Boots & Sabers

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Owen

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1139, 13 Dec 15

Break-Even Point for College Landing Later in Life

Yep.

In 2010, the typical college student had to work 8 years to break even on their bachelor’s degree investment, Goldman found. Most graduates would be around 30 years old by then.

As the price tag of a college education goes up, it’s taking longer for the investment to pay off. Here’s what Goldman projects:
— 2015 graduates won’t break even until age 31
— 2030 graduates won’t break even until age 33
— 2050 graduates won’t break even until age 37

I think this is right too:

Goldman sees a major revolution coming in higher education. College costs keep growing. Student debt is now over $1 trillion. Employers are frustrated they can’t find graduates with the right skills and many college graduates are frustrated that they can’t get better jobs.

Employers are likely to become more open to hiring people who do other forms of training and education such as Lynda.com lessons (owned by LinkedIn (LNKD, Tech30)) or “MOOCs” (Massive Open Online Courses).

Companies like Facebook (FB, Tech30) and Google (GOOG) might also end up creating their own de facto degree programs so they can tailor the courses to exactly what they want.

What’s going on in higher education reminds me a lot of what was going on in the American automobile industry in the 1980’s. Consumer demand is changing and the marketplace is rapidly¬†shifting thanks to aggressive new entrants into an industry as trade barriers are torn down. Yet the traditional producers are¬†mired in a structure rife with high fixed costs, an inflexible unionized workforce, and poor management. Meanwhile, there is declining satisfaction in their finished product. The traditional producers are not positioned well to adapt to a shifting market. The high-end producers will be fine, but the mid and lower tier ones are in for a rough couple of decades.

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1139, 13 December 2015

2 Comments

  1. SteveAustin

    I think your auto example is pretty good with two addendums.

    The auto industry has been driven by creative new financing options for consumers but we never had the government massively subsidize the industry like they have with higher ed. Less market distortion so we moved to the better cars more quickly than I fear we will with higher ed.

    And with GM and the government takeover, I fear our government will decide to take over higher ed. Then we will really get slammed as taxpayers.

  2. Kevin Scheunemann

    It’s time to abandon the campus model and embrace the netflix model when it comes to learning.

    Essentially bringing the best instructor to the student, not the student to the instructor.

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