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Is College Worth the Cost of Tuition? Yes.

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Graduation CakeEarlier this year I finished writing an article in which I tried to find the salary breakeven point for private vs. public college graduates, a task that was impossible because I couldn’t find enough publicly available information at the time. I was trying to figure out whether college was “worth it” and if so, whether public or private college was a better value. Since I didn’t have enough data, I just took some “average student loan debt” figures and calculated the breakeven point.

In a recent Business Week article, they took a 2007 College Board analysis that showed college graduates earned 61% more than high school graduates over a 40 year career. Master’s degrees earn 93% more. It’s not the private college vs. public college debate but it’s certainly a good look at whether student loan debt, in general, is worth it.

The most astounding statistic they calculated was that the breakeven point, when a public college student with student loans surpasses a high school student without loans, is at thirty-three years of age. That’s a lot sooner than I would’ve guessed, to be perfectly honest. I expected it close to the late thirties than the early thirties. While that may change given the economic realities of today (it’s based on 2005 census data), 33 is a lot sooner than you probably would’ve guessed.

Curious what the median earnings (pre-tax) are for workers ages 25 and older by education level (2005)?

  • Professional Degree – $100,000
  • Doctoral Degree – $79,400
  • Master’s Degree – $61,300
  • Bachelor’s Degree – $50,900
  • Associate Degree $40,600
  • Some College, No Degree – $37,100
  • High School Graduate – $31,500
  • Not High School Graduate – $23,400

The 2007 College Board analysis has a lot of interesting findings too, I recommend you take a quick look if you’re interested in higher education statistics. There are plenty of graphs that illustrate the data very well. Plus, we can look forward to another one of these soon as the next census is 2010.

(photo by CarbonNYC)

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35 Responses to “Is College Worth the Cost of Tuition? Yes.”

  1. Bender says:

    In my opinion, the decision to go to college, isn’t the no brainer most (including the College Board) make it out to be. Here a some quick thoughts:
    1 – Those are median earnings (no guarantee).

    2 – This study ignores the opportunity cost of college (both time and money).

    3 – The comparison is to all non-college graduates. A better analysis would include a comparison of those pursuing realistic alternatives to college.

    4- Even if you include all non-college graduates, some studies show that the increase in standard of living is approximately 10% (see Kotlikoff, Spend ‘til The End”). Taking into account the income variance of college graduates this clearly isn’t a no brainer decision (consider the life time median earnings of union electricians vs. art history majors).

    5 – That study is prepared by the College Board, an institution that makes money by administering the SAT (so if there is any bias you know where it lays).

    That said, there are obviously a number of non-monetary benefits of higher education that should be considered as well (but these are qualitative and must be personally analyzed). My advice, carefully consider why you want to go to college and what your alternatives are (not just what your guidance counselor/parents tell you they are).

    • Chris says:

      Very good points but sometimes the most important return is mere oportunities. Not everyone can come up with their own brilliant bussiness ideas, or find ways into other weatlhy career choices. Some of us have to be employees if some of us are going to be employers.

  2. Julie Ali says:

    If you consider the number of graduates in some common faculties such as Arts, Sciences and Education alone and then consider the number of jobs that are available to these graduates in their specialization, it is clear that an education at university isn’t going to guarantee a job much less a higher salary.
    I think it is always wise for any student contemplating university to go to a convocation ceremony and just see the staggering number of graduates produced each year in their field of interest and then evaluate whether they are making a wise monetary decision by choosing the field they want to enter. In general, fields with fewer graduates- medicine, dentistry, pharmacy, rehabilitation medicine – and also, that deal with sick or aging individuals is a good bet for a good return on your educational mortgage. Other fields? Not as lucrative.
    Some students currently in university would be better off in a technical college where they would acquire a trade that would serve them better than a degree that they would be paying off for the decade after they graduate.
    Of course, learning is never wasted but you can learn by taking out books from your public library system without getting into massive debt.

  3. Patrick says:

    I think college is more about what you put into it. If you go the easy route, you are just wasting your money by going. I am a software developer and college didn’t teach me the technologies I use today, but more how to think. I utilize the concepts I learned in college and still use many of them today. I think the money for my college was well worth it.

  4. Caroline says:

    I don’t believe the public vs. private argument has much basis. A college education is generally a college education, no matter from where. My public university degree in engineering is just as good, if not more highly regarded than those from some private institutions.

    When comparing degree vs. non degree earners, the points made about programs those degrees are in are valid. I’ve never understood why someone would go to an out of state school or private school for that matter, for education (esp. elementary), art history, or english. Science and engineering, and some specialties in liberal arts can be argued, but the majority of students who go for those types of degrees have an idea of what they want to do with them. An art histroy major, unless an artist or a museum lover probably just needed to pick something and graduate.

    • Andrew says:

      I agree with you that many state schools offer equally (or more) rigorous academic programs when compared to more “prestigious” schools, but brand name recognition matters in terms of job and salary offers. It shouldn’t, but it does. I didn’t go to Harvard, so I have no first-hand knowledge of how good their programs are, but I recognize the name, so I might want to hire someone who went there. Then again, I’m not a hiring manager, so what do I know?

    • BAP says:

      Shouldn’t the question be why are the universities allowing students to finance liberal arts degrees?” If there is no return and a high rate of default on these loans we should invoke a cash only system. Only then will the university cut the cost of tuition. Taxpayers shouldn’t have to subsidize these types of degrees just as future teachers shouldn’t have to pay the out of control cost of their tuition. This system is broken. Not everyone can become engineers, doctors, lawyers, etc.

  5. I’ve been seriously considering going back to school. My mind is still up in the air about it. On one hand, I can get a better paying job. On the other hand, I want to start my own company (my 2nd actually) and a degree (i.e. the paper, not the knowledge) isn’t very valuable.

    Take a look at Bill Gates or Mark Zuckerberg. They all decided to pursue their passions and dreams instead of school and it worked. I have another friend who never went to school and started his own marketing company in Atlanta which is doing very well.

    I think there is definitely an application for college degrees but I’m still not sure whether it’s for me or not.

  6. Miranda says:

    I agree with Patrick: It’s about what you get out of it. I also think that choosing a “value” education can be a good route. If you do well in college and try to distinguish yourself, it doesn’t matter a whole lot whether you go to a state school or a private school. The state school will give you a bigger bang for your buck. In my case, going for my M.A. was totally worth it. It allowed me to meet people and network in a way that benefited me and my career.

  7. Ron says:

    I don’t think any one person can decide whether college is right for them or not based solely on median earnings, but on their own motivation. “Median” is deceptive to a degree (no pun intended), but I have to admit that my salary post MBA has been very good. I’m not sure whether it’s the MBA or the self-discipline skills I learned while getting it that should get the credit. Either way, with such huge jumps in salary between degrees, it’s difficult to justify NOT going for the education if you can afford it and you’re motivated to finish.

    I may have a go at a PhD after all …

  8. Great and helpful. I’ve been looking for this data and here you go and provide it! Nice…

    The only discussion point I’d like to see covered is public vs private college.

    We just decided to send my daughter to a state college vs NYU. Why? NYU is $40k more PER YEAR!!!

    I can’t believe a BA from NYU vs a state college provides anything other than psychic income.

  9. When I went to college I regularly spoke with the people who cleaned the dorm rooms. I found out that almost all of them either drop out of college or just finished high school.

    This made me even more determined to graduate from college. You can all start your businesses while you are in college and if they gain momentum then by all means drop out. But don’t drop out of college to pursue pipe dreams that might never work.

  10. Andrew says:

    I think a more valid comparison would be to compare high students of a given IQ and high school grades (controlling for varying difficulty of high schools) who go to college vs. those similarly situated who do not go to college. Some years ago a study showed that Harvard graduates earned dramatically more than lesser-school graduates, but the study was flawed, because the key was being _accepted_ to Harvard, not graduating from Harvard. In other words, Harvard-caliber people earn more than others regardless of where they attend college. Since very few Harvard-caliber people wind up not attending college or not completing it (Bill Gates comes to mind), it is hard to answer whether they would do as well.

  11. Observer says:

    YOUR MILEAGE MAY VARY!

    A substantial number and proportion of college graduates – especially those with liberal arts degrees – earn well under the median.

    Going to college is a high-risk financial undertaking.

    Going to college cost me tens of thousands of dollars and several years of time and all I have to show for it is a pile of debt which is very burdensome on a minimum wage income.

    • Chris says:

      I think any that goes needs to have a plan understanding exactly how it is going to benefit them. Your choice of study makes a huge difference on your possible return on investment.

  12. freeby50 says:

    College is absolutely worth it financially for many people. On average college graduates make more money.

    Of course it depends on the exact situation. A very smart person with a desire to start their own business won’t necessarily get the same benefit from a degree as someone who is planning to become a nurse or engineer. If you have no inclination to study a particular major field in college and would prefer to work in construction or repair cars then college won’t be a good investment.

    Usually college is going to pay for itself and then some. But don’t go to college just cause everyone says you should. Everyone should have a plan for going to college. Simply getting a BA in random topic is not necessarily a good investment.

  13. Andrew says:

    Of course, you have to factor in not only the cost of college but the opportunity cost of foregone wages during the years spent in college.

    • Chris says:

      This is not always true. I worked full time and then some during college making more than I do now. I had to hustle so much because I didn’t understand where it was all going. Now I get paid to use my brain and life is much easier.

  14. thomas says:

    getting a college degree and getting a degree in a marketable field are on opposite sides of the spectrum. I remember a 20/20 or some nightly news show that had a bunch of whiny college grads complaining that they had all this student loan debt and couldn’t find a job. The reality was that they had some pansy degree in some really niche skill. They also were complaining about having to move to find a job.

    Sorry folks, the real world doesn’t want you to have a degree in Folklore with a minor in dance. Might as well practice saying “would you like that biggie sized?” You made a decision to get a non-marketable education. Either go back and get a real degree, find something else in a different market, or bite the bullet and put on the apron.

    • BAP says:

      Wow!! You’re a pretty big jerk. I hope I never have to work for or with someone who thinks like you. Please forgive those students. More than likely they listened to their college advisors who informed them that their degree would be worth a d***. We can’t all be engineers or perfect like you. Btw….it takes years to graduate from college. What is marketable now may not be in four years.

  15. I think higher education pays off in the long run, but that’s the problem– the long run!

    I am coming around to recommending young people consider two concepts:

    1) Consider “good” state colleges (less $$$)

    2) Consider working 1-2 years before junior year (provides focus and $$$)

  16. Observer says:

    How does one go back to college when one has no money and cannot get financial aid?

    • Chris says:

      You have to use someone else’s money. There are many ways to do this and it is up to you to decide if you will use money that is borrowed or given to you. There are many opportunities out there and you have to search for them.

  17. Andrew says:

    If one has no money, praytell, why can one not get financial aid? Is one an undocumented alien? Wanted criminal? I thought financial aid was intended precisely for this sort of situation. Please enlighten me.

  18. This is an intelligent group of posters who have added much to the original story.

    Maybe the real question here is one which cannot be answered, but maybe only anticipated: what ever the economic fortunes of college grads in the past (public or private), what will be the prospects going forward?

    Prior to the 1970s, a college grad could expect to do well because not many people held degrees. In the decades since, even with a flood of graduates, the advantage has largely held because of the shift away from manufacturing, with heavy production employment and relatively light management, to the finance sector, where a degree is helpful even for non-management jobs.

    With all areas of finance under heavy stress, and maybe past peak for the forseeable future, what sector is on the horizon that will soak up all of the graduates?

    My bet is that unless you are going into a field like medicine, law or engineering, that can’t be entered absent a degree, you will do well to thoroughly investigate future prospects before commiting the time, effort and money, including future debt, to a career with average (or below) earnings prospects.

    It isn’t beyond the realm of possibility that the employment base might once again shift, but this time from white collar occupations to jobs that require people to create, grow and fix things.

  19. Observer says:

    Andrew:

    Oh no, I am one of those EVIL student loan defaulters Reagan warned you about!

    As part of the “personal responsibility/work first” philospohy, defaulters cannot get financial aid as long as their loans are in default. (There WAS a serious problem of “perpetual students” defaulting and abusing student loans; the pendulum has now swung the other way.)

    In the meantime, defaulters face a 15 percent garnishment from their “disposable pay” which is their net pay.

    From my $960/mo income, $144 is extracted and sent to Dept of Ed for my student loans. Oh, I am also charged $17 for the “privilege” of having my money extracted.

    My rent (a room in a house with nine people) is $650 per month and medical expenses (primarily insurance which is subsidized) are $100.

    I live on fumes and food stamps.

    • SB says:

      :( Wow, that really sounds awful. I think we’d all have done it differently if someone had just told us how. I hope things get better for you! Best of luck.

  20. JNY says:

    Getting a degree is necessary of course, but I strongly believe that going into massive amounts of debt to attend a top private university is absolutely not worth it! I bought into that idea and my life has been a bit of financial mess for the past 11 years. It was a complete mistake that I deeply regret, but it’s too late to undo it.

    University education in this country is far, far too expensive. And state schools are great — but not all are created equal (some states have far better and more diverse programs than others.) And out-of-state tuition back when I attended college rivaled the cost of some private schools.

    In general, I think you shouldn’t graduate with more than $17,000 of debt. The bills can cripple you financially and severely limit the life choices you make. IT’S NOT WORTH IT. Go somewhere affordable and keep your life open to better choices.

  21. Brian says:

    Here is another interesting take on whether or not college is worth it” http://veechi.com/blog/?p=437

  22. Sean says:

    I’m in my 40′s and have an associate, bachelor’s and Master’s degree. I worked in the aviation industry for 15 years and, after being thoroughly stressed out, have owned my own home inspection business for the past 8 years. My personal opinion on whether college is worth it is……it depends. If you want to go to college and get an engineering degree, then it’s worth it because you’ll find a job. If you want a degree in history, then it’s not. After inspecting thousands of homes and seeing how people live day to day, I think instead of focusing on a “better job”, how about a business for yourself? Focus on service business (not a retail business), it’s not that hard and you can do quite well. I have personally seen college professors living in older beat-up homes while the girl who went to massage therapy school for 6 months and who works for herself is living in a pretty nice pad. I have seen stressed out middle managers going through a divorce, selling an average split entry home while a high school educated plumbing contractor is living in a 700K home. It’s not for everyone but if I had to do it all over again my personal opinion is that I would go to college, get a two year degree (healthcare or a trade to make an okay living) and then start a business on the side. With the taxbreaks and money saved by not going to a full university, I would be a wealthy (though I do pretty good now I must say).

  23. Jeff says:

    Is college worth it ? I say no…at least not anymore. It’s only worth it if you don’t have any student loans. I believe everyone deserves a higher education if they wany one, but the current college tuition cost etc is criminal. I strongly believe colleges are corrupt and are only out the steal your money. They are no different than the greedy scumbag banks that collapsed the country. They need to be taught to behave, follow the rules, or go to jail. College has nothing to do with finding jobs..it’s just meant to get an education. If you’re willing to have $100k in debt with no job for the rest of your life than go to college.

    Besides …there are no jobs left in America that require an education. We sold out to China and India…move there if you want work. Here in America you can either work at Burgar King or Mcdonalds for 6 bucks an hour.

    People need to wake up and stick to these horribly corrupt colleges and stop going. The demand will drop like a rock and so wll the cost. Wake up people!!!!

    Work with your hands…electricians, repair air conditioning etc…for God sakes stop paying the criminal college cost.

    • BAP says:

      I completely agree with you. College is marketed as a means to make more money. “Getting a college degree will earn you a million dollars more over a lifetime vs. just having a high school diploma.” Really?? I beg to differ and so would many people I know with traditional public university degrees. I also remember my advisor saying “Attaining a degree in psychology makes you marketable to more job industries. They know that you understand how to use critical thinking skills.” What a joke.

      Oh and to all you engineers out there. How does it feel to have your jobs outsourced to India. Companies seem to think it’s better for their bottom line yet you continue to tell others not to waste their time on a worthless liberal arts degree. Tell me……what degree will be in demand in four years from now? And what will you do if your marketability becomes even more depressed with an influx of engineering degrees?


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