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January 7, 2017 Comments (0) About Education

Have Recent Studies Made Faulty Assumptions About College?


With the price of college rising every year faster than inflation, more attention has been given to determining how students can make the best choices when it comes to picking their school as well as their major. So much in fact, that C based on the Atlantic C students now overrate the significance of both of these decisions.

As Andrew G. Biggs of the American Enterprise Institute?and Abigail Haddad, a Ph.D. student at Pardee RAND Graduate School,?write, it is no secret that conventional wisdom says that the surest method of achieving economic success is to enroll in college after graduating high school and majoring inside a tech-related discipline. Several recent reports have been published supporting this time of view. Yet, there are reasons to question these findings because most of them are plagued with simple statistical errors, draw conclusions the evidence doesn’t warrant, and C what is worse C encourage governments to introduce and pursue bad public policy.

It is a basic tenet of statistics that correlation doesn\’t suggest causation: simply because two things tend to occur together — such as college attendance and better incomes — does not always mean that one causes another. While both college attendance and choice of major do affect earnings, their effects tend to be smaller than continues to be reported.

Even straightforward-seeming analysis falls prey to those kinds of errors. For example, a fairly popular recent study C authored by Michael Greenstone and Adam Looney from the Hamilton Project C sought to find out if college was still a good investment despite the rising tuition. They estimated the cost of a four-year degree to be about $100,000 and, discovering that college graduates tended to create, on average, $13,000 more each year than their peers who didn’t go to college, estimated the ROI of the college degree to become about 16%.

Since the price of borrowing money for tuition along with other expenses is usually far below that number, they concluded that even going deep into debts are a better economic decision than skipping college altogether. Biggs and Haddad discover that reasoning faulty:

There are a couple of problems with this analysis. First, it conflates attending college with graduating from college. They’re not at all the same. Data in the National Center for Education Statistics show that only 58 percent of new college students who began in 2004 had graduated six years later. Dropout rates are even higher at less selective colleges, whose students are presumably most on the margin between attending school following high school and entering the workforce. Dropouts can end up holding the bag for thousands in college debt, but earn significantly less on average than college graduates. Calculating returns to education just for those who attend college and graduate is much like measuring stock returns for Google while ignoring those for General Motors. University of Rochester economist Gonzalo Castex finds that dropout risk accounts for a significant portion of the seemingly high returns to college education.

Furthermore, in their analysis, Greenstone and Looney didn’t take into account the fact that high schoolers who go on to enter college really are a pretty self-selecting group; they differ from their peers in additional than just the option they make about higher education. In reality, students who will continue to college make different alternatives much earlier within their academic careers. They take tougher courses, apply more effort for their studies, typically score better on standardized exams and have a more advantageous upbringing. This type of wide range of differences doesn’t lend itself well to side-by-side comparison.

It is extremely likely which should those kids have somehow not had the opportunity to enroll in college, they would have still been more likely to out-earn their fellow graduates who never contemplated entering college whatsoever.

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