The Tipping Point of When College Just Isn't Worth It

The arguments for attending college are simple. Those with a college degree experience much less unemployment. Lifetime earnings are higher. You don't have to choose a football team to root for, as one is chosen for you. But is it that simple?

Of course, it isn't. There will be a point when the cost of college becomes equal to or greater than the benefits for many who plan on attending, and we are heading toward that point faster than many believe. All because of "malemployment."

Mal-anything can't be good
And it isn't. Malemployment is defined as when the education and skills of a worker are greater than what a job requires -- for example, a barista with a master's degree. Many college grads work in jobs that don't put their education to use and they're therefore never compensated for those extra skills.


Students are often blamed for studying an unmarketable major, like one in the humanities. And, yes, those with humanities degrees suffered the worst malemployment, near 34% in 2009, according to research (link opens PDF) from Drexel University. However, the popular refrain about the employability of those who major in science, technology, engineering, and math is not as true as it seems. Science majors suffered from 29% malemployment, with a wider spread for engineering, math, and computer science at 18%.

So what?
One might say there will always be a degree of unused skill. That is true, but the important point is that malemployment has increased over the past decade, especially for those between ages 20 and 29. From 2000 to 2010, malempoyment rose 9.3% for those between the ages of 20 and 24 and 6.4% for those between 25 and 29:

This means more college graduates are working in jobs that don't require their skills and are therefore earning less than they could, making a college education seem less worthwhile. For all levels of degrees from bachelor's to doctorate, those who were malemployed earned a median income of about $39,000. Those who were able to find jobs that made use of their degrees and skills earned a median income of roughly $76,000.

Forces against the college equation
Add this rising tide of malemployment to a few other depressing factors, such as tuition increases significantly outpacing inflation; the uptick in students due to the recession (which is finally trending downward); and higher learning available through other, cheaper means like OpenCourseWare.

Together, they show that it's only a matter of time before the expected value of a college education is a wash. Going to college will become a gamble on finding a job that fully compensates the degree -- and the best move, as with most casino games, could be simply not to play.

Mathematically, the variables are extremely complex to calculate exactly when college doesn't become worth it. And it is very much on a person-by-person basis. College will not be worth it much sooner for a prospective art history major who wants to attend a private university than an aviation mechanic who attends a public associate's program -- especially if that art history major does not qualify for any financial aid or grant programs and has to pay the full sticker price of tuition.

Skilled or unskilled sticky wages
Even students who think they're studying and paying to learn the right skills for employment can be let down with the stagnant domestic job market, further declining college's potential payback. The CEO of Caterpillar , Doug Oberhelman, says in a BusinessWeek article: "I, for one, struggle a little bit with a $250,000 education for a philosophy degree. They are wonderful people, but we can't employ philosophers in manufacturing in the United States." The key part of that quote is "in the United States," as offshoring has had a signficant downward pressure on wages in the U.S.  According to the same BusinessWeek article, since 2008, Caterpillar increased its American head count by 2% while its worldwide workforce outside of America increased 19%.

Even if a graduate isn't afflicted with malemployment, their wages can't escape the effects of globalization.

While higher education offers plenty of social benefits other than employment, those intangibles might need to be evaluated more closely as a few years' experience and salary in place of full-time studying becomes the economically sensible choice.

Learning to invest outside of school
Through the years, Warren Buffett has offered up investing tips to shareholders of Berkshire Hathaway -- tips that have helped him earn billions. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

The article The Tipping Point of When College Just Isn't Worth It originally appeared on Fool.com.

Fool contributor Dan Newman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Finding Stock Ideas

Learn to do your research and find investments.

View Course »

Investment Strategies

What's your investing game plan?

View Course »

Add a Comment

*0 / 3000 Character Maximum