economics | January 10, 2020

Has the College Wealth Premium Collapsed? Annie Lowrey Investigates for The Atlantic

Has receiving a college education become more trouble (re: debt) than it’s worth? The Atlantic’s Annie Lowrey considers new findings that suggest college grads do not necessarily have more financial security or long-term prosperity than their non-graduate peers. 

Despite rising costs, increased inequality, and stagnant wages, economists continue to espouse the benefits of a college degree, arguing that college grads out-earn their peers 2:1. Annie Lowrey fears this logic is too simple. While the college earnings premium has, indeed, proved durable and considerable, the wealth premium—accumulated over time—has toppled. “Younger folks have come of age during an era of consumer debt, with banks more than happy to load customers up with credit cards, car loans, and so on,” Lowrey writes. “Those debts then get subtracted from the value of families’ assets when determining their net worth, helping to explain the Millennials’ crummy wealth accumulation.”

 

Recent generations have also been unable to enter the housing market or buy their way into the stock market, not to mention that the cost of college itself has increased by a factor of 14—a huge leap that requires young people to pile on more debt, eating away into their future earnings. “Even if going to college is still important for young people’s earnings and employment, it is less of a clear economic boon than it was 30 years ago.”

 

Read the full article here.

 

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