College Students Need to Think Like Investors

College Students Need to Think Like Investors

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Going to college pays off, on average. But to maximize the chance that a college education offers a satisfactory return, students need to think like investors.

They need to carefully consider which degrees pay off and why, and they need to make informed decisions about the type of degree and major they select. Investors in financial markets consider many complex variables to mitigate risks and maximize returns. Investing in college is no different.

In a report on the value of college majors, the Center on Education and the Workforce at Georgetown University found that people who earn bachelor’s degrees and work full-time can expect to earn 84% more than their peers with a high school diploma over their lifetimes. It’s compelling evidence that a degree from a four-year institution is a good investment.

It is less well known whether community college degrees are worth the cost. Evidence on labor market returns from associate degrees can be hard to come by. Fortunately, that is changing with research by the Center for Analysis of Postsecondary Education and Employment, or CAPSEE.

Researchers found that earnings vary greatly depending on which degrees students earn. Health-related fields have the largest returns. In some cases, earnings for those who receive associate degrees in the arts and humanities are no better than the earnings of non-completers. What you take largely determines what you make. And because students today pay more of the cost of tuition out of their own pockets than earlier generations of students did, the economic stakes are especially high for those from low-income backgrounds.

Fortunately, there is a growing amount of consumer information designed to help students make smart investments in college, such as the U.S. Department of Education’s College Score Card. While the growth in consumer information about college and earnings is a step in the right direction, it is not enough to help students make smarter investments in college.

A study from the Urban Institute found that access to labor market information did not have a discernible impact on students’ college choices. Students who don’t have experience with college are unlikely to use the available tools to their fullest advantage without support from knowledgeable advisers.

People who invest in financial markets often rely on highly trained advisers to help them set goals, determine acceptable levels of risk, and decide among varied investment options.

Community college students could benefit from similar advice. College advisers are uniquely positioned to help students think like investors. They are among the first people with whom students interact on campus. They help students select courses and set schedules. But while advisers are well-positioned to help students think like investors, they tend to spend very little time helping students set educational and career goals or navigate the risks that could threaten their investment.

Student-to-adviser ratios are high. There isn’t enough time for advisers to help students set educational and career goals and thoughtfully consider the employment prospects and earnings potential associated with different degrees. Moreover, advisers often work in organizational structures that don’t support deep and sustained advising over the course of students’ college experiences.

Few advisers have sufficient training to help students factor real-time labor market information and employment trends in the local and regional labor markets into their selection of degree programs.

For college advisers to support students in thinking like investors, several things must happen.

First, the advising function in colleges needs to be adequately resourced. Additional resources can reduce the high student-to-adviser ratios in colleges, which would allow advisers to spend quality time helping students set educational and career goals that are aligned with good jobs in the local and regional labor markets.

Second, colleges can make structural shifts that lighten the load of advisers. For example, offering a focused set of guided pathways — leading to credentials that are aligned with good jobs available in the local and regional economies—can extend advisers’ ability to help students make smart choices in college.

Third, advisers need sustained, high-quality professional development to increase their knowledge of the earnings associated with different types of degrees. They need to be able to help students consider the risks and returns of short- and longer-term degree options.

Advisers also need to be aware of the wage premium in health-related fields. Importantly, they must be aware of academic, student, and financial-aid supports that students may need in order to access high-wage credentials. Advisers should increase their awareness of proven strategies for helping underrepresented students gain admission to competitive degree programs such as nursing, and also be able to suggest alternatives for those not accepted.

The fact that associate degrees can pay off is good news if students have the information and support they need to make smart investments and choose degree programs that provide wage premiums. Supporting students to think like investors can pay dividends, not only for students and their families but also for the communities where they live and work.

This opinion piece was written by Michael Lawrence Collins for The Hechinger Report, where it was originally published. Collins is vice president of Jobs for the Future.