An Economist Explains How to Make College Pay

Deciding whether and where to attend college is a giant decision for students and families, as well as the educators and guidance counselors who seek to advise them. It can also have an outsized influence on their financial health for the rest of their lives. In her new book, Making College Pay: An Economist Explains How to Make a Smart Bet on Higher Education, Beth Akers offers data and analysis that can help navigate these tricky waters. Beth, formerly of the Manhattan Institute, Brookings Institution, and the Council of Economic Advisers, and now a resident scholar at AEI, provides practical advice on how to choose a college, what to study, and how to pay for it. I recently spoke with Beth about her advice for students, families, and educators.

— Rick

Rick: Tell me about Making College Pay.

Beth: When I listen to former students talk about their feelings regarding college and the money they spent, I hear a lot of regret. I think that’s because we’ve convinced people to shop for college in a really romantic, impractical way. My book takes the opposite approach and coaches aspiring students and their families on how to use economics — meaning data and cost-benefit analysis — to inform their decisionmaking. And it isn’t just another college-rankings book. Instead, it gives readers a way to make the best decisions possible for their circumstances, without pretending that we’re all made of money or are in pursuit of the most elite experience we can stand to afford.

Rick: You’re an economist by trade. What made you get into higher education?

Beth: The short answer is that I fell into it. I was taking a year off from graduate school and working in the George W. Bush administration in the Council of Economic Advisers when the financial crisis of 2007 to 2008 struck. I had the privilege of working on a small team that implemented a necessary bailout of the federal student-loan program. When I went back to graduate school, I stuck with writing about higher education and have been fascinated/obsessed with the topic ever since.

Rick: Who should read your book?

Beth: I wrote this book with aspiring college students and their families in mind. Unlike some of my other writing, which is written more for an academic and policy professionals, this book was intended to be a very accessible read, even for someone without much previous exposure to the complex world of higher education in the United States or to economics.

Rick: So, is college really worth it?

Beth: Yes … on average … and if you make the right decisions along the way. College enrollment is expensive, but the typical student will see a bump in their earnings that more than outweighs the upfront cost. Unfortunately, that’s not true for everyone, and you need to make savvy choices to ensure you’re going to come out ahead.

Rick: What’s an example of making a “right decision” or “savvy choice”?

Beth: First, shop with data. Go to the College Scorecard and investigate the colleges and majors you’re considering. You’ll find information about how much graduates at each academic program in the country are earning. Or, if you don’t know which school you’re heading to, check out this report from the Georgetown Center on Education and the Workforce. It gives information about how much each major tends to pay, across all institutions. You needn’t make a choice based on expected earnings alone, but if the school and program you’re considering don’t have a good track record for placing graduates into high earnings, then you might want to think carefully about whether that path is affordable for you.

Rick: OK. What would be another “right decision”?

Beth: Another one is to be sure you have a plan. If you aren’t sitting on a trust fund, chances are that going to college “undecided” might be a dangerous path. That’s because it’s harder to make sure that you’re not paying too much if you don’t have any idea about where you’re going to end up. For example, a high-priced private college might be a good choice for someone gunning for immediate enrollment into an elite law school but probably doesn’t make sense financially if you end up as a social worker or public school teacher.

Rick: What are some of the most common mistakes students and parents make when choosing a college?

Beth: Confusing the price as an indicator of quality. I see a lot of parents sending their kids to “fancy” schools. I’m sure they imagine that the premium they are paying is worth it, but it’s very often not — at least not from a strictly financial perspective. For some, prestige is important. If it’s important to you, then it might make sense to go to a fancy school even if it is going to set you back a bit financially.

Rick: If money is an issue, does it make sense to go to a community college first and transfer into a four-year college?

Beth: If your goal is to finish a four-year degree, I’d actually recommend that you start at a four-year school, even if it costs a bit more to do so. Community colleges are a great resource to the localities they serve, but their students don’t have the best track records for finishing their degrees.

Rick: What advice do you have for high school counselors or educators advising students on whether or not to go to college?

Beth: It’s not a popular thing to say, but sometimes not going to college is the best financial decision a student can make. This is especially true if you live in a small town where job opportunities are limited and you aren’t able to relocate to follow a high-paying job offer. In the book, I explain how to compare the financial consequences of going to school versus not. It’s an exercise that we don’t do enough. But just assuming that college is the best path can be a very costly mistake in some instances.

Rick: What should be the go-to resource for counselors and educators looking for good information on different colleges?

Beth: I also recommend that counselors head to the College Scorecard I mentioned to familiarize themselves with the outcomes — such as graduation rates, student-loan default rates and earnings — at their local institutions. Most students don’t pick up and move across the country to enroll in school, so having a handle on the tradeoffs of enrollment at your local institutions would go a long way in helping students to make better decisions.

Rick: What’s one thing high schools could do better to help students and families make informed decisions?

Beth: Honestly, I’d encourage them to avoid getting into the game of celebrating their graduates for where they’ve chosen to enroll. That’s probably not what most counselors, students, or parents would want to hear. People love celebrating acceptances and revealing where they’ve chosen to go. But I believe it “gamifies” the whole process and encourages decisionmaking based on superficial factors, like “what everyone will think.” Instead, counselors could elevate the idea of being a critical consumer and encouraging students to walk through the data available on the options they are considering. We’ve got to get young people thinking beyond the college-enrollment decision and encourage them to see college as a pathway to a future ambition.

Rick: What’s the key takeaway you want someone to remember after reading your book?

Beth: College is risky. Getting a degree is akin to investing in yourself. And just like any other type of investment, you can’t make it willy-nilly. Do your homework and make sure you’re on a path that will pay.

This interview has been edited and condensed for clarity.

This post originally appeared on Rick Hess Straight Up.

Direct Ed Policy Studies at AEI. Teach a bit at Rice, UPenn, Harvard. Author of books like Cage-Busting Leadership and Spinning Wheels. Pen Ed Week's RHSU blog.