Since the introduction of the GI Bill in 1944, college has been part of the American dream, in large part because it is viewed as a ticket to economic security. Currently, about 21 million individuals attend a postsecondary institution, and the vast majority of high school students aspire to earn a bachelor’s degree or higher.1 While the popular image of college may be dominated by Ivy League schools, flagship state universities, and elite liberal arts colleges, in fact only a minority of students attend such institutions. Many go to less-selective regional four-year colleges and universities and vocational institutions, and nationwide close to 40 percent are enrolled in open-access community colleges. A small but growing number of students are working toward college degrees mostly or entirely online.
Students pursue postsecondary education for a variety of reasons. Some are looking for a broad liberal arts education, while others are more career focused. Still others enroll to take only a class or two to keep up their skills or simply for the joy of learning. U.S. postsecondary institutions serve not only those students with the best academic preparation but also those who were not well served in the nation’s elementary and secondary school system and need a second chance. This range is reflected in the differing degrees of “college readiness” among entering postsecondary students and in the increasing proportion of students who are “nontraditional” in that they are older, from less advantaged families, financially independent of their parents, parents themselves, or working while going to school.
As enrollments in postsecondary education have increased, so have private and public investments in education. Federal, state, and local governments combined contribute about 1 percent of the nation’s gross domestic product ($160.9 billion in 2011) to postsecondary education, largely predicated on the belief that it addresses long-standing economic inequalities and leads to economic growth.2 Namely, investment in education benefits the individual in many forms, including higher lifetime income, and benefits society by increasing labor force productivity, which in turn generates faster economic growth. Growing evidence backs these claims. For example, individuals with a bachelor’s degree earn 50 percent more during their [End Page 3] lifetime than individuals with no more than a high school diploma, and their unemployment rate is less than half as high.3 Research also suggests that college graduates have higher job satisfaction and better health outcomes than those without a college degree. Finally, economists such as Enrico Moretti have documented significant benefits to the broader society: workers earn more in cities with higher proportions of college graduates, suggesting that more educated workers generate positive “spillovers” to other workers. In fact, he documents that cities with more highly educated populations are hubs of innovation and experience faster economic growth than those with less educated populations, again generating positive spillovers to all residents.4 Increased globalization and advances in production technology suggest that post-secondary education will become even more important to the economic security of individuals and society in the future, as suggested by the work of economist David Autor. He has documented that the occupations that have grown over the past two decades require more “non-routinized” skills, many of which are associated with postsecondary education.5
Despite these data, critics are starting to ask whether current high levels of investment in postsecondary education are still worth it. Nowhere is this question more starkly voiced than by Peter Theil, cofounder of PayPal, who two years ago began offering young entrepreneurs up to $100,000 not to go to college. His reasoning is that traditional postsecondary institutions do not teach the critical skills that individuals need to succeed in the “real world” of business. Because timing is everything in business, Theil argues that young people with good ideas should not wait an additional two to three years to complete a degree before fully developing a new product.6
Others agree that postsecondary education may not be worth it, but their reasons primarily concern the relationship between the high price of postsecondary schooling...