Report: A College Education Remains a Good Investment in the Long-Run

By Laylaa Randera, Communications Intern

A college education still remains a good investment, regardless of rising tuition and falling wages over the past several years, according to a new report released by the Federal Reserve Bank of New York.

The report analyzes data from the past four decades specifically looking at the costs, benefits, and economic return of a college education. “With the costs of college rising, and the benefits in doubt, many are wondering whether earning a college degree still pays,” it states. The findings show that either a bachelor’s degree or an associate’s degree tend to outweigh the cost with a return of around 15 percent on both degrees over the past decade. 

Economists Jaison R. Abel and Richard Deitz, state that between 1970 and 2013, “those with a bachelor’s degree earned about $64,500 per year and those with an associate’s degree earned about $50,000 per year, while those with a high school diploma earned only $41,000 per year.” Over the past four decades, graduates with a bachelor’s degree were likely to earn 56 percent more than high school graduates. 

Using data from 2013, the authors calculate that “workers with a bachelor’s degree on average earn well over $1 million more than high school graduates during their working lives, while those with an associate’s degree earn about $325,000 more.” 

The average “net tuition” cost shows that “the amount actually paid out-of-pocket remains much lower than what the sticker price suggests”—due largely to funds students receive that need not be paid back, such as grants, tuition concessions, and tax benefits,

Although students forgo employment and its monetary benefits while pursuing a college education, the rates of return once the average college graduate starts working (for each type of college degree) remain well above 7 percent.      

Further investigation done by the authors shows that the return on a bachelor’s degree tends to vary according to the field of specialization. Particular majors tend to bring in a greater return, especially areas that provide technical training to the student. Thus, students should take into account that “while the benefits of college still outweigh the costs on average, not all college degrees are an equally good investment.” 

Either way, the rate of return for college graduates remains higher than for their high school-education only counterparts. “When we put all the pieces together, the good news for college graduates is that the return to college remains high on average, regardless of one’s college major,” the authors’ state. 

What is your perspective on the return of a college degree? Do you think that media is overemphasizing the burden of student debt and underscoring the return of a college degree?

 

Publication Date: 7/2/2014


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