Media stories about the rising cost of college education and growing student debt, combined with the lingering economic effects of the recession, have led many people to question whether it still makes financial sense to attend college.
The answer is a resounding yes, according to new research from the Federal Reserve Bank of San Francisco. Fed researchers analyzed U.S. labor data and found that, on average, people with a bachelor’s degree earn over $830,000 more over the course of their working lives than people with high school diplomas, even when the cost of attending college is taken into ac-count.
The recession appears to have had little effect on this “college earnings premium.” Researchers grouped work-ers into cohorts by decade and com-pared the earnings premiums of those graduating in the 1950s-1960s, the 1970s-80s, and the 1990s-2000s. Al-though the earnings premium fluctuated over time, its lowest point was actually in the 1980s, when college graduates earned about 43% more on average than those with only a high school diploma. In 2011, the latest year available, college graduates earned on average, about 61% more than high school graduates. “There is little evidence to suggest that the value of a college degree has declined over time, and it has even risen somewhat for graduates five to ten years out of school,“ wrote the researchers in their study report which was issued in May.
But, what about rising college costs? Does the cost of a college degree today negate the value of the college graduate earnings premium? Again, the researchers found that popular perception wasn’t supported by the hard data. Taking inflation and lost earnings while in college into account, the researchers compared the average earnings of a college graduate, which increase over time, to average college tuition costs to calculate break even scenarios. They found that the aver-age college graduate recoups the cost of attending college in their extra earnings in less than 20 years. The re-searchers noted that once the break-even point is reached, college gradu-ates continue to enjoy the benefits of higher earnings for the rest of their working years.
“The value of a college degree remains high,” the researchers noted in their report. “Although other individual factors might affect the net value of a college degree, earning a degree clearly remains a good investment for young people.”
Read more: To read the full Federal Reserve Bank of San Francisco’s study and access the accompanying break-even calculator, visit http://bit.ly/UGkhfq.
