Tuesday, May 6, 2014

Is It Still Worth Going to College?

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, researcher from the Federal Reserve examine whether going to college remains a worthwhile investment. Using U.S. survey data, theycompare 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.


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