Assessing the value of education
Recently I had an interesting conversation with a young student currently studying at an English university. Two years away from completing his undergraduate studies, he told me that he intended to travel the world and then settle down to a job that would have to pay less than £21,000 – permanently. He did not wish ever to cross the salary threshold at which he would have to repay his student loans. And why? Because once he allowed himself to be sucked into the game ‘in which my salary would have to chase my debts’ he would be in ‘negative educational equity’. He had no intention of going there.
While there may not be too many people planning their careers quite like this, the student’s assessment is not wholly out of line with what some commentators are saying, particularly in the United States. In a recent blog post Professor Mark J. Perry of the University of Michigan looked at the relative rates of inflation of property prices, consumer prices and higher education tuition fees in the United States. He found that since 1980 tuition fees had risen more than twice as fast as house prices. And yet, the inflation in real estate, as we know, created the property bubble and its horrendous economic effects. The question he asks is whether the ‘education bubble’ is also about to hurst, creating a fresh set of very serious problems. This could happen where those in the education system are no longer convinced that the debts they take on in order to acquire a degree are greater than the financial benefits of being a graduate.
There are of course differences between the funding and costs of a university education in America and one on this side of the Atlantic; indeed in these islands the position varies between different countries. But as the costs rise – whether these are borne by the taxpayer or by the student or in some other way – some may ask whether there is an adequate repayment for the investment. Where this is asked more generally by society it can be answered in terms of the capacity of higher education to provide relevant skills and a civilising influence; where it is asked by individual fee-payers the answer sought is about the return on investment in terms of career development and salary.
If we slip into a situation where students walk away from higher education opportunities because they are not convinced they will provide an adequate return, then as a society we will be in trouble. If there is even a hint of a risk of this we need to look closely at our higher education strategy. The time to do that is now.