For many, a college degree holds the promise of a better future. A degree is a symbol of knowledge, success and the readiness to achieve even greater things. However, the steady rise in the cost of a college education, coupled with the decline of graduate salaries and a dreary economy, have some wondering how much a degree is truly worth. Even the non-profit College Board stopped touting its long-held claim that the difference in lifetime earnings of college grads over high school grads is $800,000, after multiple critics refuted the number. (For more advice, see 5 Financial Mistakes New Graduates Must Avoid.)
TUTORIAL: Budgeting Basics
A 2011 study by the Pew Research Center found that the typical college graduate earns about $650,000 more than the typical high school graduate over a 40-year work life. That is $350,000 less than 2002 figures, when the U.S. Census Bureau's "The Big Payoff report" stated that college graduates would earn nearly $1 million more over their careers than their high school graduate counterparts. The Census Bureau reports that the annual median gap in earnings was $19,550 as of 2010.
The price of education is a big factor to consider in the determination of the worth of a degree. The following figures where listed in College Board's Trends in College Pricing 2010 and Trends in Student Aid 2010 report:
- Public four-year colleges charge, on average, $7,605 per year in tuition and fees for in-state students. The average surcharge for full-time, out-of-state students at these institutions is $11,990.
- Private non-profit, four-year colleges charge, on average, $27,293 per year in tuition and fees.
- Public two-year colleges charge, on average, $2,713 per year in tuition and fees.
These dollar amounts do not include textbooks, room and board, and other costs related to attending college. If a student, or his or her family, can afford to pay these costs outright, the monetary value of his or her degree will be more than a student who has to take out loans to cover all or part of the expenses. Two-thirds of all American college graduates leave school in debt. The median debt load for graduates of classes 2006 to 2010 is $20,000.
Today's college graduates are being met with a bleak job market that means either working at low paying jobs or having no job at all. Only 56% of 2010 college graduates said they were able to find employment by spring. Even more disheartening, only half of those positions required a college degree. The median starting salary for students graduating from colleges in 2009 to 2010 was $27,000, which is less than an average year's tuition at a private four-year college. The average high school graduate, age 18 to 24 who did no go on to post-secondary education is paid $23,000 for full-time work. They don't have the worry of student loan debt, and they had the opportunity to earn full-time wages for longer than college graduates.
Majors must also be taken into account. The amount of pay and the ability to find work after college varies greatly by career path. Education, teaching and engineering students have better job prospects on average than humanities majors. Computer and engineering majors earn much higher salaries than education and liberal arts majors, which gives them a better return on the monetary and time investment they made to attain a college degree.
The Bottom Line
The value of a college education has changed over the years. The troubled economy and high cost of tuition and other college expenses has lowered the payoff for many recent graduates. The ultimate return on investment seems to depend greatly on a student's debt load and the job prospects and earning potential for their given field of study. (If you have chosen to go to college, here are 5 Ways To Fund A College Education.)