THE value of a college education is under attack. While more US students are enrolled than ever before, a perfect storm of soaring costs, rising student debt and shrinking job prospects has led critics to increasingly challenge whether college remains a worthwhile investment.

Among those leading the attack is PayPal co-founder Peter Thiel, who charges that higher education has become a dangerous bubble.

Thiel, whose own credentials include bachelor's and law degrees from Stanford University, has put his money where his mouth is by awarding US$100,000 two-year fellowships to 20 promising teenage entrepreneurs to develop their business ideas instead of attending college.

Like other bubbles, college is "characterized by runaway costs where people are paying more and more for something whose quality hasn't gone up," Thiel argued during an October 12 debate in Chicago sponsored by the website Intelligence Squared US.

College advocates counter that higher education has never been more vital as employers demand the advanced schooling and training that are required of workers in a global, technologically oriented economy.

"China and India are educating," says Vivek Wadhwa, who holds research positions at Duke University, Harvard Law School and the University of California at Berkeley. "If we're going to dumb down America at the same time the world is getting smarter, we'll become a Third World country," notes Wadhwa, founder of two software companies.

Few people dispute the economic value of at least some post-high school education, since incomes can rise sharply with further schooling. At issue is who is best served by a four-year college experience and what the viable alternatives should be.

Underlying this debate are rapidly changing workplace trends arising from ceaseless automation, the movement of jobs off-shore and sometimes-clashing data on the impact of these changes.

Soaring costs

Here is a look at the key elements on both sides of the argument over whether college remains worthwhile:

The price of schooling has indeed been rising at a breakneck pace.

Tuition and fees at US colleges and universities climbed 439 percent in current (unadjusted for inflation) dollars from 1982 to 2007, according to a 2008 report from the National Center for Public Policy and Higher Education in San Jose, California.

That topped the 251 percent rise in US health care costs over the same stretch, and was nearly three times higher than the growth of median family income.

While the US$50,000-plus per year sticker price of elite private colleges and universities has gained headlines, the increases have hit public schools that enroll some three-quarters of all US undergraduates particularly hard.

Cash-strapped states are driving the increases by slashing funding, leaving students to foot more of the bill.

Tuition and fees have more than doubled at the University of California since 2005, for example, igniting student protests at the Berkeley campus this fall.

Along with soaring costs have come growing debt loads.

On average, US college seniors who graduated in 2009 carried US$24,000 in student loan debt, up 6 percent from the previous year, according to the Institute for College Access & Success in Oakland, California.

President Obama has announced plans to use his executive authority to institute an initiative to lower student loan payments for many borrowers, offer additional consolidation options and shrink the time period after which any remaining debt would be forgiven.

Bleak job picture

Debt-burdened graduates face the toughest job market in years.

Data collected by the Center for Labor Market Studies at Northeastern University show a drop in the share of graduates under the age of 25 who have jobs from 81 percent in 2000 to 74.4 percent in the period from October 2010 to March 2011.

The share of recent graduates with jobs that require a college degree fell further, from 59.7 percent in 2000 to 45.9 percent, indicating that some graduates have resorted to positions like waiting on tables or parking cars.

Meanwhile, automation and the transfer of US jobs to other countries are reshaping workplace demand.

Microsoft Excel software now performs tasks that once required in-house computer programmers, notes Wharton management professor Peter Cappelli, and computer technology has made it easier to move white-collar jobs offshore. Radiologists in Bangalore, India, routinely read US hospital x-rays, he adds, while workers in the Philippines handle US back-office banking chores.

These trends will only accelerate. "The range of easily off-shored jobs will get bigger and bigger over time," says Princeton University economist Alan Blinder. The college graduates most likely to suffer are those "who get pushed into going to college because 'you have to'," and land in jobs like computer programming that are easily moved off shore, notes Blinder. These individuals will be forced to compete with low-wage earners in other countries "and not get much return" on their college investments.

Such students would be better served by using their talents to become skilled electricians, carpenters or plumbers, says Blinder. "But if you asked me whether it would be better to send more or fewer kids to college," he adds, "my answer would be 'more,' but not 100 percent."

The good news for college students is that incomes tend to rise along with education. "The empirical evidence on this is very clear," says Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. "A bachelor's degree is now worth about US$1.2 million more than a high school diploma" in average lifetime earnings, he notes, while virtually any post-secondary education can boost income. A two-year associate of arts degree is worth about US$425,000 more than a high-school diploma, for example, and college dropouts can still earn more than US$240,000 more than students who stop at high school.

Higher education brings additional benefits, college advocates say. "In college you learn a broad set of disciplines," notes Wadhwa - "everything from marketing to mathematics. They broaden your horizons and provide a foundation on how to build new skills."

This will prove crucial in a changing economy, says Cappelli. "The basic problem we have is uncertainty about the job markets in the future. That argues for the ability to learn and adapt and pick up new skills, and that would seem to argue for going to college."

Plenty of variation exists within these estimates, of course. Petroleum engineers with a bachelor's degree have median earnings of US$120,000 a year, or more than three times the US$36,000 median income for graduates who teach preschoolers after majoring in early childhood education. "What you major in matters a lot," says Carnevale.

Some college graduates may earn less than workers with a high school diploma.

An electrician who never went to college can earn US$1.8 million over a lifetime on average, according to Georgetown figures, compared with US$1.5 million for a real estate broker with a bachelor's degree.

Thiel noted in Chicago that he hired only graduates of top colleges for PayPal jobs at first. But he gradually changed his mind. "In Silicon Valley I saw so many talented people who had not gone through college tracks and had done extraordinarily well. In some ways, they were more creative and were not weighed down with these enormous college debts." That apparently helped inspire his Thiel Fellowship awards to enable budding entrepreneurs to develop their business ideas instead of going to school.

But skeptics question this approach. "What's the point of asking kids to start businesses at 18 rather than 22?" asks Cappelli. "I can't see the reason. Successful entrepreneurs are people who know what they are doing, who understand their industry and what the competition is like. Somebody who's not educated, either formally or through experience, is not going to do very well."

Wadhwa says a study of some 500 engineering and technology firms that he coauthored illustrates such points. It found that startups launched by college graduates from 1995 to 2005 outperformed those started during the same period by entrepreneurs with only high school diplomas.

Companies launched by the high school graduates averaged less than half the annual sales and number of employees as compared with the average for the startups as a whole.

If education is vital to success in the global economy, other countries appear to be gaining on Uncle Sam. The United State ranks seventh out of 29 advanced countries in the percentage of young adults enrolled in college, and 15th in terms of the number of certificates and degrees awarded per 100 enrollees, according to the National Center for Public Policy and Education.

Dropout

The high rate of dropouts means that many US students must now repay hefty educational loans without the benefit of a college degree to help them get jobs. "A large number of people who go to college do not succeed," notes Ohio University economist Richard Vedder, who directs the Center for College Affordability and Productivity in Washington, DC. "More than 40 percent fail to graduate within six years. So there's a substantial risk associated with attending college."

Many high school graduates are turning to community colleges for vocational training and the chance to transfer to four-year institutions. Enrollment in two-year schools rose from 45 percent of all students in US public colleges and universities in 1990 to nearly 49 percent in 2009, data from the National Center for Education Statistics (NCES) show.

But tuition at community colleges is coming under pressure as states pare back their support. "There's real distress at those institutions," says Laura Perna, a professor at the University of Pennsylvania's Graduate School of Education.

"They have a tradition of low tuition as a means of providing open access. As they raise tuition, they may not be enrolling everyone who wants to go."



Adapted from China Knowledge@Wharton. To read the original version, please visit: http://bit.ly/vqWTgP