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New York Fed: College Is 'Worth It' Albeit With Caveats

New York Fed: College Is 'Worth It' Albeit With Caveats
(Zimmytws/Dreamstime)

Tuesday, 11 June 2019 11:58 AM

Despite rising tuition costs, students can expect a solid return in their college education investment, according to a new post by Federal Reserve researchers.

This holds true for almost all students with several important exceptions: those who finish in the bottom 25% of their class, college drop-outs, or those who take more than four years to graduate, wrote authors Jaison Abel and Richard Deitz in a Liberty Street Economics blog post.

The average college graduate with a bachelor’s degree earned about $78,000, compared to $45,000 for the average worker with only a high school diploma. This wage premium college graduates generate over their peers with only a high school degree is roughly $33,000.

The Fed researchers measured the costs of college followed by a lifetime of positive cash flow benefits from the college wage premium that one received over their entire career to estimate the rate of return a college education provides.

While the return generated by a college education has declined in recent years from its peak due to rising tuition prices the benefits still outweigh the cost.

Of course, individual circumstances and opportunities can make the economic value of a degree differ widely. “Given the complexities involved, these figures should be viewed as back-of-the-envelope estimates, and are meant to provide only a rough guide to the value of a college degree for the average undergraduate,” the researchers noted.

“While the rising cost of college may be troubling, it has not yet changed the basic calculus as to whether earning a college degree is worth it,” wrote Abel and Deitz. “The benefits still outweigh the costs, at least for most people.”

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Taking more than four years to graduate hurts opportunity cost.
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2019-58-11
Tuesday, 11 June 2019 11:58 AM
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