Farrell: It college worth it? Yes, but be smart and curb borrowing

The drive from the Twin Cities to St. Peter on Wednesday was pretty miserable, cold and windy, the highway periodically obscured by gusts of snow. However, the audience at Gustavus Adolphus College couldn’t have been warmer. That evening I played the straight man, along with philosophy Prof. Lisa Heldke, for the Theater of Public Policy improv comedy troupe (all but one graduates of Gustavus). We took questions on the topic “Is college worth it?’’ and the actors imaginatively spun our serious insights into humorous skits. Who knew student loans could be so funny?

One student wondered whether a college degree was worth the time and the money for those with the drive to open their own business. The student had started a venture the previous semester and, he pointed out that neither Bill Gates of Microsoft nor the late Steve Jobs of Apple earned a college degree. Mark Zuckerberg of Facebook and Jack Dorsey of Twitter also dropped out before earning a degree.

My answer is that college pays for entrepreneurs. For one thing, more than half of business owners have a college degree, according to the Census Bureau. It takes nerve and skill to establish and run your own business. Fledgling entrepreneurs have to learn a variety of tasks, including finance, marketing, bookkeeping and sales. For another, Gates, Jobs, Zuckerberg, Dorsey and other titans of the high-tech ecosystem have surrounded themselves with well-educated workers, staffing their corporate empires with people carrying higher-education diplomas. According to research for the Kauffman Foundation, 92 percent of U.S.-born tech founders had bachelor’s degrees; 31 percent had master’s degrees, and 10 percent Ph.D.s. My sense is that entrepreneurship among the younger generation is on the rise, especially among young people in the creative industries and knowledge occupations. A college degree helps.

The value of college is apparent for those who don’t go on to be entrepreneurs. Pew Research data suggests that for the millennial generation — ages 25 to 32 — the gap in earnings between college graduates and their peers with a high school diploma or less has never been greater in the modern era. The financial penalty for not getting some form of postsecondary education — whether a technical college certificate or an advanced degree — is steep measured in job prospects, wages, benefits and career opportunities over a lifetime. I’d argue that postsecondary education has never been more valuable in the U.S.

That said, there’s no question the job market has been rough on recent college graduates. Colleges and universities have pushed students and their families to borrow too much to attend. The overall borrowing trend is worrisome, but it shouldn’t be exaggerated either. Only 3.7 percent of student borrowers have balances greater than $100,000 while 40 percent of borrowers have balances less than $10,000, according to the Federal Reserve Bank of New York.

So, is college worth it? Yes. The reality is postsecondary education is a critical safety net in our society, limiting downside employment risks. That doesn’t mean it’s worth paying any price to go to a particular college. Students and their parents should work hard at minimizing student loans. Students should realize that college is worth it, especially if you graduate on time and you borrow as little as practical.

Chris Farrell is economics editor for Marketplace Money. His e-mail is cfarrell@mpr.org.

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