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Today college is seen as crucial for career success and prosperity. "Will College Pay Off?" is a new book by Peter Cappelli, and the answer, he suggests, is that it depends -- on the price tag, how fast a student finishes and what job they get afterwards. Economics correspondent Paul Solman talks to Cappelli about finding an educational path that makes financial sense.
Now: Will college pay off?
The question may be on the minds of recent high school graduates and their parents.
Economics correspondent Paul Solman takes a look. It's part of our weekly segment Making Sense, which airs every Thursday on the NewsHour.
Graduation day for the class of 2015 at Philadelphia Academy, a charter school in Northeast Philly.
The greatest senior class in Philadelphia Academy history.
(CHEERING AND APPLAUSE)
Since history here only goes back 12 years, the greatest might actually be a true superlative, but this is also a fairly typical senior class in America these days with about three out of every four grads attending college in the fall. The national average is 66 percent.
I'm going to Temple University.
Community College Philadelphia
And since everyone knows college is crucial for career success, these kids will prosper, right? After all, it was in the 18th century that Benjamin Franklin, who founded the University of Pennsylvania here in Philadelphia, said, an investment in education gives the best returns.
PETER CAPPELLI, The Wharton School, University of Pennsylvania: You can do enormously well going to college in the U.S., the right kids going to the right college. And you can do really poorly as well.
Peter Cappelli, a professor at Penn's Wharton's Business School, is the author of "Will College Pay Off?" He says that, from a strictly economic point of view, the answer isn't always yes.
The average American family now pays seven times as much as the average European family to send their kid to college. Seven times is a lot. You have about a quarter of colleges in the U.S., the degrees from that college earned a negative rate of return. That is, you're never going to make back the money that you spent going to college in the first place.
So, Cappelli answers his own question, will college pay off, with a very big, it depends. First, what college and how much does it cost?
JAMES SMITH, Student:
I'm going college at Penn State University, main campus.
Did James Smith, class salutatorian, consider a pricier private school like Penn, where tuition and fees approach $50,000 a year?
I would love to attend an Ivy League college, but I rather think financial — the financial situation wasn't good for us. And so Penn State was the best option for me.
Where in-state tuition is $17,000, but, says Cappelli:
You're likely to be able to get much better financial aid at elite schools. If you're making less than $100,000 as a family, you tend not to pay much of anything in tuition costs anyway.
So, it's cheaper than going to a state school?
So, it's cheaper than going to a state school.
And even private schools less elite than Ivy League Penn offer sweet deals.
One of the things that is new about financial aid is the rise of these merit-based scholarships, which many people my age really didn't experience. And these are basically schools giving you a discount if they really want you to come.
To boost their SAT school average, for example.
Right. And that's why they do it.
To move up in the various college rankings. By contrast, kids attending cash-strapped state schools have to rely on loans.
Dave Worrell, heading to the public Kutztown University, is one of triplets.
It's going to be a lot to have to pay back. But it's worth it, it's worth it.
Or is it? Especially since federally unsubsidized loans accumulate interest from day one, and odds are that a four-year degree will take longer than four years to finish.
The completion rates at a school like ours here at Penn, in — 98 percent in four years. Across the U.S., the completion rate is only 40 percent in four years and only 60 percent in six years. If you think it may take your kid six years to graduate, that rate of return goes way down.
So price tag and completion rate are factors in whether college will pay off. But so's the job you get with that college degree, and certainly you have gotten this message by now.
The college grads have half the unemployment of high school grads, that's true, but it doesn't mean that those college grads are getting jobs that require college-level skills. You could make more than a high school grad, and still not make enough money to pay off your education, right?
But not all college grads have to settle for high school-level jobs. What about the STEM fields, science, technology, engineering, math?
The job market for science majors has never been particularly good, for math majors, never been all that great either.
The jobs that paid pretty well were the engineering jobs. But it's not the same engineering field every year that's hot.
Take the hottest, highest paying job for the last few years, petroleum engineering. The field had been dead, but with the fracking boom, lots of students poured into the major.
Flood of kids are coming out, and oil prices down, and exploration down, and that market is just about to collapse.
So one of the things about these technical fields is if you hit them right, it's likely that you will do terrifically well. But if you hit them wrong, you could be waiting tables. And many of these jobs that pay well initially, engineering in particular, and in I.T. especially, don't seem to last very long.
In those fields, the employers can come back to campus every couple of years and get new engineering graduates and new I.T. people who have the latest courses and the latest skills, and it makes those jobs a little more disposable.
Finally, says Cappelli, most employers care much less about your degree than your work experience.
Employers don't seem all that interested in what you actually learned in the classroom. The number one thing they want out of kids who have just graduated from college is work experience.
I hope to get into UPenn, University of Pennsylvania.
With a 4.0 GPA, rising junior Tommy Turko has a good shot at getting into Penn, and, as one of nine kids — his sister Angel was graduating this day — he might even score major financial aid. What will he major in?
Whatever makes me the most money.
But as his friend reminded us:
JOSEPH FLYNN, Certified Electrician:
I am Joseph Flynn, certified electrician.
College isn't just about career prep, nor is it the only path to economic success.
College, it wasn't for me. So I thought 12-month program, being active, working with my hands, and I'm doing pretty good.
Making good money. So, it worked out. It worked out good.
This is economics correspondent Paul Solman, reporting for the PBS NewsHour from Philadelphia.
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