A strong job market is causing more students to drop out of college. The potential loss to future earnings, however, is significant
- As the U.S. economy adds more jobs and wages rise, some college students are choosing to join the workforce instead.
- The opportunity cost of staying in school is even greater among lower-income students.
- However, the potential loss to these students' earnings and futures is significant.
A college education is considered the ticket to a better career and higher pay.
And yet, these days there are plenty of good opportunities for job seekers, with or without a degree.
In April, employers added 428,000 jobs and wages grew by a solid 5.5% year-over-year. For some currently enrolled college students, that may be too good to resist.
Students are choosing to earn over learn right now.Daniel RosensweigChegg CEO
"Students are choosing to earn over learn right now," Daniel Rosensweig, CEO of online education company Chegg, recently said in an interview on "TechCheck."
They're taking fewer classes so they can work more hours and some are unenrolling altogether, he said.
"And you really shouldn't blame them, right? It's a smart, prudent business decision for them at this moment, which is, if their salaries are doubled and tripled, why not take that money and give more hours and take fewer classes or no classes," Rosensweig said.
Fewer students went back to school again this year, dragging undergraduate enrollment down another 3.1% from last year, according to a report by the National Student Clearinghouse Research Center based on data from colleges.
The number of undergraduates in college is now down 6.6% compared to two years ago — a loss of more than 1 million students.
Even more students are opting out in the coming year.
As many as 17% of current students said they will not be back, and 19% are unsure about their plans, according to a survey by Intelligent.com, which polled 1,250 undergrads in April. Students nearing graduation are most likely to drop out, the report found.
Most cite the strong labor market as the reason — 31% of students who plan to quit school said they want to take advantage of increased employment opportunities and secure a job. Of course, the rising cost of college and ballooning student loan balances have also played a role.
And yet, studies show that college graduates will earn nearly $1 million more over the course of their careers.
"The potential loss to these students' earnings and futures is significant, which will greatly impact the nation as a whole in years to come," said Doug Shapiro, executive director of the National Student Clearinghouse Research Center.
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The number of currently enrolled students who have completed the Free Application for Federal Student Aid, or FAFSA, for next year sank 12.3% from one year ago, according to a separate report by the National College Attainment Network based on data from the Office of Federal Student Aid.
Because the FAFSA serves as the gateway to all federal money, including loans, work-study and grants, completion rates are another indicator of students' intent to re-enroll, particularly among low-income undergraduates, according to Bill DeBaun, the National College Attainment Network's director of data.
"The most likely explanation here is the economy being so hot, jobs being plentiful, and the opportunity cost that students are faced with may be pulling them from academic pathways into the workforce," DeBaun said.
For lower-income students, the opportunity cost is even greater. "The prospect of turning down a well-paying job costs you more if your household income is smaller," he said.
However, "this data presents a troubling picture for stopped out students," DeBaun added. Historically, only 13% of college dropouts return within five years, a National Student Clearinghouse report found, and even fewer graduate.
"I am glad that there are many Americans that are finding work," added Cody Hounanian, executive director at Student Debt Crisis Center. But "if we lose sight of the value of education, we may find ourselves less prosperous in the future," he said.