Dr. Caplan is not saying that college isn’t worth it–rather, it’s worth it for all the wrong reasons.
From Arnold Kling: Student debt and inequality:
You can inherit from your parents: genes; social norms (coming from them and also from the peers with which they surround you); wealth. School funding is a fairly significant component of inherited wealth nowadays, but it is not all of it. Moreover, I suspect that the other two types of inheritance matter more.
But suppose you do not have wealthy parents. Is going to college your ticket to upward mobility? My guess is that for some it is, but for many it is not. And for those who take on a lot of student debt, the net effect may be adverse.
For several years, I have believed that the higher education system impairs economic mobility. It certainly serves to segregate affluent young adults from non-affluent young adults.
I think he overestimates the socioeconomic side of the equation. Rather than college segregating by affluence, it segregates by IQ, and affluence is downstream from IQ. It tends to be that affluent people have higher IQs. The push for more college has exacerbated the consequences/ramifications of individual IQ differences, with the college wage premium benefiting smart people but hurting the less intelligent, who tend to have inflation-lagging wages and higher rates of unemployment. Give how abundant financial aid is, I don’t see tuition and debt being as much of a hindrance as IQ, meaning that someone is more likely to not have a college degree because they are simply not smart enough to obtain it, not because they cannot afford it.
Students seldom pay the full sticker price. According to cappex.com “A quarter of college freshmen and 38 percent of all undergraduate students pay the full sticker price for their college education,” and there is tons of financial aid and other programs. Students are drowning in financial aid. I don’t think anyone has been denied a college education because they could not afford it. The problem is that the talented poor may not fully understand all their options ,so they settle for second or third rate institutions instead of applying for the most prestigious ones, which also have the most aid too.
But what about the student loan debt? This source ( https://ticas.org/posd/state-state-data-2015) puts the debt at $29k/student, or about the same price as new car, except, unlike a new car, a degree gains value due to the rising college wage premium,whereas a new car loses half its value after your drive it off the lot. A reason why that seems too low is because stories of people who take on much more debt ($150-200k) get more media coverage so we assume it’s the norm when it’s not (availability bias).
According to cornerstone.edu, the college wage premium is $17k/year, or about $1 million over a lifetime, but $17k is the low point. Given that wages for non-graduates lag inflation and that wages for grads match or exceed inflation, this premium is only expected to rise. But alluding to Bryan Caplan, are college grads earnings more because they know more, or some other factor? Caplan argues that it’s not because of skills, but rather due to signaling. If high-IQ people are more likely to graduate, then it’s possible graduates succeed not because of the degree but rather due to having a high IQ. This is corroborated by Terman’s famous IQ study, which showed Terman’s subjects who only had a high school diploma but IQs above 135 (the cutoff point for inclusion into the study) still earned more than census-average college grads.
Becoming really successful without a degree, such as through entrepreneurship, is difficult. You have to be smarter, more ruthless than your competition. Bill Gates spent the 70-90’s destroying his competitors, so he can now preach philanthropy as if he’s a changed man. You’re up against people whose sole goal is to destroy you.