Yesterday I profiled two big lessons from the AEI survey of adults without a college degree (for more, see my paper High Costs, Uncertain Benefits). To summarize: most see education after high school as necessary to get a job “these days,” but they think it’s too expensive and not flexible enough. Also, somewhat surprisingly, a substantial number of respondents did not aspire to a degree or certificate.
Today I examine one potential explanation for the second finding: that adults may not have a clear sense of the costs and benefits of further education. The survey asked respondents to estimate tuition and fees at local community colleges and for-profit colleges, the median wage among different types of graduates, and how much they thought earning a degree or certificate might affect their earnings.
First, a disclaimer: ideally, education is about more than just increased earnings. And, as alluded to yesterday, evidence suggests that it is. College graduates are healthier, more civically active, and more likely to trust others.
But nearly 90 percent of beginning college students say they’re enrolling in college in order to get a better job. (And this probably underestimates the proportion because it excludes many adults who are not first-time students). Put another way: most of those who enroll believe the cost-benefit of going or returning to college is positive. (How positive is an interesting question that others have asked).
But what we don’t know is how adults without a degree see the costs and benefits of further education. Our new survey sheds light on both pieces of the value proposition.
1. Most adults were unable to provide an accurate estimate of tuition and fees, and many overestimate the cost of tuition at community colleges.
The survey asked respondents to first name their local public community college. Nearly two-thirds (63 percent) were able to name a two-year college in their state, and five percent named an institution that was not a public two-year school. Thirty percent said they did not know or skipped the question.
When it came time to estimate tuition and fees for a year of full-time enrollment at local community colleges, respondents were given a ‘slider’ running from $2,000 to $20,000 (with additional options to choose “less than $2,000” or “more than $20,000” or “don’t know”). We then compared their answers to the average two-year tuition and fees in each state reported by the College Board to get a sense of their accuracy. I considered estimates within $1,000 of the state average to be accurate.
Just 14 percent provided an estimate within $1,000. Over half of the respondents overestimated the cost of tuition and fees at community colleges. More than 40 percent overestimated by $2,500 or more. An additional 27 percent said they didn’t know what tuition cost. The survey also asked them what they thought they would pay, after accounting for any grants and scholarships they might be eligible for. About 55 percent thought they would pay less than their estimate of the sticker price, but many of these estimates were still far too high: nearly one-third of respondents thought they’d pay a net price of more than $5,000. (These findings are in line with other research on families of traditional-age students).
We also asked them how much they thought community college should cost, and gave them the option to answer “it should be free to anyone with a high school diploma” (mirroring President Obama’s recent proposal to make community college tuition-free). Interestingly, just over one-quarter thought it should be free. If we look only at those who provided an answer other than “don’t know,” 63 percent thought that it should be either free or less than $2,000. In other words, most adults thought people should pay some tuition to attend community college.
To summarize: adults are likely to overestimate the cost of attending local community colleges, often dramatically. These faulty beliefs likely lead to a faulty cost-benefit calculation for many who might benefit from enrolling.
2. Adults were uncertain about the returns to different postsecondary programs, especially when it came to how a degree or certificate might affect their own earning power.
The survey asked respondents what they thought the median worker who had completed different postsecondary programs earned in a year, as well as how much they thought they would earn if they went back to earn particular degrees or certificates. We first explained the concept of the median wage using a simple prompt, and told them what the median high school graduate in their region earned in 2013 (taken from the American Community Survey) to help anchor estimates.
We asked respondents about workers who completed an apprenticeship; a certificate; an associate degree in liberal arts, nursing, or manufacturing technology; or a bachelor’s degree. The sliders ran from $20,000 to $70,000 (with an option of “more than $70,000”), with a peg for the median high school wage. Respondents were asked to provide their “best guess.” In other words, if respondents thought that there was a positive return to a postsecondary credential, all they had to do was move the slider above the high school anchor.
Perhaps the most surprising finding came when we asked adults how they thought going back to school for a degree or certificate would affect their earnings. A sizable minority believed that earning a certificate or an associate degree would have no effect on their earnings. Forty-four percent said they’d earn “less than I do now” or “about the same as I do now” when asked about earning a certificate; almost 40 percent said the same about a technical or academic associate degree. Just over one-quarter thought that a bachelor’s degree wasn’t a surefire path to higher earnings.
In short, a substantial proportion of adults were awfully bearish on the returns to further education.
Overall, then: half of adults overestimate the cost of tuition at community colleges, and somewhere around 40 percent believe that earning a certificate or associate degree wouldn’t significantly improve their earning power. In short, for a sizable proportion of adults, further education does not pass the cost-benefit test. And for others, only a bachelor’s degree seems to get over the bar.
Though it will pain the “college for all” crowd to hear, some of them are likely right, given the opportunity cost of working fewer hours, the low probability of completion at many community colleges, and the inconvenience of having to balance school with other commitments. But there are shorter-term training options and those that blend work and school (apprenticeships) that could be a worthwhile option for many who currently see little value in further education.
To the extent adults are foregoing college because they don’t recognize the costs and the benefits of these other options, it represents a lost opportunity for both individuals and for the economy. Could better information on costs and benefits nudge some in the neglected majority to invest in human capital? Stay tuned…
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