Another look: Is a college degree is worth it?

Lots has been written recently re: the economic value of a college degree.

Let’s boil it down to 3 key charts …

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First, the cost side of the equation …

Sky-rocketing tuitions are loading students with an enormous amount of post-graduation debt.

While other forms of consumer debt have held relatively constant for the past 10 years, student loans have soared from “only” $200 million in 2004 to over $1 trillion today.

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That’s the cost.

What about the benefits side?

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Lower Unemployment Rate

The unemployment rate for bachelor’s degree holders is currently about 3.3% … about 1 point higher than long-run averages.

That’s about half the unemployment rate of all folks who don’t have a bachelor’s degree.

Note that the unemployment rate gap widens during tough economic times – to the disadvantage of those not holding college degrees.

 

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Higher Pay

According to the N.Y. Times, he pay gap between college graduates and everyone else (chart below) reached a record high last year (based on an analysis of Labor Department statistics by the Economic Policy Institute in Washington).

Graduates with four-year college degrees earned 98 percent more an hour on average in 2013 than people without a 4-year degree.

 

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Net Present Value

The lower unemployment rate and wide pay differential   more than offsets the high cost of an undergraduate degree.

According to David Autor, — an M.I.T. economist,– “the true cost of a college degree is about negative $500,000.”

Said differently, the net present value – the cumulative benefit of the earnings gap less the cost to get a degree, adjusted for inflation – is about $500,000

The half-million NPV is roughly double what it was three decades ago.

The Times’ conclusion:

“For all the struggles that many young college graduates face, a four-year degree has probably never been more valuable.”

#HomaFiles

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One Response to “Another look: Is a college degree is worth it?”

  1. Los Says:

    A key variable is missing: marketability in the dating pool. Partner selection is the most important decision one makes, and not going to college, severely limits one’s chances of finding a partner with a positive NPV.

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