College still pays off — if you avoid 3 decisions
New data from the New York Fed found that a college degree still pays off under certain circumstances.
Going to college still pays off — mostly.
With high college costs and a growing number of alternatives to a four-year degree, more young people are questioning whether a college degree is worth the investment. The New York Federal Reserve on Wednesday released new data that indicated college does still typically pay for itself, but it depends on the student’s choices.
“The typical college graduate earns a return that easily surpasses the benchmark for a sound investment,” the New York Fed said in a blog post. However, some college students don’t fall into that category.
The New York Fed found that the rate of return on a college degree remains high, and college graduates continue to earn more than those who do not earn a college degree. Using data from the Census Bureau adjusted for inflation, the Fed found that the median worker with a college degree earned about $80,000 a year, compared to $47,000 for a worker with just a high school diploma.
“With the annual college wage premium at more than $30,000, it is easy to see why the return to college remains so substantial,” the blog post said. “Over an entire working life of more than forty years, such a premium adds up to a benefit well in excess of the costs.”
There are some students, however, who might not see that premium. A companion blog post from the New York Fed highlighted three reasons a college degree might not pay off for some students:
- Taking more than four years to complete a degree;
- Picking a low-paying college major;
- Choosing to live on campus.
The blog post said that while most students complete their degrees in four years, “taking an extra year or two to finish school adds considerably to the cost,” primarily because of the opportunity costs of staying in school longer and missing out on wages they’d earn by working.
Based on data from the Census Bureau and Department of Education, the total cost of college increases from $180,000 to $272,000 when students graduate in five years, the blog post said.
Additionally, graduates in certain majors tend to earn more postgraduation than others; those majoring in engineering, math, and economics typically have a higher return on investment, but the New York Fed said that a degree generally pays off regardless of major.
The higher cost of living on college campuses can also decrease the return on investment for some students, depending on the amount of additional financial aid they receive.
College degrees can also provide benefits beyond financial ones; a report from the Lumina Foundation found that those with a college degree are more likely to have greater career stability, be engaged in their communities, and enjoy a more secure retirement.
A College Board report from last year found that adjusting for inflation, the net cost of college had declined over the past few years, thanks mainly to an increase in grant aid and a decrease in student-loan borrowing.
That’s not to say students aren’t feeling the financial burden of a degree; some Gen Zers have told B17 that they didn’t want to take out student loans when they felt they could further their careers by directly entering the workforce.
Education Secretary Linda McMahon has said that one of her goals is to strengthen and expand alternative routes to a college degree as part of President Donald Trump’s mission to eliminate the Department of Education.
