Why Students (and Barack Obama) Should Shut Up Already About College Costs

Note: This originally appeared at The Daily Beast on September 3, 2013. Click here to read the original.

It's back-to-college time, which means it's the season for bitching and moaning about rising college costs, lack of access to higher education, and the pressing need for even more taxpayer-funded subsidies to the leaders of tomorrow. In just the past few weeks, we've been subjected to breathless reports that "college tuition costs" have risen 500 percent since 1985 and a mini campaign swing by President Obama touting more free money for students and a federally sanctioned knockoff of college guides already provided by the Princeton Review, U.S. News & World Report, Washington Monthly, Barron's, and countless other sources.

Enough already. The plain facts are that college is still well within reach of most Americans, the wage premium for a college sheepskin remains huge, and student loans are not a new form of indentured servitude. You wouldn't get any of that from grandstanding politicians always looking for a new way to rob Peter to buy Paul's vote, an educational establishment that's always on the hunt for new revenue sources, and a news media that alternates between the credulity and ignorance of, well, a first-semester freshman.

According to the latest figures from the National Center for Education Statistics (NCES), total tuition, fees, room, and board at four-year colleges for the 2011–12 academic year came to $23,066 on average. For state schools, the cost was substantially less (about $16,000 per year), and for private schools, it was substantially more (about $34,000 per year). In inflation-adjusted dollars (as opposed to the unadjusted figures favored by alarmists), that's about twice as much as costs were in 1985. As a recent New York Times headline put it, "College Costs: Rising, Yet Often Exaggerated."

Rising costs (and we'll get to reasons for those in a moment) haven't deterred people from going to college. About 68 percent of high school seniors enroll in two- or four-year higher education right after they graduate, a percentage that has stayed at or near historic highs for the past decade. (In 1985, by comparison, just 58 percent enrolled.) If college were being priced out of the reach of most Americans, that percentage would surely be cratering, especially in the depths of the Great Recession.

Coming up with $23,000 a year for a conventional residential college is a lot of money, but the sticker price is routinely offset by various grants and other forms of aid (as in everything else, only suckers pay retail). There's also a good reason why so many people go on for more schooling. Depending on your assumptions, a college degree generally increases lifetime earnings between $280,000 and $1 million. According to NCES, full-time, annual median earnings for college grads between 25 and 34 are about $15,000 per year more than they are for high school grads.

As important, college grads at every stage of their careers are far less likely to be unemployed than nongrads. Recent grads are about 2 percentage points less likely to be unemployed than the typical worker, and older college grads are half as likely to be unemployed as those with a high school diploma.

There's been a lot of hand-wringing over whether today's grads are overqualified for the jobs they do take. Ohio University economist and higher-ed curmudgeon Richard Vedder is always quick to point out that there are "115,520 janitors in the United States with bachelor's degrees or more." But as researchers at the New York Federal Reserve Bank have pointed out, the 1980s and '90s saw similar levels of underemployment of recent grads. (My first job when I graduated from college in 1985 was pumping gas; six months later, I started my first full-time journalism gig.) Despite some delays caused by the rotten economy, there's every reason to believe that college grads will continue to filter into jobs that are higher paying and more in line with their interests, skills, and abilities.

That's good news for students who take out federally subsidized loans to pay for postsecondary education. Few aid programs come in for as much abuse as federal student loans, which, despite lower-than-market-level interest rates and longer-than-typical payback periods, are routinely castigated as rip-offs that push students into economic despair and neo-serfdom. That's simply not true. For starters, just 35 percent of high school grads going on to two- or four-year institutions take out any loans (public or private) out in a given year. That's according to Sallie Mae, the agency that oversees the federal loan program.

If you focus on students attending four-year colleges, that number goes up to 52 percent at public schools and 64 percent at private, nonprofit colleges. Of those who borrow to finance their education, they typically owe $26,000 upon graduation. At annual interest rates of 3.9 percent (the amount charged for federal loans originated this year), that means a monthly payment of $262 over the 10-year repayment period. (Go here for a loan calculator.) If you can avoid taking out loans, more power to you, but given how much more money a B.A. gets you over time, it's actually a very good deal. And it's totally right that the person getting most of the benefit shoulder a good chunk (if not all) of the cost, isn't it?

Far from creating "a new caste system," as the New America Foundation would have it, the country's colleges and universities are somehow managing to turn out more and more graduates as a percentage of the population. In 2012 34 percent of Americans ages 25 to 29 had a bachelor's degree or more. That compares to 25 percent in 1995.

None of this is to deny that some people get overwhelmed by student debt, often because they choose ridiculously expensive private schools that provide no boost in earnings for most students. And about 45 percent of students who start college aren't finished after six years, either because they lose interest or are ultimately not capable of doing college-level work. Neither of those outcomes constitutes anything like a crisis or a scandal requiring a complete overhaul of a system that is serving students extremely well.

If anything, the tough questions about our college system lie mostly on the taxpayer side of the equation. As Ohio University's Vedder notes, the public money being spent to subsidize college is vast and growing. In 1999–2000, total federal, state, and local appropriations, grants, and contracts came to $7,000 per student (in 2010 dollars). In 2009–10 that figure came to $7,942 (in 2010 dollars) (see Table 370). The federal government is guaranteeing more than $1 trillion in student loans, and Pell Grants have increased in size and scope. (Eighteen percent of families making between $60,000 and $80,000 get them, compared with just 2 percent in 2007.) All that free and reduced-price money is one of the main reasons why the main reasons college costs outpace the general rate of inflation—what some have properly identified as a higher-education bubble. Far from making college more affordable, increasing subsidies to students—whether in the form of larger grants or bigger loans at low, low rates—allows colleges to raise prices with near impunity.

How to slow the growth of college costs while maintaining access and intellectual standards is no easy task, to be sure. While it may be in the best interest of President Obama to spread more money around, of college administrators to vacuum it up, and of students to carp about rising costs, that shouldn't be confused with the public good.

Correction: The original version of this article incorrectly identified Sallie Mae as a federal agency.

Note: This originally appeared at The Daily Beast on September 3, 2013. Click here to read the original.

At The Daily Beast, Zac Bissonnette has responded to this article. Read that here.