Why Millennials are Eager to Foot the (Growing) Bill for College

Outstanding student loans totaled 1.2 trillion dollars in 2015. That’s one trillion, as in a one with nine zeroes after it, plus an extra 200 million dollars stacked on top. This astronomical sum is being repaid slowly and surely (for the most part) by roughly 40 million educated Americans. Not everyone is bearing the same burden, though, with millennials responsible for tuition as much as 1200% higher than Baby Boomers and even Gen-Xers.

Don’t weep for millennials, though, as even with the higher debt they seem to be doing just fine: 10% of them earn over $150,000 per year, compared to just 3% of their Gen X counterparts. Even more astoundingly, a quarter of millennials earn over $110,000 per year, versus only 4% of Gen Xers. This pay gap in favor of millennials may explain why 76% of them (vs only 68% of Gen Xers) feel strongly that college tuition — high as it may be — is worth it.

The (Real) Power of a Degree

Higher education — and specifically, a bachelor’s degree — is still romantically regarded as a ‘differentiator’: a key factor that can lead one down a professional career path instead of a lifetime of unskilled labor. While this notion may sound antiquated, it’s very much alive in the millennial mentality. With that in mind, is the proverbial ‘leg up’ really worth an arm and a leg?

Unsurprisingly, the first and most plausible explanation for millennials happily footing the bill for college is income potential. Much has been written of skyrocketing college tuition, but millennials diving head first into lucrative careers following graduation are focused on a different metric: ROI (return on investment). The earning figures noted above may sound impressive, and when examined coldly, lead to the conclusion that college is a hefty but lofty investment. Top schools such as Stanford and Harvard yield an ROI of up to 15 over the course of 20 years following graduation, a metric that shoots to over 17 when examining leading state schools such as the University of Virginia. While it may sound presumptuous to attribute 20 years’ worth of salary to a degree, consider that a degree is often a requisite for entry-level jobs that develop into lucrative careers in finance, tech and other industries.

To get to these levels of ROI, millennials aren’t as quixotic in their disciplinary selection, as the more political and idealistic students of the 1960’s and 1970’s. Contrary to their ‘special snowflake’ stereotype, millennials are hardly wearing rose tinted glasses when deciding on college majors, more interested in cushioning their bank accounts than enriching their soul. To wit, majors such as art and philosophy have been declining since the 1970’s, while practical vocational majors such as education and law have been on the rise. This indicates that their dreams, while grand, are not necessarily out-of-touch.

In fact, those grand dreams are precisely yet another reason millennials flock to and stick with academia. Dreams so grand, in fact, they require a master’s degree, which in turn calls for a bachelor’s degree — and a lot of debt. This signals a serious shift in the times; for the majority of individuals comprising the Silent Generation (born between 1920 and 1940), college was a faraway, somewhat elitist goal. As such, it was not a pre-requisite for success as much as a secondary education (high school diploma) was. Nowadays, with over a fifth of American men and a quarter of American women possessing a bachelor’s degree, a new frontier is necessary to stand out from the rest in a corporate environment that prizes higher education. Enter master’s degrees, whose rate of acquirement has doubled in the past 15 years alone, and is projected to be the fastest growing educational requisite for job seekers in coming years. We almost forgot the most important part — individuals with master’s degrees typically earn as much as 25% more than those with bachelor’s degrees and up to 40% more than those with associate’s degrees.

What does the future hold?

The current system appears balanced today, but as higher education attainment rises, so will competition — which could lead to a drop in wages. If that happens, two of the main justifications for paying high tuition — both the high income post-graduation and the expected ROI — will either fly out the window, or deepen to justify investing in further schooling, chasing higher wages.

There may be other explanations behind this phenomenon, from the sobering effect of the most recent recession, to the expansive skill-set demanded by a perpetually-evolving technological world. However you look at it, tuition will not be a driver of desertion throughout the current shift towards more capitalistically-inclined institutions of higher education. Whether or not that’s good news, only time will tell.

Originally published at gochange.co on June 21, 2016.

Change develops an Invisible Service that links to bank and credit card accounts, analyzes money transactions and discovers bad financial behavior (symptoms). It then matches those symptoms with behavioral treatments that are executed through smart sms messages (nudges).

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