But for too many others, it’s a risky investment. Many who start higher education never finish a credential. Just 31 percent of those students from the bottom income quartile who start college finish a bachelor’s degree. Recent data suggests that the returns to “some college” have essentially fallen to zero. Even among those who do finish, there’s a risk that the investment won’t pay off. One study from the Federal Reserve Bank of New York show that the 25th percentile of bachelor’s degree recipients earn no more than a high school graduate, and haven’t since the 1970s.
As a country, we’ve tried to manage this risk on the back-end, with protections for borrowers for whom higher education doesn’t work out so well. Income-based repayment and loan forgiveness fall into this category. We’ve also tried, and largely failed, to regulate bad colleges out of business. But we’ve done less to manage these risks at the front end, either by aggressively nudging students toward options that are most likely to make them successful or by limiting those options based on academic ability.
But this is exactly how many high-performing countries manage the risk in their systems. Higher education is free or extremely low-cost, but access to academic degree programs at top universities is heavily rationed. Students who are not academically qualified have the opportunity to attend vocational training. Tracking students in this way reduces the risk of failure (and wasted public money); it also places something of a ceiling on success, something that Americans often bristle at.