Skipping College Can Cost You $800,000

Moneybox
A blog about business and economics.
May 5 2014 5:58 PM

Skipping College Can Cost You $800,000

171528577-students-throw-their-caps-in-the-air-as-friends-take
Is a college degree still worth it?

Photo by Ed Jones/AFP/Getty Images

It might be the hottest question in higher education today: Is a college degree still worth its cost? Despite soaring tuitions, a new study from the Federal Reserve Bank of San Francisco finds, the general answer is yes: The average U.S. college graduate can expect to earn at least $800,000 more than the average high school graduate over a lifetime. Not surprisingly, the so-called earnings premium that a college degree bestows increases with each additional year out from graduation.

Using U.S. survey data on income, the Fed study finds that a college student who pays $21,200 or less in annual tuition (some 90 percent of students at public four-year colleges and 20 percent of those at private nonprofit institutions) can expect to recoup that investment by age 38. After that, the extra income they make from their earnings premium is a net gain. "Tuition amounts lower than our estimate make going to college strictly better in terms of earnings than not going to college," the study's authors write.

Advertisement

Of course, to say that college is always worth what it costs oversimplifies the issue. The college-grad earnings premium has grown recently more because wages for high school grads have stagnated than because pay for college grads is on the rise. A PayScale ranking of America's colleges and universities done earlier this year also identified almost two dozen schools that actually make their students poorer—in other words, programs where the earning power granted by the degree doesn't justify the cost of tuition. And as my colleague Jordan Weissmann notes in the post linked above, there are also many other schools where the return on investment is so low that students would be better off putting their money in the stock market.

Alison Griswold is a Slate staff writer covering business and economics.

TODAY IN SLATE

Culturebox

The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer

Foreigners

Kiev Used to Be an Easygoing Place

Now it’s descending into madness.

Technology

Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The Slate Quiz
Oct. 24 2014 12:10 AM Play the Slate News Quiz With Jeopardy! superchampion Ken Jennings.
  Business
Moneybox
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
  Life
Outward
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Working
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
  Arts
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
  Technology
Technology
Oct. 23 2014 11:47 PM Don’t Just Sit There How to be more productive during your commute.
  Health & Science
Bad Astronomy
Oct. 24 2014 7:00 AM Gallery: The Partial Solar Eclipse of October 2014
  Sports
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.