or have little to do with him. The rising cost of tuition and whether a degree is worth it. The growing gender imbalance amongst those who graduate. Women now receive about 60% of bachelor's degrees in the US and to top it all off, there are emerging questions about how artificial intelligence will change the value of a college degree and and shrink the availability of entry level jobs. So we're going to try to get to as much of that as possible today with our guest, Preston Cooper. He's an economist and senior fellow at the conservative leaning American Enterprise Institute. He's also on the Board of Visitors at the George Mason University. Preston, welcome to the podcast.
- [01:45]
B
Galen, thank you for having me. It's a pleasure to be here.
- [01:48]
A
So, did I leave anything out of my list of challenges facing higher education?
- [01:53]
B
Well, the list certainly is long and seems to be growing every day. The only thing that I would add is demographic change, the potential for declining enrollments in college simply because there are fewer high school graduates. And when you add that onto the top of the fact that more students are seeing college degrees as maybe not worth the cost the way they did in the past, many colleges are going to face an enrollment crisis, and we could see enrollment slide significantly at some institutions, and some will probably close altogether.
- [02:22]
A
Okay, so you mentioned the value proposition of higher education for college students. This is an area of expertise for you. In fact, you've estimated the return on investment of 53,000 different degree and certificate programs across the country. That's bachelor's programs, master's programs, professional degrees, technical and Associate's degrees, certificates, etc. So I am going to start with an overly simplistic question, and then we can unpack it a little bit. But is a college degree worth it?
- [02:54]
B
Today, on average, a college degree is worth it, but there are exceptions. A student who gets a bachelor's degree, graduates on time, pays a reasonable amount for tuition, and chooses a major that's not completely silly will probably be fine. They'll probably get a good economic return from their degree. But if any of those things are not true. So if you take longer than four years to graduate, or you don't graduate at all, if you pay way too much in tuition, or if you choose a major that just doesn't have any labor market value, that value proposition starts to look very questionable. And we do see that sometimes students who pursue a college education end up worse off than they would have been if they had never gone to college at all. That's not the majority of cases, but it's certainly a big enough minority of cases that it's cause for concern that some students are not necessarily receiving the value from college that they were promised. And that is leading to questions about the value proposition of college overall.
- [03:54]
A
What really struck me is not so much what your research shows about bachelor's degrees in general. Bachelor's degrees do show a return on investment. In fact, 77% of the Bachelor's programs that you looked at showed a positive return on investment. Of course, 23% negative return on investment is a sad reality, but it's nowhere close to some of the other programs. In fact, it's. It's master's degrees and also associate degrees that are far less likely to lead to a positive return. Why is that?
- [04:29]
B
That's right. So for both associate degrees and master's degrees, we see over 4 in 10 of these programs lead to a negative return on investment. So students are usually worse off for having pursued one of these credentials than they would have been if they hadn't gone to the university at all. For associate degrees, a big reason for this is non completion. So there are a lot of community colleges out there offer offering two year degrees where the graduation rate is something around 20 or 30%. And if you don't graduate from college, even a community college, you're often not going to get most of the benefits of the degree because you don't have the degree. And you often end up just wasting some time and money without really anything to show for it. Then at the other end of the spectrum, we have master's degrees. So master's degrees, the problem's a little bit different, but a lot of Universities are offering master's degree programs for which they charge an arm and a leg. They're charging way more in tuition than they do for undergraduate credentials. And often the value of these credentials in the labor market really isn't that great. People are getting very small increases in salary from their master's degrees, sometimes no increase in salary at all. And that increase in earnings often is not enough to justify the often exorbitant costs of these master's degrees. I'll give you a good example. So Columbia University in New York, where you are, the Wall Street Journal reported a couple years ago, they have a master's degree program in film for which the median student debt is $180,000. The typical starting salary for graduates of this film master's degree program is just $30,000. So people owe six times more than they earn when they come out of this program. And they're simply never going to get a return on investment for programs like that. And unfortunately, that kind of thing is all too common among master's degrees where universities will these programs charge way too much for them and then just not produce the economic value that students expect when they pursue graduate school.
- [06:29]
A
And to be clear here, we are talking about master's degrees exclusive of professional degrees. So if you are going to school to become a doctor or lawyer, of course, or if you're getting an MBA or something like that, that does not fall into this category. Right. And in fact, amongst doctoral and professional degrees, the return on investment is just as good as a bachelor's degree.
- [06:51]
B
Yes, for doctoral professional degrees. So if we talk about law, medicine, dentistry, those do extremely well on the return on investment calculations. So most medical programs, you know, will have an ROI that is close to a million dollars or above over the course of the student's lifetime. So doctors and lawyers are doing very, very well. Even though those programs are expensive, they unlock access to careers which are extremely lucrative. So often people are earning upwards of $200,000 a year over the course of their lifetimes. So they are getting a for those degrees. But you did mention MBAs, and I want to actually call out MBAs quickly because that's a bit of a special case. We actually see that the MBA does not have a great return on investment on average. So if you're going to one of the super elite MBA programs, so the ones at, say, Chicago or Penn or one of those other very highly ranked universities, those MBA programs tend to do pretty well. But I think people mistake the outcomes of those elite programs for the average MBA program and there are about 500 MBA program nationwide, and most of those do not have anywhere close to the outcomes that you might expect if you're looking at, you know, the elite programs. In fact, about 40% of MBA programs have a negative return on investment. And the reason for this is these programs often charge, you know, really high tuition, sometimes $80,000 a year, sometimes even more. And often the benefits that students are getting in terms of earnings just are not that great. These students who are pursuing MBAs might already have a bachelor's degree in a relatively high value, such as business or economics or finance or something like that. And so the value that the MBA is adding on top of that often isn't that great. And so we see a lot of people who are pursuing these MBA programs do end up worse off than if they had not pursued the MBA at all, which is a very sad reality.
- [08:42]
A
We talked about a number of conclusions here, but I think this might be the point where we want to nerd out for a second and talk about the data that this is all based on. How are you able to determine what the return on investment of one particular program at one particular university is?
- [09:00]
B
Sure. So we are looking program by program, institution by institution, to get this data. So there is a relatively new federal data set called the College Scorecard, which will basically report the median earnings for graduates of individual programs. So the film program at Columbia versus the political science program at Columbia versus the political science program@ UNC, we can get that granular level of data for graduates of each of these individual programs. That data goes out about four or five years after the students graduate. So we can see the actual salaries for students in those programs four or five years after they graduate. And then we supplement that with data from the US Census to basically figure out, okay, so a person who graduated with this kind of degree, who is earning x four years after graduation, you know, what do we expect them to be earning 10 years after graduation, 20 years after graduation, based on the typical trends for somebody with that degree type and that salary level. And we can use that data, combine that college scorecard data and that census data, to basically create what we call the lifetime earnings profile for each program. So the typical graduate of this program, this is what we think they're going to earn at each stage of their careers, and we can compare that to what they would have earned if they had not gone to college at all. So taking into account the place that the college is located. So some colleges are located in labor markets that are more expensive than others. The demographics of the types of students who are completing the program, the socioeconomic status of the students who are completing the program, and we can basically come up with an estimate of the increase in earnings that students who graduated from that particular program can expect. So their actual earnings versus their counterfactual earnings, what they would have earned if they had not gone to college at all. And then we can compare that increase in earnings to the cost of college. So not just the direct cost of tuition, but also the opportunity costs, the time you might be spending out of the labor force while you're pursuing that college credential. And if the increase in earnings exceeds the costs of college, great. That is a positive ROI program. You can expect to be economically better off. But if the increase in earnings is not enough to justify the cost of college, that program is going to be negative roi. And we think that students who pursue that program are often going to be worse off than they would have been if they had not gone to college at all.
- [11:19]
A
It's really interesting stuff, and in fact, folks can go play with this themselves. I'll drop it in the notes so you can go back and look at the degree that you graduated from college with and see if it rings true based on your own experience. I want to go back to bachelor's programs for a second. So you look at all of the different institutions. You look at bachelor's versus master's versus associates. You also look at the kinds of majors that are, on average, returning a positive investment. So if you look at these median returns, it's not average. I should say the only bachelor's degree for which there's a median negative return on investment is fine arts. For everything else, there's a positive return on investment. Number one is engineering, then computer science, then nursing, then economics, then science. And engineering goes, oh, next is political science. There we go. And it goes on down. But fine arts is the only median negative. Should we take from this that we as a society ought not pursue fine arts as an area of expertise? Because, like, I think there's a lot of people would say, oh, well, the arts are worth it for the art's sake. Like, we can't be so cold and calculating when we make decisions about what society ought to support?
- [12:34]
B
Well, I certainly think that there's a lot of value to the fine arts. So I was actually a theater kid in college, so I have firsthand appreciation for the value of the fine arts. But I do think that we can't just ignore the negative return on investment that we see for a lot of Those programs. Because if you look at polls of college students, you're a public opinion guy, right? You know, most college students, most college students will say, if you ask them, you know, what is their primary reason for going to college, they'll say some variation of, I want to get a better job, I want to increase my salary. You know, they'll say other things are important too, but usually those economic considerations are paramount. And so if students are going into college with the expectation that no matter what kind of degree they get, they're definitely going to get a good return on investment and be able to earn a high salary, and then they major in fine arts and they find that they're disappointed from that, I think a lot of students will end up being resentful, and they might even go back to their communities and say, hey, college wasn't worth it for me. And I think that might contribute to a lot of the distrust of a college's value proposition that we're seeing right now. The other consideration here is student loans. I mean, we cannot escape the student loan question here. If you are getting a degree in fine arts and you're using student loans in order to do that, it's going to be much less likely that you're going to be able to pay back those loans in full. And you might have serious problems down the road, whether that's facing loan payments that are too high relative to your income, or sometimes even defaulting on your loans, which can trigger some bad consequences. So I do think that we need to make sure that students are aware of these differences in return on investment before they decide on a college major. If they still want to pursue fine arts, knowing that this is not a great return on investment for them. You know, I think that they should be allowed to do that. That's a free country. But students definitely do need to be aware that there are differences in earnings by major and have that information in their back pocket as they are making this college decision.
- [14:34]
A
Apart from, I guess, just picking on fine arts here, there are things that don't show up in this data necessarily. I mean, I think the value of networking probably does show up in this data, because if networking leads to better job prospects, then that will show up in salary and will be recorded by this. And so I think one of the arguments for some of these programs as well, you meet a bunch of people who will help you in your life, but you also meet a bunch of people who will make perhaps life more meaningful in general. College is a very particular time to make friends in your Life. People who graduate from college are more likely to get married or be involved in civic activities in their community. How should we think about some of the other social goods that college contributes to that might not specifically be about income?
- [15:23]
B
I absolutely think those, those social goods are real. You know, I made a lot of my, my lifelong friends in college. I think that that's absolutely part of the value of pursuing a traditional college education. You know, there's some evidence that college might make you a more engaged citizen. For instance, learning for learning's sake is very important. You know, I don't, I don't dispute any of that. But again, I keep going back to the polling data which shows that students want to see a return on investment from their college education. And if they are not getting that roi, I think that that is going to fuel a lot of distrust of college and that will lead to more students choosing not to go to college at all. Perhaps, if they don't think that the value proposition is there. And then colleges will not be able to share all those wonderful non financial benefits that you just listed with students if the students are not going in the first place. The other thing that I really hope that people can take away from this data is the lessons for the institutions themselves. If I'm a college and I see that some of my programs are on this list of negative ROI programs, I'd want to start asking questions about how can we get these programs in the black? What can we do to actually improve the return on investment for some of these programs so that they are a better financial value proposition for students? I mean, some programs like Fine Arts, it's going to be difficult for students to get a very high salary from those. But there are certainly things that, that colleges can do to improve the labor market value of their degrees somewhat to make sure students are getting higher earnings. One thing you can do is give students more support in finding an internship. There's a lot of data showing that students who do an internship tend to have better job prospects than students who don't. So could you potentially use that as a lever to try and improve the ROI of some of your programs? Could you look at the curriculum in some of these programs and see is this really aligned with what is needed in the labor market right now? Are there ways to revamp the curriculum in order to make students more attractive to employers to increase their likelihood of landing a job? There are lots of things colleges can do to try and improve return on investment. I don't think that colleges should just, you know, throw up their hands and say, well, there's nothing we can do about roi. I think that there's a lot that they can do. And I hope that the data set that we've constructed here can kind of be a starting point for those conversations that colleges need to have.
- [17:40]
A
And in case people are curious, you can can actually look at the college degree in America with the highest return on investment and the lowest return on investment. And so in case people are curious, the highest return on investment is a computer engineering degree from Princeton University. The return on investment for that degree is over $7 million.
- [18:04]
B
That's right.
- [18:05]
A
Pretty incredible. It's not so different for, you know, computer science majors at Carnegie Mellon University or the California Institute of. But then when you go and look at the worst return on investment, it's. This is a little embarrassing. It's my alma mater. It's a music degree from Johns Hopkins University, which shows a net negative million return on investment for a music degree from Johns Hopkins University. And that's followed by a theological and ministerial studies degree from the Talmudic Seminary of Babov in New York. Interesting. Two very different things. Should we take anything from the outliers here? Sort of the degrees that are the best return on investment and the worst return on investment.
- [18:54]
B
I tend not to emphasize the outliers that much, mostly because they're very small programs. So the computer engineering degree you mentioned at Princeton, I think had 24 students enrolled at the last count. So, I mean, against 20 million college students nationwide, that's really. That's less than a drop in the bucket. That's like an atom in the bucket or something like that. And so, yeah, it's great if you can get into that program, but that kind of program is going to be serving very few students. The programs which I actually think are having the biggest impact are the programs that might have a significantly positive, if not, you know, super out on the right tail, return on investment, but are serving a lot of students. So we created something called the mobility index, where basically we multiply the return on investment times the number of students that that program is serving. And this is kind of a measure of the total economic value that this program is creating. And the programs that do the best on this mobility index tend to be registered nursing programs at large public universities. You know, these are programs where the ROI is $800,000 rather than $7 million, but they're also serving 10,000 students rather than 24 students. And so these programs are actually adding a lot more economic value overall than the computer engineering degree at Princeton, even if Princeton's ROI for individual students is higher.
- [20:15]
A
Yeah. And in fact, this brings us to another trend, which is when you compare certificate programs in technical trades as well as nursing and other health associate degrees with bachelor's degrees, the return on investment is actually better for the technical trade certificates and nursing associate's degrees than bachelor's degrees in general. Now I should stress those are very specific certificate programs. There are other certificate programs that have significant negative return on investment. Like cosmetology was the worst, for example. But that means that when people suggest, well, maybe more kids ought to be going to trade school, is that the kind of data that they're looking at?
- [20:59]
B
I've certainly seen my data cited by, you know, people making that argument. But I really think the four year college versus trade school is the wrong framing because the field of study, which within each of those categories really matters a lot more. So we talked about for bachelor's degrees, there's this huge range of return on investment between the engineering programs at one end and then the fine arts programs at the other end. It's the same with the technical trades. I mean, you've got things like welding, vehicle maintenance and repair, electrical transmission installation, some of these highly specialized certificates that have an extremely high return on investment. You know, if you get one of those, you know, you're, you're going to probably have a pretty high salary. Then you've got cosmetology at the other end of the spectrum, which is, that's also a trade. But you know, the earnings for that credential are just, are really quite low and usually the return on investment is negative. So rather than saying, you know, go to college versus go to trade school, I would say look at the individual fields of study within each of those and examine the ROI for each of those fields of study. Because there's a lot of nuance by that field of study that is missing when you just have the debate of, you know, college versus trade school. School.
- [22:06]
A
You've only been doing this for a couple years, probably in part because this data is very new. Maybe there's other data we can look at to try to answer this question. Has the value proposition of college changed over time?
- [22:19]
B
This is, this is a very interesting question. So the best data that we have that is kind of long term, and obviously there's a lot of caveats with long term data, has shown that the value of a bachelor's degree, so the wage premium that a college graduate gets over a high school graduate, but was rising throughout most of the second half of the 20th century. So from the 60s to around 2000, it was becoming a better deal to go to college. You were getting a bigger wage premium over somebody with only a high school diploma that has now flatlined. So over the last 20 years or so, the wage premium of a college degree was pretty stagnant. And there's some evidence now that it is actually starting to fall. So that even though a college degree is still a good investment, on average, the wage premium has been dropping in recent years. And so it's not quite as good a deal as it was in the past. That's not to say that, you know, college is all done for and that we should all just, you know, go to trade school or get apprenticeships, I mean, even though those things are great. But I do think that it should cause us to question whether, you know, a college degree is always going to be this very lucrative, you know, economic opportunity that it sometimes has been in the past. And I think it really stresses the importance of looking at the individual degree, the individual credential that you want to get as a student, and seeing what, whether that credential in particular is a good investment rather than just relying on the average. For a college degree overall is a.
- [23:45]
A
Bachelor'S degree, the return on investment is the reason it's positive because so many entry level jobs require it, or because it provides something valuable on its own terms. And I imagine it's not an either or, but like how much of this is, it's just a ticket to ride. And so if you don't have that ticket, you're not riding versus you acquire skills in college that allow you to perform work that you otherwise couldn't. That adds a lot of value.
- [24:14]
B
I think it's, it's absolutely both. So, you know, a college degree is something that, you know, is often expected for people in certain jobs. And that's, some people will just see that as a box you have to check because the college degree will signal that you took the time out of your, your life to go get the degree. It signals that you have a certain level of academic ability, motivation, ability to get your assignments done. And so for forth, it signals a lot of basically competencies and those that, that has value to employers, if they hire someone with a college degree, maybe they think that that college degree signals that that person is going to be a good hire. So it's not necessarily the college degree that's adding the value. It's, you know, what the college degree says about the person who got it. I think that that definitely explains part of the premium for a college degree. I don't think you can ignore that. But I do think that the kind of human capital side of things, the skills that you're getting in college, are important as well. I think that especially explains a lot of the differences between majors. When I see that, you know, an engineering major has a typical return on investment of $900,000. I don't think that's all the signaling value of the engineering degree. I think that people really are, you know, learning important things in engineering school that will help them, you know, succeed in the labor market will teach them skills that are going to be valuable to employers, values valuable in the high paying jobs that they're going to go on to. And so the skills are important as well. But this really is one of the most fundamental debates in higher education economics. How much of it is the signal versus how much of it is the skills? And I don't think we're going to resolve it on this podcast, Galen, as much as hard as we might try.
- [25:51]
A
Well, that's a bummer to hear. I want to talk about something that's sort of bubbling up in this space. Which is what? Well, as an AI fellow, I'm guessing you read the Wall Street Journal. Is that a correct assumption? Okay, well, I do too. And they recently published an article titled, quote, AI is wrecking an already fragile job market for college graduates. Companies have long leaned on entry level workers to do grunt work that doubles as on the job training. Now ChatGPT and other bots can do many of those chores. So how is AI changing the value of a college degree? Because it seems like in particular AI is coming for the kinds of white coll jobs that college prepares you for more than anything else.
- [26:36]
B
Yeah, this is. It's an interesting question.
- [26:38]
A
All right. And that is the end of today's preview. Head over to GDPolitics.com to become a paid subscriber and hear the full episode. We get into a lot more hot button issues within higher education. In the full episode we talked about how AI might reshape entry level work, the gender imbalance in degree attainment, student loan debt, debt, Trump's pressure campaign against elite schools and Americans confidence in higher education overall, it's maybe surprisingly not so low. Like I said, head over to GDPolitics.com to become a paid subscriber. Paid subscribers get about twice the number of episodes, can join in the paid subscriber chat, and most importantly, keep this podcast going. When you become a subscriber, you can connect your account to wherever you listen to podcasts so you'll never miss an episode, there's a link in the show notes explaining how to do that again. Head over to GDPolitics.com see you there.