Skipping College Can Cost You $800,000

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

Skipping College Can Cost You $800,000

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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.

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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.

 

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