Is It Still Worth Going to College?

By Mary C. Daly and Leila Bengali Earning a four-year college degree remains a worthwhile investment for the average student. Data from U.S. workers show that the benefits of college in terms of higher earnings far outweigh the costs of a degree, measured as tuition plus wages lost while attending school. The average college graduate paying annual tuition of about $20,000 can recoup the costs of schooling by age 40. After that, the difference between earnings continues such that the average college graduate earns over $800,000 more than the average high school graduate by retirement age. Media accounts documenting the rising cost of a college education and relatively bleak job prospects for new college graduates have raised questions about whether a four-year college degree is still the right path for the average American. In this Economic Letter, we examine whether going to college remains a worthwhile investment. Using U.S. survey data, we compare annual labor earnings of college graduates with those of individuals with only a high school diploma. The data show college graduates outearn their high school counterparts as much as in past decades. Comparing the earnings benefits of college with the costs of attending a four-year program, we find that college is still worth it. This means that, for the average student, tuition costs for the majority of college education opportunities in the United States can be recouped by age 40, after which college graduates continue to earn a return on their investment in the form of higher lifetime wages. Earnings outcomes by educational attainment A common way to track the value of going to college is to estimate a college earnings premium, which is the amount college graduates earn relative to high school graduates. We measure earnings for each year as the annual labor income for the prior year, adjusted for inflation using the consumer price index (CPI-U), reported in 2011 dollars. The earnings premium refers to the difference between average annual labor income for high school and college graduates. We use data on household heads and partners from the Panel Study of Income Dynamics (PSID). The PSID is a longitudinal study that follows individuals living in the United States over a long time span. The survey began in 1968 and now has more than 40 years of data including educational attainment and labor market income. To focus on the value of a college degree relative to less education, we exclude people with more than a four-year degree. Read the full article here:

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