Does university pay?

College tuition is often the single-most expensive burden American families have to shoulder. In the Cara Community tradition of providing readers with timely advice and financial planning tips, this article -- written by education policy expert Sophia Foster -- takes a hard look at what rising college costs mean for students and families, and offers a number of ways to make the investment produce returns in our still-dragging economy.

The debate about tuition fees corroborates one of my prejudices - that in popular political debate, the arguments that are used are often weaker than the arguments that are not. What I mean is that three arguments for higher fees are just nonsense:1. “The nation can’t afford it.” But if taxpayers as a whole cannot afford to fund university tuition, then a subset of taxpayers can’t afford it either, especially as they will be paying higher interest rates than taxpayers generally.

A UNIVERSITY education costs a fortune. Student loan debt in America has been rising rapidly in an effort to keep up with the expense. According to the 2007 Survey of Consumer Finance 8.9% of households had student debt in 1989, averaging $8,700. In 2007, by contrast, the share had risen to 16%, holding an average of $21,500 in debt. To make matters worse new graduates face a slack job market which could depress their earnings for decades.

In one respect at least, it seems to me that the students protesting about higher tuition fees have an overwhelmingly strong argument: why should they have to pay £27,000 for something that I got for free?It’s not good enough to say that student numbers have increased enormously since my day, and that whilst the tax-payer could afford to educate an elite it cannot afford a mass education. This will not satisfy today’s elite students, who might reply: cut student numbers, then - I‘ll still get in.

It’s being alleged that the government is thinking of allowing universities to give extra places to richer students who can pay higher fees - the idea being that this would allow poorer students to win more places on the capped fees.I reckon there are four arguments against this:

Traditionally, universities have selected the smartest applicants. But could this change, so that they select the stupidest, in one sense at least?

Could rises in tuition fees have unintended consequences for the labour market? Here’s a theory. Let’s suppose that the graduate premium exists not because universities create more productive workers, but simply because more the sort of people who go to university are more attractive to employers anyway.

It was reported in the media as showing that, controlling for all the right variables, going to an elite college or university as an undergraduate doesn't really matter for your future prospects or income.  But Robin Hanson, with money on the line, investigated further.  After reading the relevant pieces closely, he reports [what follows is Robin, not me, but with the multiple indentations I haven't indented everything again]: