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Reason Foundation

Obama's Higher Education Budget and Exaggerated Lifetime Earnings From College Completion

Lisa Snell
February 2, 2010, 4:06pm

Despite cries of fiscal restraint, the Obama Administration has proposed billions more in higher education spending. Under the proposed 2011 budget, the maximum Pell Grant increases by $160 to $5,710 and would automatically rise by rate of inflation plus 1 percentage point annually over the next decade. It also includes the $10.6 billion American Graduation Initiative to improve and modernize community colleges and a $3.5 billion College Access and Completion Fund.

We can put these spending increases in the context of a feature in today's Wall Street Journal which reports that:

A college education may not be worth as much as you think.

For years, higher education was touted as a safe path to professional and financial success. Graduates, it has long been argued, would be able to build solid careers that would earn them far more than their high-school educated counterparts.

The numbers appeared to back it up. In recent years, the nonprofit College Board touted the difference in lifetime earnings of college grads over high-school graduates at $800,000, a widely circulated figure. Other estimates topped $1 million. . . .

Mark Schneider, a vice president of the American Institutes for Research, a nonprofit research organization based in Washington, calls it "a million-dollar misunderstanding."

Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says.

Bottom line will be ever rising college costs caused by the influx of more "free" taxpayer money. College then becomes less affordable and prompts more calls for government investment to help young people who cannot afford college! Repeat.


Lisa Snell is Director of Education


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