If you grew up sometime between the 1960’s and the 2000’s, you undoubtedly heard the college sales pitch. If you went to college, your lifetime earnings would be “a million dollars more” (or some other seemingly astronomical figure) than they would be if you did not go to college. And for those at the earlier end of that date range, that’s largely been true.
But not all colleges are the same, not all degrees have the same earnings potential, and the cost of a college education has risen far faster than the rate of inflation. As a result, at some point during the last two decades, the college value proposition has tipped. It’s no longer a sure bet – at least not in the minds of the current generation of college-age students – that going to college will represent a net financial gain during a person’s lifetime.
Some Zoomers simply don’t want to wait their entire lifetimes to find out whether a college degree still has the same economic mojo. Others are not willing to gamble their financial futures on high-cost degrees, only to find out that the benefits don’t balance out the costs.
So, why is Gen Z so skeptical of the post-secondary value proposition? It is likely a combination of factors. Not the least among them is the huge student loan debt crisis. (And it’s not hyperbolic to characterize it as a crisis.) As of early 2023, borrowers owed about $1.8T in student loan debts. The average borrower owes more than $37,000 in federal student loan debt. Private student loan debts are much higher. The average private student loan debt exceeds $55,000. While federal student loan debts have guaranteed interest rates, private student loan debts may have extraordinarily high interest rates and onerous repayment terms.
College education is a variable-grade investment
Student loan debt is near-impossible to get rid of. Whether the lender is public or private, the loans are not typically dischargeable in bankruptcy. Repayment can take decades. Even worse, some parents borrow to pay for their children’s college education. The non-dischargeable nature of student loans applies to parents, too. When parents should be saving for retirement, they’re spending hundreds (or thousands) of dollars per month trying to repay enormous high-interest debt.
Debt precludes recent graduates from buying cars and homes, getting married, or having a family. Without being able to buy a home, they forgo wealth accumulation. According to Federal Reserve data, Millennials own just 5% of all US wealth, despite being the largest group active in the workforce. About 20% of Millennials and 10% of Zoomers believe they will never be able to purchase a home.
It’s easy to see why: 90% of Millennials owe some kind of non-mortgage debt with an average balance that exceeds $90,000. As Gen Z watches the Millennials struggle with high-interest, low-value debt, they know they don’t want to be next.
Avoiding the perpetual debt trap would either mean making a lot of money (which isn’t guaranteed, regardless of the degree) or simply not taking on debt. Of those two strategies, Zoomers strongly prefer the latter.
Their desire to sidestep debt affects community colleges in two ways: first, Zoomers will not enroll in college no matter how inexpensive it is. In their minds, low cost equates to low quality and low return-on-investment. In other words, community college degrees are not worth their time. Second, potentially lower-than-expected wages mean that there is no meaningful way to climb out of debt, whether that’s debt from student loans, car loans, credit cards, mortgages, medical expenses or anything else.
High wage, high demand programs will counter reluctance to enroll
The best way for community colleges to combat this perception is to commit to developing programs that lead students to high-wage, high demand jobs. The required Gainful Employment disclosures will make it difficult to hide affected degree and certificate programs. In other words, it’s going to take more than a tired marketing strategy to convince these student to return to school or enroll for the first time.
Photo Credit: Backdoor Survival , via Flickr