Over the last decade, Americans’ faith in the value of a higher education has been waning, in no small part due to ever-rising tuition and mounting student debt. And yet, hiring managers continue to list a college degree as an essential job requirement.

With such conflicting factors, many are unsure as to whether college is a solid investment. There may be small doubt that the degree will pay off for students at institutions like Boston College with their high rates of placement in rewarding professions. But can the costs outweigh the tangible benefits as parents and students pile on debt? Or will innovations in academic learning bolster the value of higher education in the long run?

Tackling these and other questions are Carroll School Professors Vyacheslav (Slava) Fos and Mei Xue, from the Finance and Business Analytics Departments, respectively.

In “Tuition, Debt and Human Capital,” published last April by The Review of Financial Studies, Fos—alongside collaborators Rajashri Chakrabarti of the Federal Reserve Bank of New York, Andres Liberman from Betterfly, and Constantine Yannelis from the University of Chicago—examined the effect that college tuition has on student debt and “human capital” accumulation. They found that substantial tuition hikes make it less likely that undergraduate students will get their degrees or enroll afterward in graduate programs, particularly if they come from economically struggling families. For example, $10,000 in higher tuition causally reduces the probability of graduating with a graduate degree by 6.2 percent, while also increasing student debt by $2,961, according to the research.

“Low income students are much more likely to drop out of school, meaning that financial constraints are probably binding for them,” says Fos, who is a Hillenbrand Family Faculty Fellow at the Carroll School, where he also coordinates the Ph.D. in Finance Program. “When the price goes up, some people simply cannot afford it. And it obviously doesn't help with inequality, because it means that this inequality will be transferred from one generation to another.”

Vyacheslav (Slava) Fos

Getting in the way of human capital?

Fos was inspired to research the impact of tuition and debt after noticing a disconnect between the socioeconomic backgrounds of his undergraduate and graduate students. He wondered if debt could be a factor.

“I am an educator, and I think of my mission as producing human capital in terms of educating students, and also producing research,” Fos noted. “It was possible for me to imagine a situation in which extremely high levels of student debt would prevent people from continuing their education” both in undergraduate school and into graduate education, says Fos. “This paper was motivated by high levels of student debt in the U.S. and me wanting to understand the consequences of investments in human capital.

Human capital, as defined in the paper, includes variables such as whether a student is able to complete an undergraduate degree and whether grad school is a realistic option. Fos and his collaborators looked at students who had already been accepted into the same school, and found that those who had less school to finish at the time of a tuition raise—in their third and fourth years—were less affected by the tuition shock. Students who would have to pay the higher price for longer periods—typically freshmen and sophomores—may have limited abilities to expand their human capital.

“Students who are exposed to extremely high tuition accumulate more debt and are more likely to drop out of schools, and they’re much less likely to go to grad school,” says Fos.“ The high level of tuition prevents some students from accumulating human capital.”

The scholars also found that the dampening effect of high tuition on graduate enrollment extends to students of all backgrounds, including those from somewhat higher-income families. For many, says Fos, continuing into graduate school is just too expensive.

Students who are exposed to extremely high tuition accumulate more debt and are more likely to drop out of schools, and they’re much less likely to go to grad school.
Vyacheslav (Slava) Fos

Of course, the picture is far less problematic for people who walk away from college with the degree, especially from prestigious institutions, Fos noted in an interview. At the Carroll School, students in the class of 2023 netted an average starting salary of over $88,000.

For those who drop out or choose not to attend college in the first place, new technologies such as AI programs like ChatGPT may hold out hope. That’s according to research by Xue, an associate professor, together with four colleagues. Their article, “Is College Education Less Necessary with AI? Evidence from Firm-Level Labor Structure Changes,” appeared last year in the Journal of Management Information Systems

The researchers (including Xing Cao, Xu Feng, Yongjie Zhang from institutions in China, and Bin Gu of Boston University) found that AI had a positive impact on the employment of workers without a college education. Many of them have analytical jobs, traditionally known as “entry level white collar jobs,” notes Xue. 

That may sound like altogether good news for them, and perhaps not-so-great news for those investing deeply in a college program. Relying on AI without higher education, however, can be dicey: Xue points out that these workers will remain particularly vulnerable to the inevitable technological advances of the future.

“Because such a person is limited to only do the entry level job, that also means they're most vulnerable for further automation by not necessarily AI but other automation technology, such as robotics,” Xue explains.

“I really feel in my own personal experience that technology happens faster than you can think in many, many ways,” says Xue, reflecting on how technologies such as email and the Internet have radically changed the way we learn and work. “Like any technological advancement, there's no going back from AI.”

Mei Xue

Restoring faith in higher education

Higher education has a key role to play in this transformation, Xue says.

“It's not whether education is no longer relevant. It is just whether the knowledge and skills we currently use to teach our students are still relevant in today's environment,” she says. “We need to seek ways to integrate our undergraduate education with graduate level education and aggressively integrate AI into our curricula.”

As technologies continue to advance—whether it be AI, robotics, or the next new technological mechanism—Xue says a college education will continue to be fundamental and crucial for personal and career development, as well as the understanding and advancement of technology.

Xue is currently experiencing this decision-making process on a personal level, as her daughter is applying to colleges and hopes to enter into the medical field. The professor says that integrating emerging technologies into her daughter's education was something she thought about extensively, and she has encouraged her daughter to pursue a degree in robotics or engineering, alongside the traditional biology route that many pre-med students take. Similar paths can be developed for a student in any major, she says.

“In every field I think AI will become something we work with on a daily basis,” says Xue. “So that's why I say to our management students that they need to understand not only how AI will change the business field, but how AI will change many industries that could impact their future.”

We need to seek ways to integrate our undergraduate education with graduate level education and aggressively integrate AI into our curricula.
Mei Xue

Asked what kind of curriculum changes might address these issues, she pointed to new courses at the Carroll School such as Coding for Business, a core course that teaches skills instrumental to data mining and AI applications in business. She added that the faculty is also integrating the applications into existing classes—for example, her Operations Management course, in which Xue has updated a simulation game to allow students to depict AI robots that play roles in the supply chain alongside human managers. This and other simulations help students think about how AI could “change the way supply chain is managed and how to optimize the interface and collaboration” between the robots and those human managers.

Higher education is an investment. Rising debt and the specter of technology continually replacing human workers have made many question the probability of their return on that investment. But a greater understanding of the value of technology within higher education could help restore faith in the value of a college degree, Xue says.

“I think, as a parent, we need to reexamine our curriculum,” she explains. “As a teacher I often stop to ask myself if what I am teaching is something the students will be able to use afterwards. We need to ensure that the time and money that students and their families invest will be worthwhile.”

Mason Braasch is a freelance reporter and contributing writer for Carroll School communications.