People go to college for a variety of reasons. I’d say the top 4 are:

  1. Increase human capital – education makes you more productive.
  2. Signaling device – the fact that you can get good grades, follow directions, meet deadlines, etc shows a potential employer that you can probably do the job they’d hire you for.
  3. Consumption good – education satisfies curiosities much like reading a book does.
  4. Status Symbol – college graduates enjoy prestige and avoid the social stigma of not going to college.

So why do we subsidize higher education? Well, economically speaking, increases in human capital make society more productive which everyone benefits from. That’s the traditional view of college – go there to get smart so you can get a good job and make more money. But people right away assume that an increase in productivity is what causes higher wages in workers. I tend to believe that this is much more of a correlation than a causation. Why? First, almost twice as many people are going to college today compared to a few decades ago yet we’re not really any smarter and definitely not any more productive. How could supporters of #1 above reconcile this fact?

Instead, I tend to believe that college graduates do better in terms of money and employment because of #2. If you go to a great college and/or get good grades, an employer sees you have some level of work ethic. Bryan Caplan brought up a great example:

Take me.  If I’d failed Spanish, I couldn’t have gone to a good college, wouldn’t have gotten into Princeton’s Ph.D. program, and probably wouldn’t be a professor.  But since I’ve merely forgotten my Spanish, I’m sitting in my professorial office, loving life.

The push for everyone to go to college has been misguided. Not everyone should go to college. The exorbitant cost of it today makes it very inefficient for most professions. The reason people are still going is because not getting a college education puts you behind all other applicants who are similarly skilled but have that degree on top of it. So when are people going to stop paying $200k and wasting four years for an experience that doesn’t help their productivity at all? Well hopefully sometime soon. Unfortunately though people are not only wasting that much money and time on undergraduate degrees but also going to more school by the way of graduate school. All to gain a leg up on the competition. Especially in a weak employment market getting a graduate degree can show an employer that you are fully committed to the topic of your degree and can get good grades. Often these graduate degrees can do nothing to improve your productivity.

Yes, I am intending on getting a graduate degree in the future so I am not totally innocent here. But increasingly people are going to graduate school because they don’t know what else to do and/or they just can’t find a job so it seems like a good alternative.

So will the bubble burst? I sure think so. Over 42% of Undergraduates are attending community colleges. I believe this reflects that while most people see college graduation as necessary for certain careers, spending $200k on a four-year all-things-included experience is just not financially worth it. Community colleges provide essentially the same experience as all those expensive liberal arts schools, even if they don’t have the glitz and glam. Soon, as the costs of college get to the point where the wage benefits are exceeded by the time and money of college attendance, people will realize the stupidity and go to more community colleges, trade schools, and apprenticeships.

Bottom line: the government shouldn’t be subsidizing higher education. It only over-saturates the market of college students and makes college even more expensive.