Is Starting College and Not Finishing Really That Bad?

In this report, The Hamilton Project examines whether starting college is worth it for students who fail to complete a degree. Their "startling" finding is that it is: these students’ lifetime earnings are roughly $100,000 higher (in present value) than that of their peers who ended their education after high school. Measured by the rate of return, getting some college is an investment with a return that exceeds the historical return on practically any conventional investment, including stocks, bonds, and real estate. (Of course, the return to some college is considerably smaller than the return to finishing either an associate’s or bachelor’s degree.)

The College Earnings Premium

More education corresponds to better employment opportunities, even in the current, tepid job market. In April 2013, according to BLS data, the unemployment rate for individuals age twenty-five and older without a high school diploma was 11.4 percent; for high school graduates, 7.2 percent; for individuals with an associate’s degree, 5.0 percent; and for graduates with a bachelor’s degree or higher, unemployment was only 3.6 percent. Based on a more expansive measure of employment—the employment-to-population ratio—these disparities are even larger. Of all individuals without a high school diploma, age twenty-five and older, only 39.9 percent had a job; for high school graduates with no additional education, the employment rate was 54.5 percent; for individuals with an associate’s degree it was 68.6 percent; and for graduates with a bachelor’s or higher it was 73.2 percent.

The unemployment rate for individuals that reported some college but no degree was below the national average at 6.6 percent and the employment-to-population ratio was 60.9 percent.

In addition to increasing the chances of employment, education also has a substantial effect on one’s earnings potential. The graph below shows the average annual earnings of individuals with varying levels of educational attainment. Those with a bachelor’s degree earn a premium of roughly $30,000 each year relative to those with just a high school diploma. Over a lifetime of work, a college graduate with a bachelor’s degree would earn over $500,000 more than an individual with just a high school diploma.

What has not been previously appreciated is that even those who enroll in a two- or four-year program but do not attain a degree also experience substantial increases in earnings. On average, these individuals made about $8,000 per year more than those with just a high school diploma. Over a lifetime, this results in over $100,000 more in earnings.