Board of Governors of the Federal Reserve System

Higher Education and Human Capital

Whether an individual attends college and completes his or her degree has long been understood to be a major determinant of lifetime income and financial well-being. However, as both real college costs and the percentage of students borrowing to pay for education continue to rise, some have questioned whether the relationship between higher education and lifetime returns may now be more complicated.

The survey asks respondents about their educational experience, their perceptions of the value of their degree, and--among those who did not complete a college degree--why they did not continue their education. The survey also considers the financing of education and the use of student loans, which is discussed in the "Education Debt and Student Loans" section of this report.

Consistent with findings in the 2015 survey, results of the 2016 SHED show that most adults who went to college believe that the value of their education meets or exceeds the costs, although the perceived value of higher education varies widely depending on program completion, type, and major. In particular, while most respondents who have a degree from traditional public or nonprofit institutions report that their education was worth the cost, perceptions of the value of one's degree are less positive among non-completers and among respondents who graduated from a for-profit school.

Value of Higher Education by Educational Characteristics

In order to monitor the perceived value of higher education, the survey asks respondents who completed at least some college whether they believe that the lifetime financial benefits of their postsecondary education outweigh the lifetime financial costs. Overall, 53 percent of adults with at least some college education feel that the benefits of their education exceed the costs and an additional 26 percent feel that the costs and benefits are about the same. Just 19 percent believe that the costs of their education exceed the financial benefits that it produced.

While individuals generally view their education as worthwhile, responses to this question vary based on several characteristics of the education.³³ Among non-completers, who attended college but failed to complete at least an associate degree, 36 percent feel that the education was worth the cost, whereas 26 percent feel that the costs outweigh the benefits.³⁴ For those who completed additional education, the likelihood of viewing the degree as beneficial is much greater. Among these degree completers, 64 percent feel that the benefits of their education outweigh the costs, compared to just 16 percent who feel the costs outweigh the benefits.

Self-perceptions of the value of one's education also vary based on the type of institution attended. Among non-graduates, the type of institution attended has no statistically significant impact on the self-perceived value of the education. However, among those who completed their degree, substantial differences emerge based on where the individual went to school (figure 22). Sixty-five percent of graduates from public or not-for-profit institutions report that the value of their degree exceeded the cost. Among graduates of for-profit institutions, just 40 percent feel this way.³⁵

Additionally, this difference is not purely due to the selectivity of the institutions. The Carnegie Classification categorizes schools based on how selective (accepting a small number of applicants) or how inclusive (accepting a larger share of applicants) they are.³⁶ Among respondents who completed a degree from a public or nonprofit school that the Carnegie Classification rates as a part-time, two-year, or inclusive institution, 56 percent feel that the benefits outweigh the costs, which still exceeds the percent with this level of satisfaction regarding the value of their degree among graduates of for-profit institutions.

As was observed in previous years of the SHED, there is also evidence that the field of study impacts how people with similar levels of education value their degree (table 24). While sample sizes for any given degree are small, among respondents who completed at least an associate degree, those with degrees in engineering are the most likely to report that the benefits of their degree exceed the costs.

Table 24. Overall, how would you say the lifetime financial benefits of your bachelor's or associate degree program compare to its financial costs? (by field of study)

Percent

Desire to Change Educational Decisions

The responses to the question of whether one's education was worth the cost suggest that degree completion, type of institution, and choice of major all play a role in whether individuals feel that their educational investment paid off. In order to gain further insight into the dimensions on which some people feel their educational investments were lacking, the survey also asks respondents what they would do differently if they could go back and make their educational decision again.

Among those who started college but did not complete their degree, two-thirds say that, if they could make their educational choices again, they would have completed more education (table 25). Notably, even among respondents who feel that the costs of their education outweigh the benefits, 62 percent of non-graduates say that they would have completed more education. This suggests that many non-graduates who feel that their education was not worth the cost believe that their failure to complete a degree contributed to the low return on their investment.

Table 25. Knowing what you know now about the benefits and costs of your education, if you could go back and make your education decisions again, would you have done each of these things? (by education)

Percent

Among respondents who completed at least an associate degree, the pattern of responses is similar. Thirty-eight percent of these respondents would have completed more education, which includes 59 percent with only an associate degree who would have done so. Only 7 percent would have either completed less education or not attended college.

This question also provides evidence that respondents who attended a for-profit institution have a higher level of regret about their choice of school than those who attended a not-for-profit or public institution. Forty-eight percent of respondents who attended a for-profit school say that they would have attended a different school if they could make their educational decisions again. This compares to 28 percent of individuals who attended a not-for-profit institution and 19 percent of those who attended a public institution (figure 23). This difference across institution types remains statistically significant even after controlling for the selectivity of the school attended (using the Carnegie Classification),³⁷ gender, age, parents' education, own level of education completed, and the age at which the individual last attended the educational program.

Factors Influencing College Attendance

Recognizing the importance of college attendance and completion decisions, the survey considers several factors that influence these choices. The likelihood that an individual attends college is significantly correlated with the education of his or her parents. Among young adults ages 25 to 39 whose parents both have no education beyond high school, 52 percent received a high school degree or less themselves and just 18 percent obtained at least a bachelor's degree.³⁸ Among similarly aged respondents with at least one parent who has a bachelor's degree, 66 percent received a bachelor's degree, whereas 9 percent have no education beyond high school (figure 24).

Additionally, among those who do attend college, family background is correlated with the type of school that they attend. Sixteen percent of individuals ages 25 to 39 who went to college and whose parents both have a high school degree or less report that they attended a private for-profit institution. For comparison, among respondents with at least one parent who has a bachelor's degree, 4 percent attended a for-profit institution (figure 25).

Differences in the types of schools attended also differ based on the race and ethnicity of the student. Approximately 6 percent of white young adults (ages 25 to 39) who went to college attended a for-profit institution. This compares to 16 percent of black young adults and 20 percent of Hispanic young adults who went to college reporting that they went to a for-profit school (figure 26).

One possibility for these different educational decisions is that the types of people providing educational advice differ based on one's socioeconomic background. However, the survey asks young adults and recent college attendees about who provided them with advice when making their educational choices and there generally are not clear patterns in responses across demographic groups.³⁹ The one exception is that individuals whose parents attended college are more likely to have received advice from their parents than are those whose parents did not. Seventy-seven percent of those whose parents have at least a bachelor's degree say that their parents provided advice and that this advice was at least moderately important. This compares to 60 percent of those whose parents did not complete a bachelor's degree.

Overall, parents are the most frequent source of advice for educational decisions, with two-thirds of respondents indicating that they received advice from their parents and that this advice was at least moderately important (table 26). However, sizeable minorities also received advice from high school teachers or counselors (38 percent), friends (36 percent), or representatives of a college or university (31 percent).

Table 26. How important was the advice or opinion of each of the following people when you were deciding whether to attend college and what school to attend?

Percent

Reasons for Not Starting or Not Finishing College

In order to better understand the decisionmaking process of those who have no education beyond high school or who completed some college but have no certificate or degree from that education, these respondents describe what influenced that decision or outcome. This question is only asked of respondents age 30 or younger, or who attended school in the past decade. Respondents can select all responses that applied to their situation.

Among respondents who completed a high school degree but who did not attend college, the most common reasons provided for this choice are that they needed to earn money (37 percent), it was too expensive (37 percent), they simply were not interested (33 percent), or because they wanted to work (27 percent) (table 27).

Table 27. Reasons for not attending college or not completing college

Percent

For students who attended college but did not finish and are no longer enrolled, the expenses of college are the most frequently cited reason for leaving without completing a degree (43 percent). This is followed by 36 percent who felt that they needed to earn money and 29 percent who wanted to work.

For both the reasons for not attending college and the reasons for not completing college, there is a substantial gender gap in the responses. Among women who either did not attend college or did not complete a college degree, 22 percent indicate that child care responsibilities contributed to this decision. This compares to 5 percent of men who saw child care as a barrier preventing attendance or completion of a degree. In contrast, men are more likely than women to report that they either wanted to work or that they simply were not interested in college (table 28).

Table 28. Reasons for not attending college or not completing college (by gender)

Percent

 

References

 

 33. For additional discussion of the self-perceived value of education by educational characteristics, see box 4, which discusses the educational perceptions of traditionally aged students and adult learners. Return to text

 34. When limited to those who have not completed an associate degree and who are not currently enrolled, 29 percent feel that their education was worth the cost and 29 percent feel that the costs outweigh the benefits. Return to text

 35. Recognizing that many people may not know whether a school is a public, nonprofit, or for-profit institution, respondents are instead asked in the survey for the name and location of their college or university. These schools are then coded into institution types using data from the Center on Postsecondary Research at the Indiana University School of Education. Return to text

 36. The Carnegie Classification defines selective institutions as those whose first-year students' test scores place most of these institutions in roughly the middle two-fifths of baccalaureate institutions and more selective institutions as those whose first-year students' test scores place these institutions in roughly the top fifth of baccalaureate institutions. Inclusive institutions extend educational opportunities to a wide range of students with respect to their academic preparation. For more details on the Carnegie Classification, see Center for Postsecondary Research at the Indiana University School of Education, "Carnegie Classification of Institutes of Higher Education," web page, http://carnegieclassifications.iu.edu/. Return to text

 37. Some respondents may have pursued higher education soon after college, and then returned to school later in life. Among those who completed an associate or bachelor's degree, the separation here is on the age at which they completed that degree. Among those who did not complete an associate or bachelor's degree, the separation is based on the age at which they most recently attended a higher education program. In the survey, 64 percent of individuals who went to college and report their most recent date of attendance are considered traditionally aged students and 36 percent are adult learners. Return to text

 38. Ibid. Return to text

 39. Respondents ages 18 to 24 are excluded from young adults here to reflect that many individuals in that age cohort have not yet completed their education. Respondents age 40 and older are excluded in order to focus on young adults whose educational experiences are more recent. Return to text

 40. This question is only asked of respondents who attended college in the last decade or who are under age 30 (irrespective of whether they attended college or not). Return to text