While opinions differ on the worth of a college education, it remains a dependable path to financial prosperity for graduates. The discussion often aligns with political views, possibly shaped by the voting tendencies of those with college degrees. Nonetheless, there is substantial evidence indicating that college graduates enjoy higher wages and face lower unemployment rates.
- Attending college offers numerous advantages, including the potential for increased salaries, opportunities for personal growth, and avenues for professional development.
- Attending college can open the door to higher income potential and job security.
- Higher education also provides opportunities such as networking and a desire for lifelong learning outside of work.
- There are many factors that need to be considered when assessing the costs of college, including tuition, fees, housing costs, and future career prospects.
- Ultimately, whether or not college is worth its cost depends on individual circumstances.
Wage Premium for College Degrees
Annual income rises with higher educational attainment. This chart shows mean annual earnings by educational attainment, based on data from the U.S. Census Bureau. College graduates have higher annual earnings. For example, people with at least a bachelor’s degree have annual earnings that are over double the earnings of people without a college degree.
U.S. Bureau of Labor Statistics. (2023, September 6). Education pays. U.S. Bureau of Labor Statistics. https://www.bls.gov/emp/chart-unemployment-earnings-education.htm
Similar results have been demonstrated for lifetime earnings. According to the Associate of Public and Land-Grant Universities, “College graduates on average make 1.2 million more over their lifetime”. This is confirmed by a similar but more recent result from the Federal Reserve Bank of New York demonstrated that those with only a high school diploma make a median of roughly $40,000 annually. Those with a bachelor’s degree however, range above $60,000 annually, depending on type of degree. The U.S. Bureau of Labor Statistics (BLS) reported in 2022 that bachelor’s degree holders took home a median wage of $1,432 per week, while workers with just a high school diploma earned only $853. An article by David H. Autor in the journal Science, Skills, education, and the rise of earnings inequality among the "other 99 percent," reports that the lifetime earnings premium has been growing over the last three decades.
As noted in a paper from the Brookings Institution, a college education is one of the best investments a student can make, with, “the average four-year college graduate earning about 65% more than the average high school graduate.” College may be expensive, but not going to college is even more expensive. Not only has the earnings premium of having a college degree continued to increase, but the average earnings and employment of people without a college degree has been decreasing.
Lower Unemployment Rates for College Graduates
College graduates have lower unemployment rates, and the unemployment rates decrease with higher educational attainment. This chart shows unemployment rates by educational attainment, based on data from the Bureau of Labor Statistics (BLS). According to a report from Pew Research, “44% of college graduates – including 45% of men and 43% of women – say their college education was extremely useful to them in opening doors to job opportunities.”
U.S. Bureau of Labor Statistics. (n.d.). Education still pays : Career Outlook. U.S. Bureau of Labor Statistics. https://www.bls.gov/careeroutlook/2014/data-on-display/education-still-pays.htm
College graduates are more likely to find jobs, even during an economic downturn.
Nuances
However, there are crucial nuances to consider. The data provided primarily pertains to college graduates. Those who attend college but do not graduate may not experience the same level of earnings and employment benefits. For instance, according to a 2021 Forbes article written by Mark Kantrowitz, students who drop out of college are almost 100 times more likely to default on their student loans than students who graduate. These dropouts also make up the majority of loan defaults (roughly 62%). This information is based on the latest data from 2023.
The results are also influenced by academic major, gender and race. U.S. Census Bureau data, as analyzed by the Center for Education and the Workforce at Georgetown University, demonstrates that students who graduate with degrees in science, technology, engineering and mathematics (STEM) earn more than students who graduate with degrees in the humanities. A Bachelor's degree in nursing pays better than a degree in anthropology or music. Payscale.com's College ROI Report similarly demonstrates a lifetime wage premium for college graduates with degrees in STEM. U.S. Census Bureau data also demonstrate that female college graduates earn about two-thirds as much as male college graduates and that minority college graduates earn about four-fifths as much as white college graduates. The College Board report, Education Pays, provides additional data about the financial benefits of a college degree by gender and race.
The financial benefits of a college education are also influenced by the type of college and the amount of educational debt. Similarly, in a 2021 article from Inside Higher Ed they note that, “there’s no way around the fact that calculating the ROI of college is complicated and involves a lot of variables and numbers.” Students who graduate from one of the most elite private non-profit colleges have the greatest dollar return on investment, according to Payscale.com. But students who graduate from an in-state public college have the greatest rate of return on investment because the lifetime earnings are only slightly lower than at the elite private non-profit colleges while the cost is much lower.
It is important to keep student loan debt in sync with expected annual income after graduation. Education debt may be good debt, because it is an investment in your future, but too much of a good thing can hurt you. As debt at graduation rises, the financial benefit of a college education may not yield as much of an advantage. This chart shows that debt at graduation is growing, and growing faster than net price as more of the burden of paying for college is shifted from the federal and state governments to students and their families.
This chart shows that students who graduate from higher-cost colleges are more likely to graduate with student loan debt and more of it. Each $10,000 increase in college costs corresponds to about a $3,000 increase in debt at graduation. Over any 17-year period, total college costs will triple, and the net price will more than double.
Looney, A., Sandy Baum, A. L., Holzer, H. J., & Pam Harder, G. W. (2022, September 26). Biden is right: A lot of students at Elite Schools Have Student Debt. Brookings. https://www.brookings.edu/articles/biden-is-right-a-lot-of-students-at-elite-schools-have-student-debt/
The age of the college student is also a factor to consider. For individuals who pursue a college degree later in life, the wage premium may not be as significant. This is due to the shorter time available to repay student loan debt and reap the benefits of increased wages. Older undergraduate students are at a higher risk of federal student loan default compared to those of traditional college age. It is advisable for older students to only borrow what they can afford to repay within ten years or before retirement, whichever comes first.
Arguments suggesting an oversupply of college graduates often rely on flawed analysis that focuses on the number of college graduates employed in occupations that supposedly don't require a degree, like taxi drivers or janitors with Bachelor's degrees. This analysis fails to acknowledge that during economic downturns, individuals with higher education tend to secure jobs that would otherwise be filled by those with less education. Additionally, some of these positions may necessitate a college degree due to management responsibilities or job-specific details. For instance, attaining a janitorial role at a nuclear power plant likely demands more education compared to a janitor working at a secondary school. Even among jobs that don't require a college degree, individuals with a degree tend to earn more than those without.
