hacking education

The cost of higher education in the US has soared in recent decades while median incomes have stagnated, pushing college increasingly further from the grasp of many Americans and limiting social mobility. Three-quarters of US repondents to a recent survey by the Pew Research Center said college was now too expensive for most Americans.

In the past decade, tuition rates at public universities have risen 5.6 per cent a year above inflation, while fees at private college have increased by 3 per cent a year, the College Board says.

The faster acceleration in fees at public universities is highly significant for those on median incomes. For students from wealthy backgrounds, college may still be affordable. Moreover, thanks to handsome endowment funds, colleges such as Harvard and Yale can afford to give generous financial aid to able-but-needy students.

However, public universities – many of which have been forced to raise fees in recent years because of dwindling support from cash-strapped states – have much less ability to offer financial assistance, even though they are now starting to charge fees comparable with their private-sector peers.

The increase in fees has not stemmed demand for higher education. Applications rose during the downturn, as more Americans deferred the search for scarce jobs and took the opportunity to get training – with what traditionally has been good reason. College graduates generally receive bigger salaries, on average earning $20,000 more a year than workers without higher education, according to the Census Bureau. That translates into career earnings of $1.4m for a worker with a bachelor’s degree – almost twice the $770,000 a non-college graduate can expect, according to Pew.

But there are signs that part of the equation is changing.

Average starting salaries for college graduates fell sharply in the downturn, from $30,000 in 2006-2008 to $27,000 in 2009-2010, according to Rutgers University research. And the combination of rising graduate debtloads and falling starting pay has renewed a debate in the US about whether college is still worth it.

Laurence Kotlikoff, an economist at Boston College, argues that if you take into consideration the higher income taxes that college graduates pay and the years of earnings they forgo while studying, a university education is less lucrative than it can seem.

The renewed debate has yielded some new initiatives.

The Thiel Foundation, an organisation set up by Peter Thiel, a libertarian venture capitalist who co-founded PayPal, the online payments hub, established a fellowship this year that offered 20 teenagers $100,000 each if they dropped out of college and pursued entrepreneurship instead.

One recipient, Dale Stephenson, 19, left university in Arkansas three months ago after becoming frustrated with the over-theoretical nature of his classes. He now lives in San Francisco, is working on a technology start-up and is promoting the social movement “UnCollege”, which is trying to change the notion that college is the only way to prosper. “College shouldn’t be the only path to success,” he says. “There’s a value in university. It teaches you how to follow directions and meet deadlines and work in groups. But it shouldn’t be the only way we learn.”

Jim O’Neill, head of the Thiel Foundation, sees a crisis in the making. “It’s very similar to what happened with housing,” he says. “Over the past 60 years, owning a house became part of the American Dream. People were told: ‘buy a house, don’t worry about the price, you’ll earn it all back later.’ Now it’s the same thing with college.”