A new report by the Center for College Affordability and Productivity suggests that more than one-third of people who graduated from college during a recent 16-year period are underemployed and that the government policy of encouraging college attendance by providing federal grants, student loans, and other federally funded student aid, is contributing negatively to the U.S. economy.

The report, entitled "From Wall Street to Wal-Mart: Why College Graduates Are Not Getting Good Jobs", examines the employment rates and occupational attainment of college graduates who graduated between 1992 and 2008, noting the proportion of these graduates who are working in fields where a college degree is not required.

The authors conclude that more than 60 percent of these college graduates have taken on student loans and completed post-secondary degrees but work in fields where their degree is not put to use and makes little, if any, impact on their relative economic prosperity.

Further, the report offers data to suggest that there is actually a negative relationship between college graduation and overall economic prosperity in the United States -- increased state government spending on higher education is correlated with lower rates of economic growth.

When a College Degree Doesn’t Translate Into a Better Job

According to the report, less than 8 percent of employed persons in the United States held a college degree in 1960, a time prior to the passage of the Higher Education Act and the federal government’s push to increase the number of the country’s college graduates.

In 1967, approximately 10 percent of the U.S. population held a college degree, and about 11 percent of college graduates were employed in jobs that did not require a college diploma.

By 2008, about 30 percent of the national population was now holding at least one college degree, and more than one-third of the people who graduated from college during the 1992-2008 report survey period are currently working in fields where a college degree is not required.

The researchers argue that the federal government’s policy of providing grants, student loans, and other financial assistance to students who have not demonstrated that they are likely to succeed in (or after) college is creating a large pool of over-trained citizens, while higher education policy is not creating "gainful employment" opportunities for most college graduates.

The notion of gainful employment is significant because the Department of Education is in the process of drafting modifications to federal financial aid rules that will prohibit some higher education institutions from offering federally funded grants or college loans to their students unless the schools can prove that a significant number of their graduates have achieved "gainful employment" following graduation.

The Education Department is defining "gainful employment" as employment that allows a graduate to earn enough to make the required monthly payments on her or his federal student loans.

Student Loan Debt and the ‘Negative Economy’ of a College Degree

The report also ties the cost of a college education and growth in student loan debt to the "negative economy" of attending college.

According to the website My Budget 360, the cost of attending college has increased by more than 400 percent since 1982. In comparison, during the same time period, the cost of medical care has increased by about 250 percent and median family income has increased by only 150 percent.

As a result, students are absorbing significantly more student loan debt than they were 20 years ago. Today, about two-thirds of college graduates leave their alma mater with more than a diploma: On average, they carry with them more than $20,000 in college loan debt.

These student loan debt loads are compounded by the fact that about 2 million recent college graduates are still looking for work.

"America today is oversupplied with college graduates," the researchers write.

Although the 9 percent unemployment rate among college graduates is marginally lower than the 9.8 percent national average, college attendance is at an all-time high, and a bevy of economic experts have begun to question the wisdom of attending college as an across-the-board maxim and of the increasingly common practice of taking on significant student loan debt to pay for a degree that may not pay for itself.

College, and its associated costs, may end up paying off for some graduates, translating into better employment opportunities, but it may not necessarily be the right or even the most economically viable choice for others.

If a college degree has only marginal, if any, returns for the bulk of college graduates, failing to lead to greater occupational attainment for three-fifths of the recent graduate population, the researchers argue, taxpayer-subsidized public dollars that are currently funding government-issued student loans and college grants would be better invested in other, more productive areas.

"Evidence on the negative relationship between government higher education spending and economic growth," the researchers write, "suggests we may have significantly ‘over-invested’ public funds in colleges and universities."