An April 5, 2014, article from The Economist reviewed some interesting research. The Pew Research Center looked at 25 to 32 year-olds and found those who had graduated from college and were working full time earned about $17,500 more annually than those of the same age who only graduated from high school. But the large costs of a college education can negate those earning gains, even more so when a college graduate’s degree does not allow him to find a higher paying job. It could be true, as President Obama has said, that learning a trade may allow a student to earn more than if she got an art history degree.
It is most likely unfair to focus on an art degree, but it is practical to look at which college degrees pay off. This can all be calculated by taking the cost of a degree (minus scholarships and grant monies) and looking at pay scale estimates for graduates over a 20 year period. This equals the annual return rate of a college degree or whether or not the cost of a college degree is worth it over 20 years of work.
For example, a Harvard degree yields a 15.1% annual return rate versus a degree from the University of North Carolina at Asheville which only yields a -.03% rate of return annually. Big Difference! So how can a college applicant decide whether or not to pay for a college degree and where to go for the best return on a college degree’s cost?
First, what you choose to earn your degree in can make a difference. An engineering degree is always a good investment. An engineering degree from the University of California at Berkley can mean a graduate can be $1.1 m better off in a 20 year period than someone without a college degree. Even an engineering degree from a lesser known public university means a $500,000 boost in earnings over twenty years over that of a person with no degree. Arts and humanity degrees offer varying investment returns. A liberal arts degree from more prestigious schools like Columbia pay off, but the same degree from a school that is less selective may actually cost a graduate money. For example, you could earn less than a person who never got a college degree after paying off the debt accumulated in earning your college degree, even over a 20 year period. In Fact, 46 liberal arts degrees’ return rate of investment is less than putting monies into a 20-year treasury bill.
There are other factors to consider. Some colleges may look like a poor investment…To continue reading about how to weight the value of a college degree and how to have the best return on your educational investment, go to the College Basics website.