May 6, 2016 Reading Time: 3 minutes

From 2004 to 2013, the median annual cost of tuition at a four-year public academic institution rose nearly 30 percent, from $13,270 to $17,474. Similarly, the cost of tuition at private four-year institutions rose 12.5 percent, from $31,167 to $35,074.

The increasing cost of higher education in the United States is something of which the public is well aware. Indeed, addressing this issue has been a major platform for more than one of the 2016 presidential candidates.

Given the increased cost of education, it is not surprising that student debt has also grown substantially over the past decade. From 2004 to 2013, the average college student loan debt for a new graduate rose from $17,493 to $26,860 per student. That’s an increase of over 50 percent.

Mark Kantrowitz, who is a nationally recognized expert on student loans and a regular contributor to The New York Times and Wall Street Journal, finds that 2016 graduates will enter the workforce with a debt burden of well over $30,000.

Given the already high and rising cost of tuition, one might expect a decline in college enrollment. However, this hasn’t been the case.

Undergraduate enrollment in degree granting post-secondary institutions rose by 37 percent over the first decade of the millennium, and is projected to increase by another 12 percent over the next decade, according to the U.S. Department of Education and the National Center for Education Statistics.

What is the explanation for this apparent paradox?

The answer is that the cost of not going to college has also risen. In other words, the benefit of a higher education is growing faster than the cost of higher education. Let’s look at median income levels pertaining to various levels of education: no diploma, high school diploma, some college/associate’s degree, and bachelor’s degree.

The benefit of a particular level of education is the “premium” associated with obtaining that level of education. The annual premium for each level of education is the difference between the annual median income for a given level of education and the annual median income associated with the level of education one step lower.

From 2004 to 2013, the annual premium for a high school diploma went from over $9,000 to just over $7,200, a decrease of 20 percent. Similarly, the premium for an associate’s degree dropped 24 percent, from over $7,000 to $5,350. This shows that the value of reaching educational milestones short of a four-year degree have become less valuable.

However, the premium associated with a bachelor’s degree increased by more than 13 percent over this time period, from approximately $15,200 to over $17,200. Furthermore, the annual income benefit of a bachelor’s degree (as opposed to an associate’s degree) is three times as high as the benefit of obtaining an associate’s degree (instead of a high school diploma).

So, as tuition rates rise, income levels for those who do not hold a bachelor’s degree are converging downward, while income levels for those with a bachelor’s degree are diverging upward. Obtaining a four-year college degree is becoming increasingly beneficial, but it’s also becoming increasingly costly. While educational attainment seems to be the key to upward income mobility, educational access appears to be the roadblock.

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Tristan Coughlin

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