Education Inflation – Your College Degree is Becoming Worthless

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Education inflation is making your college or university degree practically worthless.

One of the key principles of economic theory is the principle of supply and demand.  Increase supply with demand being constant and prices go down.   Increase demand with supply remaining constant and prices go up.  Our student loans system has increased the supply of university degrees and diminished their value at the same time.

Your College Degree is Becoming Worthless

We have more people going to college or university now than at any time before in history (recent figures peg over 70% of high school graduates in the US as going on to college).  This unprecedented multitude of college entrants is due in large part to the low or no cost loans that are being offered to them (backed by federal governments in Canada and the US and elsewhere), combined with the inflation of marks that are being granted in high schools (just how uncommon is it for a student to have an A average these days?).  Practically everyone with a heartbeat is getting the marks that they need to get into college or university these days.

This wasn’t always the case.  There was a time when an A average actually meant something (not too long ago actually).  There was also a time when a college or university degree meant something special.  You actually stood out to a very large degree (pun intended) if you had attained a college or university education.  You were coveted by employers.  Today a Bachelor’s degree is a prerequisite for many entry-level call center jobs.

True Costs – Is a College or University Education Worth it?

In Canada, yearly tuition now runs about $9,000 for an undergraduate program.  Add about a $1,000 for books, and roughly $10,000 or so if you live away from home.  That adds up to roughly $20,000 per year.

Now remember that as a full-time student you are also foregoing the opportunity cost of having a full-time job during the years that you are studying.  A entry-level typical job might pay you around $30,000 per year or so.

Now let’s do the math.  A four-year honours degree will end up costing you about $80,000 for tuition, books, and room and board PLUS about $120,000 in foregone wages.  Total cost – about $200,000 dollars!   You will start work as an indentured servant and, most probably, remain one for the rest of your life as you struggle to pay off your student loans and eventually get a mortgage when you buy your first home.

The figures in the US are even more extreme.  Non-state colleges apparently charge close to $30,000 per year in tuition.  Run this amount through the same math and your looking at roughly $41,000 per year for tuition, books, and room and board.  Assuming that your foregone full-time wages are similar to those in Canada ($30,000/yr) and your looking at a total cost of $164,000 plus $120,000 or $284,000 US!

This is a pretty big hole to get yourself out of when first starting work after you graduate whether you live in Canada or the US.

Too Many Degrees = Education Inflation

Quite simply, we have too many college and university graduates.  Each additional graduate increases the supply of graduates and, thus, reduces the value of your degree.

With that being said, I have earned two degrees.  I have to say though that many people who were in my classes really didn’t seem too interested.  They seemed to be there simply because going to college or university was the thing to do, because they were expected to by their parents, or because they simply didn’t want to get a job.

This was, perhaps, most evident during our class tutorials.  Tutorials offer a smaller group setting and they are designed as forums for discussion and debate.  I always loved my tutorials and the chance to discuss ideas but found that these sessions always turned into a simple two-way or maybe a three-way discussion between the people who actually came prepared and who were interested.  Most people just sat there and did not contribute a single idea because they were too busy texting or because they did not prepare by doing their assigned readings.  Deadweight.  Not sure how they passed, but they all did (somehow).  This blows my mind to this very day.  Why were they even there?  How did they even get accepted into the program?  How is it that they were allowed to pass?  I think their best interests and ultimate happiness might, perhaps, have been best fulfilled elsewhere.

In this case, the value of the degrees that all of us earn through much sacrifice and hard-work are diminished by the people who do very little to earn their degrees.  We all pay the price; employers by hiring less-qualified candidates with credentials, and qualified graduates who are lumped together with those who did not work as hard for their degrees.

Each and every graduate increases the supply of graduates in any given program and reduces the prices (wages) offered for these degrees.  We have taken this to such an extreme degree that an college or university degree is a prerequisite for many call center jobs.  There was a time when a degree meant something; now it is just an entry-level ticket into an entry-level job.

I guess a professional degree like medicine or law might, at first, considered the real ticket.  The problem is that in order to attain these degrees you need to spend a huge number of your earning years in school.  Even after graduating, there is little but grand promises of huge incomes (some which do come true, many which don’t).

There are many graduates that are making much less then they thought they would.  They are being forced to compete for those coveted jobs against all of the other graduates who graduated before them, with them, and who will graduate after them.  All the while paying off student loans while working at low paying jobs.

Not a Big Advantage if you have One, But a Huge Disadvantage if you Don’t

Now don’t get me wrong, education inflation means that a degree is now a basic prerequisite for many of what used to be entry level jobs.  In many cases, applying for a job without a college or university degree will not get you very far – there are hundreds of graduates applying for the same job.  All things being equal, any employer will almost always pick a college or university graduate over a non-graduate for the same position.

Find Something You Love to Do and Become Really, Really Good at it

If you love what you do, what else really matters (as long as you can get all of the other stuff you need like food, water, and shelter, and a few key items that you really enjoy)?  In fact, the people that do something really, really well are often those that love what they do.  They are the tops in their fields and often become the top earners in whatever job it is that they choose to do.  You will make a top salary and love your work.

They key here is finding what it is that you love to do.  College and university can help you develop skills in what you love to do, but it can also distract you from the real issue of finding happiness if you are not there with that goal in mind.  If you are unhappy making minimum wage, you will most likely still be unhappy making millions.  A college or university might help you achieve this, it might not.  It is a mistake, however, to think that you will suddenly become happy after you graduate if you are entering a program simply ‘because’.  If it meets your purpose, great.  If not, a degree does offer some degree of insurance against being jobless, but not as much as it used to.  Just keep that in mind.

Take some time to find out what it is that you really love to do (keeping in mind that this could very likely change as you get older).  Next, become really good at what you love to do.  The rest will take care of itself (and you’ll be happy as well).

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Author: Jason Milburn Google

Frugal dad – focusing my money and energy towards happiness and the things that matter most since around 1985.

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  1. At this point, I am not convinced that an advanced – beyond high school – education is somewhere near worthless. I believe the real issue is the traditional approach (i.e. graduate high school and straight to college and incur some debt) that many get locked into. I would suggest two, of many alternative, methods. First. Go to work immediately after high school vice college. This would provide two functions. First, it would give the individual a chance to save a significant amount of money, lessening the requirement for loans, when they did start college. Second, by taking 2-3 years off before starting college, they would gain a little maturity, a little focus, and have a better idea of what they wanted to study when they did go go school. The second option would be to consider military service. It is really disappointing to know that a lot of people will not even consider military service because they are so focused on going the traditional route. For me, going to school later and never worrying about loans was the absolute best approach. My experience has been that many educators, including guidance counselors, have the traditional model for pursuing advanced education burned into their heads and/or benefit from kids going directly to college, and never present the military as a viable option. Of course, many still feel that the military is only for those that are not smart enough for college or are somehow not college material.

    While I believe there are a lot of issues with the current system, if I’m dispensing advice to my child or any young person with regards to plotting a life course – pursuit of a degree, preferably at least a Masters – is still going to be part of that advice.

    • Jason on September 10, 2013 at 5:21 pm

    Hi James,

    You have presented some very thoughtful and convincing ideas. I would not disagree with your advice that going to college is often the right decision and that not having a degree can be a huge disadvantage. In fact, I made a point of this in my article. I agree with you completely.

    I am just not convinced that going to college is the right choice for everyone in every circumstance. A college degree is not a prerequisite for becoming an entrepreneur, for example. Also, if someone is not willing to take their studies seriously, then they are probably wasting their time and money. Maybe their energies would be best directed somewhere else? Each person must ultimately decide for themselves what the right decision for them is.

    You really got me thinking here, James. Thanks.

    Jason (froogalist)

  2. It’s the same in the UK. I work (as a secretary) in a university but I don’t have a degree (I left school in the 80’s – the only people who went to uni then wanted to be teachers, doctors or solicitors (lawyers). Universities are big business and big employers now. Where I live the city’s biggest employer is the university (closely followed by the National Health Service).
    The sad thing is that there are so few ‘graduate’ jobs. Most of the administrative positions within my university are filled by graduates. They earn 18-20K which is less than the 21K starting level to pay back their student loans, so quite often the 45K they’ve stacked up in uni debt doesn’t begin to get paid back to the government for quite some time… if at all (after 30 years it’s written off).
    Our youngsters are starting their working lives with a debt equivalent to one quarter of the cost of the average home – sometimes more. Saddled with debt and earning a pittance the lucky ones go back to their parents houses and live with them till they’re 40. Doesn’t seem right.

    • Jason on March 5, 2015 at 3:11 pm

    Thanks for your comment, Naomi. It’s wonderful to hear from you.

    I am sorry to hear that things are the same in the UK. Graduate jobs can indeed be very hard to come by (most especially for some degrees). For some people, it is virtually impossible to get work in their fields of study. This must be unbelievably frustrating and demotivating for such graduates (and a huge expense for taxpayers as well).

    The fact that this this all-too-common jobless situation also comes with a whopping debt and, as you mentioned, the need for many to move back home just seems really wrong.

    There was a time when having a degree was very exceptional; a time when a degree had a very high value. The huge increase in the number of degrees being conferred, however, has diminished their relative value. At the same time, educational requirements for most jobs have increased as the supply of degree-holding candidates has increased.

    Not sure what the answer is, but it doesn’t seem that higher levels of education are translating into good jobs in the way that they used to.

    Thanks again for taking the time to comment, Naomi. Your thoughtful comments are always welcome and appreciated.

    Is there a grant, bursary, and/or loan programme in the UK? If so, who is eligible and how much of the fees does it cover? Is a university education accessible to all students that want to go (as long as they are willing to take on the debt)? I am most curious.

    Regards, Jason

  3. Hi Jason,
    There isn’t really a bursary programme anymore – although some universities may offer bursaries to individual candidates, it is usually just a little top-up (£1000 per year) and means-tested (only given to very low income students). Similar for loans and grants: some of the loan may be paid as a grant if you can prove very low income (of your parents… or partner, if you’re a mature student).

    It is expensive to study, although very little of that money needs to be paid up front for most students: it just becomes a bigger and bigger debt as you go through your undergraduate degree (usually 3 years) and then it is taken at source from your pay-packet once you earn over £21K per year (currently at a rate of 9%). Really it should be called a ‘Graduate Tax’ as it is similar to paying higher taxation (if you earn over £40K)

    Masters degrees are seldom funded at all – many people do them part time and also work part (or full) time.
    PhD’s come with a bursary (of £12K) but VERY few are offered (in Maths we have just a couple each year).
    Post Doctoral positions here are usually more like staff (paid positions) but short contracts – depending on the research grant/funding available to the university.

    The system now strives to keep people in education for as long as possible – because there are fewer jobs available – and soon (next year?) our youngsters won’t be allowed to leave school at 16 (as I did) after GCSE’s (General Certificate of Secondary Education) but will have to do the equivalent of A Levels (Advanced Level) until 18… and then more than 50% will go to uni (until they’re 21).

    At 42 I’ve already been working for more than 25 years but as a rule now people go into ‘proper’ work at 21 or older – not 16 (as they did in the 80’s). Technology is replacing humans but our governments have to find ways of delaying entry into the labour market.

    Best wishes, Naomi

    • Jason on March 6, 2015 at 11:24 am

    Thank you so much for posting such an informative comment, Naomi.

    The university system here in Ontario sounds very similar to that in the UK. Tuitions have been rising higher than the rate of inflation for a couple of decades now as provincial governments pass more of the costs onto students and their families. Loans are easy to get, but grants are much more scarce. University education is becoming less accessible. At the same, we are producing more university graduates than ever before as students take on large debt loads.

    At the same time, we have a chronic shortage of tradespeople. Applying for university seems to have become the de facto default action for high school graduates regardless of their personal skills or interests. I think at least part of the reason for this is that it is becoming increasingly difficult to get any entry level jobs without a university degree.

    This is so unfortunate for so many reasons: filling universities with students who have little interest or motivation in the subjects they are studying, subsequent graduates working in fields that have little intrinsic value or interest to them, a large shortage of tradespeople, and a huge cost to taxpayers. It just doesn’t make any sense.

    I always look forward to reading your blog posts and your comments, Naomi. Thank you so very much.

    Kind regards, Jason

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