The relationship between attaining more education or training and benefits such as higher earnings and greater job security is widely recognized.

At the same time, education has a positive effect on the economy and society as a whole through mechanisms such as a better-prepared workforce and citizens who tend to be more productive and involved (and even healthier).

Ray Perryman
Ray Perryman

We have new information about college enrollment for last year’s high school graduates. The U.S. Bureau of Labor Statistics (BLS) recently reported that 68.4 percent of 2014 US high school graduates were enrolled in colleges or universities last fall. This rate reflects a notable increase over 2013 at 65.9 percent. About two-thirds of those who enrolled attended four-year colleges, with the others opting for two-year colleges. The vast majority (about 92.2 percent, in fact) are full-time students, though a significant percentage also works.

The 2014 dataset shows a continuation of a pattern of higher rates of college attendance for young women (at 72.7 percent) than for young men (64.0 percent). Enrollment rates vary widely by race, with Asians highest (86.1 percent), followed by black (70.9 percent), white (67.3 percent), and Hispanic (65.2 percent) graduates.

To put the current level in perspective, October 2009 data (for 2009 high school graduates) indicated that 70.1% were enrolled in colleges or universities, higher than it had been since the series began in 1959. One factor in the decision process to enroll is the opportunity costs involved. In 2009, the economy was weak and jobs were hard to come by; the overall US unemployment rate was over 9%, with even higher rates for young people. The opportunity cost of college (in the form of lost potential wages from full-time work) was lower than if there had been plentiful jobs. Unemployment rates have more recently been dropping and were in the 6% range last summer. It’s a sign of the improving economy that a somewhat lower percentage is now enrolling.

Comparing 2009 data to the most recent set shows a shift in the proportion attending by race/ethnicity. For 2009 high school graduates, the college enrollment rate of Asian graduates was still highest (at 92.2 percent), but a larger percentage of white graduates attended than did black graduates (69.2 percent and 68.7 percent, respectively), which is a reversal of the current order for those two groups. Some 59.3 percent of 2009 Hispanic graduates enrolled, indicating a significant improvement between the level then and more recently, when 65.2 percent chose to attend.

A major deterrent to college attendance is cost. Tuition, fees, and room and board charges have been rising sharply, and most families struggle to foot the bill. Loans are an important aspect of the financial solution for many students, and the ballooning total debt outstanding has made many headlines. While there are certainly young people struggling to make student loan payments (particularly those who were unlucky enough to finish college during the recession), loans remain a viable option in certain circumstances.

The most recent survey from the National Association of Colleges and Employers indicates that the mean starting salary for 2014 college graduates was $48,127: $38,604 for liberal arts and humanities majors, $49,807 for business majors, and $64,891 for engineering majors. When compared to median weekly earnings for 16-24 year olds working full time of $491 per week for men and $461 per week for women (coupled with relatively high unemployment rates in these age ranges for those without post-secondary education) as well as differentials in benefits, retirement plans, and advancement opportunities, and it quickly becomes apparent that it can be appropriate to borrow funds for college needs.

The student loan decision process is fraught with difficulties. First of all, few 17 year olds have meaningful experience with personal finances at that level (interest, compounding, contracts, and so on). Whereas there are professionals directly involved in the “yes” or “no” on other types of loans (a mortgage lending expert for a home loan, for example), student loans are very different. There are often counselors available and processes to be followed, but information is often incomplete.

Indiana University established an Office of Financial Literacy to help students make informed financial decisions before, during, and after college and decrease overall student debt. It also developed “MoneySmarts,” a webpage with podcasts and articles on a range of relevant topics. The University also sends letters detailing current debt outstanding, additional debt being added, and the payments which would be required upon graduation. This simple and straightforward information has led students to reduce borrowing via federal undergraduate Stafford loans by 11% in just a year. Students have taken action to reduce what they’re borrowing, either spending less or filling in gaps with part-time jobs. Similar programs are also being implemented elsewhere.

The benefits of increasing educational attainment are well known, both from an individual and a societal perspective. It is encouraging to see enrollment levels at impressive and generally improving levels across all racial/ethnic groups. Costs are a major inhibiting factor, and the burden of student loans can be a major challenge. With good information, however, students can make better decisions, enhancing prosperity for students, their families, and the nation as a whole.

Editor’s Note: The main photo accompanying this guest column is from Wavebreak Media.