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Peter Thiel, the libertarian technology investor, caused a stir when he created a fellowship to give promising under-20s $100,000 to skip college and focus on their own projects. But was he right to question the value of a university education?

The expansion of higher education has meant that increasingly the expectation is that to get a good job, young people must attend university. Peter Cappelli, professor of management at the Wharton school at the University of Pennsylvania, challenges these assumptions in his new book, Will College Pay Off? A Guide to the Most Important Financial Decision You’ll Ever Make. In this thought-provoking work, the author notes that sending children to college is a huge expense that hurts many families’ ability to meet other important needs, such as retirement.

His focus is primarily on the US higher education system but many of the themes are universal. There has been a shift from viewing university as a place to make friends, find partners, learn about life and develop our thinking and understanding. As fees go up, university is increasingly seen as the place to go to find a job. In part, Prof Cappelli says, this is because fewer companies invest in training and instead want graduates to come prepared with skills that were once gained on the job. The decline of trade unionism has also contributed to a fall in work-based apprenticeships, he suggests.

There are huge risks, he argues, that students fail to graduate or fail to earn enough to pay back loans that come with huge fees. They also fail when they do not get the great jobs offered by university marketeers. More worrying still is that graduates who study vocational degrees may find it helpful in getting them that first job, but it does not help them later in the workforce.

Particularly interesting are Prof Cappelli’s thoughts on Stem (science, technology, engineering and maths) subjects versus liberal arts degrees. We are often told more people should study Stem subjects not just to land a job but also to ensure economies are at the cutting-edge. Such thinking, he points out, is flawed. “The argument that students just need to pick the majors where the jobs are also assumes college students are malleable, that a budding history major could just as easily have been an engineer if only he or she had been guided in that direction,” he says. Later he notes: “Even if it were true that there are more jobs in those fields . . . if they could get through the programme, would those promising history majors really be better off as mediocre engineers?”

Employers are certainly interested in what college graduates know, he writes, but the evidence is striking that what matters most to them are the general abilities and skills learnt in any serious degree programme, including liberal arts.

He also discounts the college wage premium, noting, for example, that it could reward graduates for demonstrable abilities such as perseverance. “It is certainly possible that college grads will earn more than they would have if they had not gone to college,” Prof Cappelli acknowledges, “and still not earn enough to pay off the costs of attending college.”

For many college graduates, the much-promised pay-off is simply not there, he argues. In particular there is no guarantee of a return from very practical, work-based degrees, “yet that is all those degrees promise. For liberal arts, the claim is different and seems more accurate, that it will enrich your life and provide lessons that extend beyond any individual job.”

Will College Pay Off? A Guide to the Most Important Financial Decision You’ll Ever Make, by Peter Cappelli, PublicAffairs, 224 pages

Copyright The Financial Times Limited 2017. All rights reserved.
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