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Are College Degrees Worth the Money?

Are College Degrees Worth the Money?

By Friday, 03 January 2020 12:10 PM Current | Bio | Archive

There was a time when earning a college degree, any college degree, was a nearly ironclad guarantee of a lucrative, fulfilling career. That time is long gone.

College has become dramatically more expensive, with tuition tripling since 1990; today, the average cost of a four year degree is $26,000. Even cheaper in-state tuition has far outpaced income since 2009, increasing 2.4x faster than earnings.

One big effect of this change has been the emergence of the student loan industry. Today, over half of American families have to take out loans to cover college costs. When you take accruing loan interest, loan repayments, and declining income growth into account, many college degrees are no longer wise investments. Some still offer great return on investment (ROI), but even they come with some serious caveats.

A new study by Clever Real Estate surveys this new educational landscape, and breaks down which degrees are worth the money, which aren’t, and why some lucrative fields should be approached with caution. Let’s unpack some of their findings.

Not All Degrees Are Created Equal

Overall, having a college degree is still generally better than not having one. College graduates earn an average of $2.7 million more, over a lifetime, than people with only a high school education, and according to the Center on Education in the Workforce, almost two-thirds of all jobs will require some college education by 2028. College grads make more, and are able to find a job more easily than non-grads.

The comparisons get a little fuzzier when you compare bachelor’s degrees to graduate and professional degrees. Some graduate degrees require you to spend up to a decade in school, which can seriously impact the degree’s return on investment, since it will take much longer to earn back all the money spent on education. While the average holder of a bachelor’s degree can expect to exceed the average lifetime earnings of a non-college graduate by nearly 200%, the holder of a much more time-intensive doctoral degree is looking at exceeding that by only about 88%. That’s because doctoral degrees are more expensive, and take a much bigger bite out of a person’s prime earning years.

The Best and Worst Bachelor’s Degrees, Ranked

So what are the best and worst bachelor’s degrees? To evaluate different fields, the study used a metric that combines opportunity growth, return on investment, and meaningfulness. While the first two factors are financial measures, meaningfulness is important because workers who find meaning in their work are more engaged in the workplace, and experience more overall life satisfaction than workers who find no meaning in their work. Including this third factor in the study led to some of the study’s most interesting discoveries.

When you rank degrees by return on investment (ROI), there are some clear and predictable winners and losers. The five degrees with the top ROIs are city/urban, community and regional planning; petroleum engineering, biopsychology, nuclear engineering, and biological and physical sciences. Not many surprises there. Each of these degrees has an ROI of at least 269%, so graduates in these fields can expect to earn at least $3.9 million more in their lifetimes than someone with only a high school education.

On the other end of the spectrum, the degrees with the lowest ROIs were social work, nutrition sciences, human services, real estate, and religion/religious studies. Again, not many big surprises. A religion major can expect to earn only $230,000 more over their lifetime than someone who didn’t attend college.

But when you look past simple financial return, the rankings aren’t so predictable.

Projecting Future Job Stability

High earnings are great, but they’re less meaningful if graduates struggle to find a job. It’s no coincidence that the top-ranked job in the study, Operations Research, has by far the highest projected job growth, at a staggering 18%.

On the other hand, jobs in the engineering field are associated with high earnings, but are projected to have very slow growth in the future. So some lucrative degrees, like electrical engineering, polymer/plastics engineering, and metallurgical engineering, are only mediocre bets, since positions could be hard to come by in the next decade. Why? Experts aren’t sure, though some point to industry tends toward contracted labor, or even overseas hiring.

Then, on the very low end, are fields with projected negative job growth and/or low ROI. Only journalism/communications combines these two negatives, coming in at -3% job growth, and an ROI of only 72%. If you know a young person considering a journalism degree, send them this study.

Money Really Can’t Buy Happiness

Looking at job satisfaction teases out some interesting conclusions, and challenges some common assumptions about what makes a job “good.” While in the past, a high salary was the beginning and end of the conversation about job quality, a younger workforce has redefined what they want out of a job. Millennials, especially, value factors like a company’s ethics and social investment over raw financials, and are much more willing than previous generations to leave a job if it doesn’t give them personal fulfillment.

Degrees with the highest meaningfulness quotients generally had relatively low ROIs, especially compared to the top earning fields. Gerontology, for example, has a low ROI, but nearly 80% of people who work in the field find their job very meaningful. Another degree with a lowly ROI, religious studies, also has a meaningfulness quotient over 70%, as does social work and human services. Think of it this way: a big paycheck doesn’t mean as much when you dread going to work every morning.

One interesting outlier here is petroleum engineering, which has a great ROI, and also a high meaningfulness quotient of 72%, right on par with religious studies. Who would’ve thought that petroleum engineers were so fulfilled by drilling oil wells?

On the low end of the meaningfulness scale are fields like journalism/communications, plastics engineering, computer science, and information science. With the exception of journalism, those are all fields with high ROIs. The upshot? In general, you can have a satisfying, meaningful job with low pay, or a lucrative, high-paying job that feels futile and meaningless. In this scenario, there are a couple notable exceptions: petroleum engineers, for example, are raking it in, and feeling like they’re on a life mission, and journalists are paid peanuts and are miserable and hopeless.

The Diminishing Returns of Advanced Degrees

Another surprising finding was that graduate degrees might not be all they’re cracked up to be.

For example, someone who holds a bachelor’s degree in computer science has an ROI of around 154% over their lifetime. They’ll spend around four years in college, and graduate to earn a median salary of $86,000. But a holder of a PhD in computer science can expect to make a similar salary, even though they’ve spent 5-7 more years and up to $176,000 in tuition and loans, which drags their ROI all the way down to 103%. That’s a tough pill to swallow.

Other fields show similar patterns. In fields like city/urban planning, anthropology, sociology, and archaeology, holders of bachelor’s degree have far higher ROIs than holders of advanced graduate degrees. Those additional years of school and tuition just aren’t worth the money.

There are some exceptions. The holder of a bachelor’s in behavioral science has an ROI of only 96%, while the holder of a master’s degree in the same field nearly doubles that, with an ROI of 182%. And professional degrees in fields like law or medicine are still a great idea. In fact, doctors hold the largest ROI of any field, earning 400% more, lifetime, than someone with a high school education.

Still, the overall trends are clear: most graduate degrees are a shaky investment.

Big Picture Takeaways

Looking at the overall findings of the study makes one thing clear: about half of our assumptions about the value of college degrees simply aren’t supported by the facts. On the other hand, half of them are right on.

If you’re thinking of becoming a doctor or lawyer, you can count on a lucrative career. However, that line you’ve been hearing for decades now, that engineering is a can’t-miss degree? It’s time to reconsider that one. More schooling is not necessarily better; stick to a four-year degree if you want to maximize earning power.

It’s nearly impossible to get a high salary and meaningful work out of your career. If you’re hearing a personal calling to major in religious studies, you can be reasonably sure that your professional life will be a meaningful one - just don’t expect to make a lot of money. And while fields like computer science are reliably high-earning, students considering the field should anticipate low levels of job satisfaction, perhaps even day-to-day futility. Whether it’s worth the money is a difficult, and individual, decision.

Surprisingly, petroleum engineers may be the happiest people in the entire job market. And finally, if you’re thinking of studying journalism: just don’t.

Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.

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About half of our assumptions about the value of college degrees simply aren’t supported by the facts. On the other hand, half of them are right on.
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Friday, 03 January 2020 12:10 PM
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