Despite rising levels of total student debt over the past 10 years, better employment prospects and higher income enable most university students to pay off their loans, according to a report published last Monday by the Public Policy Institute of California.
In “Student Debt and the Value of a College Degree,” the authors suggest that students are able to pay off debt because over the past two decades, the extra income a person earns for going to college — that is, the wage premium — has nearly doubled. Additionally, the report says that student debt in California is relatively low compared to the national average because of its Cal Grant program and inexpensive community college system.
Report co-author Marisol Cuellar Mejia said that for students majoring in any subject, the cost of education pays off long-term.
“The returns on education are higher for engineering and computer science, but all majors are better off for wage distribution and employment outcome,” Cuellar Mejia said.
The authors cited a nearly 5 percent unemployment gap between those with a bachelor’s degree and those with only a high school diploma, with this gap increasing following the post-2008 recession. The report found a wage premium regardless of major, with even the lowest-earning majors earning a median of $57,000, compared to $39,000 for high school graduates.
The report also finds that students in California are incurring less debt than those in other states, with Californians incurring a median of $15,000 in debt, compared to $17,100 nationally. The authors attribute this relatively low debt in California to the community college system. The report calls the associate degree for transfer — which guarantees entry to a UC or CSU upon completion — “a step in the right direction.”
“Community college is way, way cheaper and will allow my parents to pay back the loans they took out for me to go here,” said Renee Harrison, a recently graduated UC Berkeley anthropology major and transfer student from Orange Coast College. “My sister wants to go to UCSD, and my parents are making her transfer as well.”
The report also cites the Cal Grant program for low student debt in California. Rachelle Feldman, assistant vice chancellor and director of financial aid and scholarships, said the Cal Grant program allows students to keep their debt levels down. According to Feldman, UC Berkeley has a 1.6 percent default rate — compared to 13.4 percent nationally — which she also attributes to programs such as the UC Berkeley-specific Middle Class Access Plan and the student-parent grant.
David Ezekiel, a co-author of the report, said education’s benefits extend beyond those directly benefiting from the wage premium by reducing reliance on public services and increasing the tax base, among other benefits.
“We are trying to frame education as a public good,” he said. “An educated workforce contributes to a robust economy.”