Earlier this year, U.S. News & World Report released its list of best cars for the money, based on price, cost of ownership, reliability, performance, etc. Honda has a number of winners, as do Toyota and Volkswagen.
Not coincidentally, consumers have responded very favorably to this value. The list represents some of the best-selling cars on the planet.
If consumers respond so well to value in their automobiles, shouldn’t they do the same when it comes to higher education? A close analysis of costs, debt and results would certainly support this.
Nationally, our aggregate student loan debt of $1.2 trillion is now greater than either all credit card or auto loan debt. More than 70 percent of bachelor’s-degree students graduate with debt. The average education borrower now owes more than $29,000. With default rates running as high as one in five student borrowers, our nation is clearly poised for another loan crisis.
According to the College Board, the average cost of tuition, room and board at a four-year, private college is more than double similar costs at a four-year public school. Yet the 2014 Gallup-Purdue Index Report on more than 30,000 college graduates across the country asked for self-assessment across five key dimensions, including financial, physical and social factors, and found identical levels of satisfaction for both private university and public university graduates.
Some 11 percent of respondents from each group indicated they were thriving across all five metrics. Further, breaking out the respondents to this survey by the top 100 schools — as ranked by U.S. News & World Report — the percentage of graduates indicating they were thriving was an almost identical 12 percent. Notably, the single most important factor correlating with thriving was lack of student loan debt.
The vast majority of middle-class families understand intuitively they have no business buying a Range Rover. These may be fine automobiles, but those who purchase one seek more than merely affordable, reliable, safe transportation. They are buying prestige.
Higher education is more opaque than automobiles. It’s much harder to slam the doors, kick the tires, feel the ride and look under the hood. As a result, too many consumers fall victim to confusing correlation with causation. They see that graduates from more prestigious and expensive universities often have more and better-paying job offers than graduates of less prestigious and affordable universities.
However, the work of Stacy Berg Dale and Alan B. Krueger at the National Bureau of Economic Research, in both 1998 and 2011, found that when they examined comparable students in both types of institutions, the results delta essentially vanished. Good students tended to have good results regardless of where they attended college.
Put another way, it appears that prestigious schools have good results largely because they collect good students, not necessarily because they produce good students. So the prestige bias toward such universities is like concluding that because shoppers at Tiffany’s tend to be wealthier than those who shop at Target, you should shop at Tiffany’s to become wealthier.
In this regard, it would seem too many higher education shoppers don’t think in terms of Hondas and Range Rovers at all in this area. They appear to believe you get what you pay for and therefore really can’t overpay for higher education.
I know many folks will bristle at comparing higher education to a product, much less an automobile. Still, it might behoove many education shoppers to look at their choices with the same scrutiny they apply to their transportation. They’ll find there are many Honda universities that provide a fine, affordable education, putting their graduates on par in earning power and ultimate career happiness with graduates of Range Rover U.
Greg Salsbury is president of Western State Colorado University in Gunnison.
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