By Brian Stoffel

There’s a cancer that threatens to poison the global economic recovery, and it’s not Europe or the housing market. It comes, in fact, from the very thing that’s supposed to elevate our populace and our economy: graduate school.

Dr. Deborah Stewart, president of the Council of Graduate Schools, points out that there’s a well-defined pattern that has taken hold: “Both historically and in recent years, there’s an inverse relationship between the economy and graduate student enrollment.”

Could this trend be a sign that we’ve lost our creative edge in America? Indeed, a case is being made that, recession or not, advanced degrees — in fields outside of medicine, the sciences, and engineering — fail to add the type of value needed to justify their costs.

Below I intend to show that the inclination to pursue a graduate degree during — and because of — difficult economic times is often counterproductive, and it has left millions of students with little to show for their efforts except crushing levels of debt.

Debt, debt, debt
Just how bad is the debt situation for college students? Consider the fact that it far outpaces credit card debt and is hovering around $1 trillion today.

It wasn’t always such a problem, but student loan debt grew by a cumulative 511% between 1999 and 2011, outstripping average household debt by a longshot.

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Sources: The Atlantic, the New York Fed, and Bureau of Economic Analysis.

You’d think that with a growing problem like this, lenders — and schools that are consistently raising their tuition — would start to worry. But they’re not incentivized to.

You see, student loan debts are some of the “safest” bets around. Borrowers, or the indebted students, can’t shed the loans even if they declare bankruptcy, and collectors are given extensive powers to make sure they get their money.

This means that every year, more and more graduates have to put off buying a new suit, car, and, most importantly, a house, because they can’t afford it with their student loans. These decisions affect all of us.

Come to think of it, the “college for all” battle cry that we hear so often sounds awfully similar to the “homeownership for all” mantra that began in the late ’90s. And we all know what a mess that misguided venture brought us.

Diminishing returns
As Fellow Fool Travis Hoium has shown, the returns on a college education have diminished markedly. In fact, the return on investment for a bachelor’s degree in 2009 was 20% to 25% lower than it was in 1995.

Just as a bachelor’s degree has become the new high school diploma, so the master’s degree seems to be the next undergraduate certificate. Extrapolated out over time, one can only wonder where this escalation might end.

So why are students willing to play along with this game? The answer is pretty simple: Those with higher degrees get paid more and are unemployed less.

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Source: Bureau of Labor Statistics.

Is graduate school even worth it?
But here’s where things start to get really insidious. The stats above indicate correlation, not causation. It could just as easily be the case that lurking variables (socio-economic background, IQ, professional ambition, etc.) account for the differences in wages and unemployment.

What if graduate schools, especially in the humanities and business realms, don’t add one iota to your educational or career prospects? What if all the benefits you gained through years of graduate studies could have been had — for free — by interning, volunteering, finding a mentor, or starting your own business?

Creativity crisis?
There’s a growing chorus out there that believes we’ve lost our creative touch. They believe that instead of putting ourselves out there during tough economic times, we’re retreating to the safety of graduate school to “open up new doors,” even if we could find our own way through at a fraction of the cost.

Indeed, recent studies have shown that Americans’ creativity quotient, or CQ, has been declining steadily since 1990. Think that’s not important? A poll of 1,500 CEOs found that creativity is the most important “leadership competency” moving forward. And childhood CQ is three times stronger at predicting lifetime creative accomplishments than childhood IQ.

Maybe that helps explain why, when push comes to shove, so many are paying graduate schools huge sums of money to teach them what they need to know, instead of learning through experience.

Granted, there are some experiences you just can’t get anywhere but graduate school, but those tend to be the exceptions, not the rules. When it comes to getting your MBA, for instance, studies have shown the degree to have little to no effect on your future salary or position in an organization. And The Economist recently demonstrated that some graduates take a steep pay cut after getting their MBA.

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Source: The Economist.

In the end, it’s not hard to come up with examples of wildly successful people who excelled without a college degree. Steve Jobs, Bill Gates, Henry Ford, and Steven Spielberg are all examples of individuals who were able to hone their creative energies by learning how to succeed from life experience.

But you don’t have to be one of these titans to be successful without a graduate degree. You just need to be willing to take what many consider to be an unconventional path to finding your niche. And when you get there, you won’t be saddled with debt.

Not only will that provide you with the financial flexibility necessary to get on with your life, but it will allow you to make the basic purchases you need — and help keep our feeble economic recovery moving forward.

http://www.fool.com/investing/general/2012/04/17/educating-ourselves-into-shackles.aspx


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