Educating Ourselves Into Shackles?

There's a cancer that threatens to poison the global economic recovery, and it's not Europe or the housing market. It comes, in fact, from the very thing that's supposed to elevate our populace and our economy: graduate school.

Dr. Deborah Stewart, president of the Council of Graduate Schools, points out that there's a well-defined pattern that has taken hold: "Both historically and in recent years, there's an inverse relationship between the economy and graduate student enrollment."

Could this trend be a sign that we've lost our creative edge in America? Indeed, a case is being made that, recession or not, advanced degrees -- in fields outside of medicine, the sciences, and engineering -- fail to add the type of value needed to justify their costs.

Below I intend to show that the inclination to pursue a graduate degree during -- and because of -- difficult economic times is often counterproductive, and it has left millions of students with little to show for their efforts except crushing levels of debt.

Debt, debt, debt
Just how bad is the debt situation for college students? Consider the fact that it far outpaces credit card debt and is hovering around $1 trillion today.

It wasn't always such a problem, but student loan debt grew by a cumulative 511% between 1999 and 2011, outstripping average household debt by a longshot.

Sources: The Atlantic, the New York Fed, and Bureau of Economic Analysis.

You'd think that with a growing problem like this, lenders -- and schools that are consistently raising their tuition -- would start to worry. But they're not incentivized to.

You see, student loan debts are some of the "safest" bets around. Borrowers, or the indebted students, can't shed the loans even if they declare bankruptcy, and collectors are given extensive powers to make sure they get their money.

This means that every year, more and more graduates have to put off buying a new suit, car, and, most importantly, a house, because they can't afford it with their student loans. These decisions affect all of us.

Come to think of it, the "college for all" battle cry that we hear so often sounds awfully similar to the "homeownership for all" mantra that began in the late '90s. And we all know what a mess that misguided venture brought us.

Diminishing returns
As Fellow Fool Travis Hoium has shown, the returns on a college education have diminished markedly. In fact, the return on investment for a bachelor's degree in 2009 was 20% to 25% lower than it was in 1995.

Just as a bachelor's degree has become the new high school diploma, so the master's degree seems to be the next undergraduate certificate. Extrapolated out over time, one can only wonder where this escalation might end.

So why are students willing to play along with this game? The answer is pretty simple: Those with higher degrees get paid more and are unemployed less.

Source: Bureau of Labor Statistics.

Is graduate school even worth it?
But here's where things start to get really insidious. The stats above indicate correlation, not causation. It could just as easily be the case that lurking variables (socio-economic background, IQ, professional ambition, etc.) account for the differences in wages and unemployment.

What if graduate schools, especially in the humanities and business realms, don't add one iota to your educational or career prospects? What if all the benefits you gained through years of graduate studies could have been had -- for free -- by interning, volunteering, finding a mentor, or starting your own business?

Creativity crisis?
There's a growing chorus out there that believes we've lost our creative touch. They believe that instead of putting ourselves out there during tough economic times, we're retreating to the safety of graduate school to "open up new doors," even if we could find our own way through at a fraction of the cost.

Indeed, recent studies have shown that Americans' creativity quotient, or CQ, has been declining steadily since 1990. Think that's not important? A poll of 1,500 CEOs found that creativity is the most important "leadership competency" moving forward. And childhood CQ is three times stronger at predicting lifetime creative accomplishments than childhood IQ.

Maybe that helps explain why, when push comes to shove, so many are paying graduate schools huge sums of money to teach them what they need to know, instead of learning through experience.

Granted, there are some experiences you just can't get anywhere but graduate school, but those tend to be the exceptions, not the rules. When it comes to getting your MBA, for instance, studies have shown the degree to have little to no effect on your future salary or position in an organization. And The Economist recently demonstrated that some graduates take a steep pay cut after getting their MBA.

Source: The Economist.

In the end, it's not hard to come up with examples of wildly successful people who excelled without a college degree. Steve Jobs, Bill Gates, Henry Ford, and Steven Spielberg are all examples of individuals who were able to hone their creative energies by learning how to succeed from life experience.

But you don't have to be one of these titans to be successful without a graduate degree. You just need to be willing to take what many consider to be an unconventional path to finding your niche. And when you get there, you won't be saddled with debt.

Not only will that provide you with the financial flexibility necessary to get on with your life, but it will allow you to make the basic purchases you need -- and help keep our feeble economic recovery moving forward.

Fool contributor Brian Stoffel was a teacher at an inner-city charter school for five years before joining the Fool. His mother is a graduate school professor, and his brother is applying for his MBA. He hopes he's not going to be ostracized. You can follow him on Twitter, where he goes by TMFStoffel.

The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (34) | Recommend This Article (37)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2012, at 7:18 PM, Zombie111 wrote:

    30 years ago at university (irony, I know) a lecturer spoke of "The Great Training Robbery", where higher and higher qualifications were being required for many jobs, far in excess in technological changes. It didn't, and doesn't always mean higher pay, and by the time a student loan is repaid, it means that many people are financially worse off (but with more letters after their name).

    An old lecturer of mine used to say "look for the reinforcement", meaning who benefits from this trend? If higher education is a business, it looks as though they have sucked consumers in with a model that reminds me of a Ponzi scheme (not that I am an expert). People may feel they have no choice but to play the qualification game. I liked the way your article challenges this belief.

  • Report this Comment On April 17, 2012, at 8:24 PM, xetn wrote:

    Dr. Gary North (garynorth.com) has long advocated a sort of self-education degree, whereby a student finds the requirement for a certain college course, or studies clep notes and then cleps out of the course and a local college. This is a much cheaper way of obtaining college credits. One of his "students" in fact got his BA on his 18th birthday (at the same time he graduated high school) and it cost his family under $12000.00.

    This has saved him (and his family) a huge sum of money and enabled him to get a jump on gaining experience in the job market. But, I believe he actually opted to start a business.

    I believe many kids opt to stay in college because the job market is so bad for non-experienced workers. But many students never finish their degree objectives. They just quit, leaving a huge education loan that will follow them for many years.

  • Report this Comment On April 17, 2012, at 9:35 PM, TMFCheesehead wrote:

    Very interesting contributions xetn & ir0b0t, many thanks.

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 2:27 AM, lowmaple wrote:

    I have to point out that 99.999% of us do NOT have the genius and the ultimate drive and determination that steve Jobs had.

  • Report this Comment On April 18, 2012, at 8:13 AM, TMFCheesehead wrote:

    lowmaple-

    I direct you to the 2nd-to-last paragraph

    <<But you don't have to be one of these titans to be successful without a graduate degree. You just need to be willing to take what many consider to be an unconventional path to finding your niche. And when you get there, you won't be saddled with debt.>>

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 10:25 AM, MaxTheTerrible wrote:

    I'd argue that debt and graduate degree should not even be used in the same sentence.

    Almost all graduate schools offer teaching/research assistantships and/or fellowships, especially in the science and engineer majors. If you can't get one - you are not good enough and should consider an alternative career move - it's as simple as that. The fellowship would not get you far, you will be living a life of a working poor, but it is enough to get by for 5 years (been there, done that).

    If you need to get a law degree or an MBA I suggest finding a real job in the field first and then making your employer pay for an evening program.

  • Report this Comment On April 18, 2012, at 10:30 AM, MaxTheTerrible wrote:

    ^*engineering*^ aghrrr!

  • Report this Comment On April 18, 2012, at 10:38 AM, TMFCheesehead wrote:

    Max-

    Though I didn't make it clear enough in the piece, I was focusing primarily on graduate degrees outside of the sciences, engineering and medicine.

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 10:55 AM, MaxTheTerrible wrote:

    ^ Yes, this changes things quite a bit, but even for graduate degrees outside of the sciences, engineering and medicine, I would argue that if you can't figure out a way to get somebody else to pay for your graduate degree - it's probably a sign that you should not get one.

    Being involved in hiring for my company, I can tell you from experience that having a bunch of letters after your name (however impressive it may look) *and* zero work experience will only hurt your chances...

  • Report this Comment On April 18, 2012, at 11:05 AM, bcummi5779 wrote:

    The problem with this article and many others like it is that it asumes that anything that does not add to the GDP is of no value. Humanities is a discipline that is often put into that category. Where the STEM disciplines are being crammed down our educational throughts, all they really do is teach us to follow procedures. While this often leads to new, often profitable ways to produce pratical solutions, it is the Humanities that fosters creativity and the ability to reason, the true sources of problem solving. Yet, in a society that values entertainers and athletes more than teachers, is it any surprise that we place the greatest value on material culture?

  • Report this Comment On April 18, 2012, at 11:06 AM, bcummi5779 wrote:

    "throats" not "throughts!"

  • Report this Comment On April 18, 2012, at 11:10 AM, TMFCheesehead wrote:

    bcummi5779-

    As someone who graduated with a degree in the humanities, I have to take issue with an assumption you're making. I agree that humanities fosters creativity, but...so does life.

    It would be silly to think that without an advanced degree in humanities we would be bereft of creativity. It's something that's FREE for those that apply themselves.

    As for STEM degrees, I think the focus there is more on access to cold, hard equipment that would be difficult get access to w/o admittance to a program.

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 11:11 AM, ryanalexanderson wrote:

    ^ I don't think this is a problem with the article. It's almost a corollary. Do not do a degree unless you genuinely want to learn more about the subject.

    And if you think that a graduate degree in one of the "STEM" disciplines is only about following procedures, with no creativity...I'm sorry, but I don't think you understand how science and engineering research works.

  • Report this Comment On April 18, 2012, at 12:49 PM, DJDynamicNC wrote:

    Social norm are pretty fierce in this regard too. Not only are students expected to go to college, they are expected to do so straight out of university.

    It strikes me as odd that we expect our children to decide on what advance education they are going to require over the next 60 years before they've even completed high schol or held any sort of long-term career.

    The problem is that we've made the basic 4 year degree a requirement for a great many jobs that really, really don't require it. So if you want to get a fulfilling career before deciding what sort of courses would benefit that career... you first have to take the courses anyway. It's a very strange system and forces kids to shoot in the dark and hope they wind up making the right choice, because if they don't, they aren't going to get a second chance after all the costs are tallied.

    Such a strange approach, as a society.

  • Report this Comment On April 18, 2012, at 1:52 PM, RallyCry wrote:

    One consideration not often mentioned but I feel is important is the timing of the graduate degree. I would advocate earning an undergrad degree, trying to secure 5 years or more relevant work experience while participating in a 401(k) plan (if offered) to earn the full vesting on your company match before looking into grad school. There is an equally troubling epidemic of people working 1-2 years in a job who forfeit a good chunk of their potential retirement, while moving in and out of jobs. Chances are if you can hold a job beyond 3 years, the company will view you as an investment and may even pick up part of the tab for an advanced degree.

  • Report this Comment On April 18, 2012, at 1:58 PM, seminole82 wrote:

    As a current MBA student I have had a very different experience in grad school than the one described (may be more exception than rule). I left a well-paid job in 2010 to return to school because I wanted to switch careers and found that leaving work gave me the time and opportunity to explore many opportunities that had not occurred to me previously. Unlike just leaving my job to try new things, which ultimately would have looked somewhat flakey to prospective employers, I was able to gain this experience and build much needed skills (networking, presenting, finance and accounting acumen) while gaining perspective that is much harder to come by when you can't remove yourself from the day-to-day tasks of life and work.

  • Report this Comment On April 18, 2012, at 2:00 PM, TMFCheesehead wrote:

    @DJDynamic-

    >>The problem is that we've made the basic 4 year degree a requirement for a great many jobs that really, really don't require it. <<

    Couldn't agree more

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 2:01 PM, syi916 wrote:

    MaxTheTerrible, a lot of companies are starting to veer away from sponsoring graduate degrees. It's not like it used to be. And world is not black and white. Just because you can't land a job where they're willing to pay for your education does not translate to them being less qualified.

  • Report this Comment On April 18, 2012, at 2:03 PM, TMFCheesehead wrote:

    seminole82-

    Are you being paid to go to grad school? If not, why couldn't you quit your day job to explore other opportunities, or look for internship/mentoring/volunteering opportunities.

    I realize that no one wants their resume to look "flakey", but (I wanted to include this stat but couldn't find a good spot) over 80% of job openings are filled through informal networks. Only 20% of jobs are filled in the usual "vetting the resumes" form. And I truly believe two years devoted to building out your network w/o an MBA is just as effective as going to school...at a fraction of the cost.

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 2:07 PM, DJDynamicNC wrote:

    ^^^ Exaxctly that.

    The link that the author provided for the research on creativity directly addresses that and was really fascinating. Here it is again if you missed it:

    http://www.thedailybeast.com/newsweek/2010/07/10/the-creativ...

  • Report this Comment On April 18, 2012, at 2:08 PM, DJDynamicNC wrote:

    Oh, oops. Looks like a lot of posts occurred while I was typing that last one. It referred originally to RyanAlexanderson's post.

  • Report this Comment On April 18, 2012, at 2:15 PM, cabezas100 wrote:

    I think the author's concept of higher education is a little narrow, as for me, my university degree has enriched my whole life in general, and not just opened doors in my career. I have to say that I did a liberal arts degree 25 years ago in Europe when if you got the grades, further education was almost free, and I graduated with no debts (nor did my parents have the money to put me through university.) AT the time, if I'd thought a university degree would have put me into significant debt, I think I would have passed. When I left high school at 18, had I not gone to university, I would not have had much of an idea what to do, and I think, unlike STeve Jobs etc. few young people are driven enough to know where to go to get the skills they will need later in life outside of the college experience.

    On leaving school, I had little idea as to what I wanted to do and a liberal arts degree suited me fine. It trained my mind and taught me how to find and apply information, oriented my later career and life choices and was 4 years well spent. Too bad education for its broader purposes is not more accesible to young people in North America today.

  • Report this Comment On April 18, 2012, at 2:18 PM, seminole82 wrote:

    Brian,

    I did think about the topics you raise, but I also choose the school I did because I was looking to relocate as well as change jobs and the networking provided through alumni and industry partners of my school in the region I am targeting also played a large part in my decision. I know it is cliche but a large part of the value of b-school is the network it allows you to plug in to and it has definitely opened doors for me that I did not even know existed before. Also, like Max described I was able to secure a fellowship so my cost was significantly less.

  • Report this Comment On April 18, 2012, at 2:18 PM, TMFCheesehead wrote:

    cabezas100-

    I have nothing against the content of a liberal arts education. I got one too. The bigger question has now become: "Is it worth paying for?"

    As you said, you may have passed it up at today's prices. And like I said, no one needs to shoot to be the next Steve Jobs. I genuinely believe most people would surprise themselves with how much they can learn on their own if they really put themselves out there.

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 2:19 PM, DJDynamicNC wrote:

    "And I truly believe two years devoted to building out your network w/o an MBA is just as effective as going to school...at a fraction of the cost."

    Completely agree. In fact, I think that this, if anything, might be an understatement.

    I hadn't heard the 80% of jobs filled through informal networks stat, but I absolutely don't doubt it (would be interested in a source for further reading though). I've gotten menial or basic call center jobs through the standard application or resume submission process, but all of my career-level jobs, every single one, have come from my own network of contacts - many of which had nothing to do with the business at hand initially.

  • Report this Comment On April 18, 2012, at 3:52 PM, TMFCheesehead wrote:

    DJ-

    Here's one link form 2009: http://money.cnn.com/2009/06/09/news/economy/hidden_jobs/

    Brian Stoffel

  • Report this Comment On April 18, 2012, at 6:43 PM, Zombie111 wrote:

    Hi again

    Like cabezas100 I also did an arts degree 30 years ago when the cost was minimal compared to today. I left with a post-grad degree, a professional qualification or 2 (which is still how I earn my income) and practically no debt (although I did have to work part-time). I compare my situation then to those of interns I have had, who have accumulated significant debt that they may only repay by the time they are about to retire. I wouldn't want my own children to do that.

  • Report this Comment On April 19, 2012, at 8:54 AM, captloeff wrote:

    An education not only increases your earnings power, it gives you confidence with a learned ability to adapt to an ever changing work environment. It pays dividends for generations. Regardless of the fact that graduate students with a great deal of debt have to put off making purchases for a while, they will make those purchases eventually. Graduate education is a great investment. The United States would be better off if more people were willing to invest money in their own and their children's education. Education isn't about learning facts. It's about learning how to think critically. That is a skill from which most of us could profit.

  • Report this Comment On April 19, 2012, at 9:37 AM, TMFCheesehead wrote:

    captloeff-

    Is it a skill that can only be had in expensive graduate schools? Humans have been on earth for millions of years. Only in the last 50 has graduate school become so prevalent. Does that mean for all the time before that, we had no critical thinkers?

    I agree with the intent of what you're saying "Education IS a great investment". I'm just astounded by how many people think "Education" = "School". Ironically, that in and of itself could be evidence that we've lost our creative edge.

    Brian Stoffel

  • Report this Comment On April 19, 2012, at 5:12 PM, captloeff wrote:

    Mr. Stoffel,

    I agree for the most part.

    I guess it really depends upon the quality of the school. I would argue that some schools don't necessarily educate. However, some people don't necessarily learn from experience either.

  • Report this Comment On April 19, 2012, at 6:51 PM, Dmama wrote:

    Great, thought-proving article ...

    It seems to me that lack of creativity in our society is being encouraged at younger and younger ages these days. My 2nd and 3rd grader are taking tests that ask them to fill in the right bubble in order to get a good grade. How come as a country we value sameness and "inside the bubble" thinking? We lose innovation in the workforce by squelching creativity in even our elementary school children.

    Dmama

  • Report this Comment On April 19, 2012, at 10:41 PM, TMFCheesehead wrote:

    Dmama-

    I guess we could widen the scope to "all schools", but that's for another article altogether :)

    Brian Stoffel

  • Report this Comment On April 20, 2012, at 12:01 PM, Dadw5boys wrote:

    Professor said when there are no job the smart people go back to school and prepare for the new job to come.

    I say when there are no job get to work and make you a job. I also am a big fan on having many skills to bring to the table when needed.

    I am an accountant, Welder, Business Owner, Advertizing planner, Sales Manager, Warehouseman, Supervisor, Project Planner, Father, a great cook for large groups (my 6 kids were my training ground).

    I also keep honey bees, raise cattle and raise cat fish. I have kept horses and rased veggies for sale. I still reapir my own vechiles and keep over 12 of them running from car, vans to dump trucks.

    Making good decisions takes time and experience.

  • Report this Comment On April 24, 2012, at 4:51 PM, DJDynamicNC wrote:

    "Humans have been on earth for millions of years. Only in the last 50 has graduate school become so prevalent. Does that mean for all the time before that, we had no critical thinkers?"

    That's a good point.

    School is great if you find yourself in desperate need of a really expensive piece of paper or very specialized knowledge. Otherwise basic certification or on the job training typically suffices, in my experience (for what it's worth).

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