Is College Really Worth It?

Ever since the Great Recession, when tens of thousands of college students graduated with a load of debt, no jobs, and moved back in with their parents, the value of a college education has been in question. During that time, the gap in earnings between those with a bachelor’s degree and those with a high-school diploma narrowed considerably, according to the College Board’s study, Education Pays 2013.

Being out of the work force for four years, plus spending that time accumulating debt, does make a financial difference. The study found the age at which a college degree becomes worth it, assuming the student finishes in four years and also has student loan debt, is 36. That’s 14 years of work before it begins to pay off, financially speaking.

Past that, however, it’s hard to argue a bachelor’s degree, even if it’s financed, won’t pay more dividends than a high school diploma over a lifetime. The median earnings of college graduates with no advanced degree in 2011 was $56,500, while for high school graduates it was $35,400, a gap of $21,100. For 25- to 29-year-olds, the gap was $15,200, while for 45- to 49-year-olds the gap was $32,000. The value of the education keeps growing with age and experience.

Just putting some simple math to it – a gap of $21,100 – from age 22 to age 65 = $907,300. Yet there are those without a college education who do just fine, even better, financially, than their college-educated counterparts. The study found 16% of men without a degree earned as much or more than those with one. 16% are not bad odds; although that means 84% do not.

But what else do you get from a college education besides higher earnings? The study found that, on average, college graduates lead healthier lifestyles (as measured by smoking rates and obesity); are more likely to be covered by health insurance and pensions by their employers; are more active in their communities through voting and volunteering; and that college-educated moms spend more time with their children, and more of that time is spent on their children’s developmental activities.

For many families, then, college’s returns compound over the generations.

College is one of the biggest investments of our lifetimes – exceeding the cost of a house, in some instances. Not every parent can both save for retirement, and save for all of their children’s educations. With resourcefulness and persistence, students and their families can find many different ways to pay for college. (However, students must stay prudent about the amount of debt they incur. See this post: Drugs, Sex, and Money).

Nevertheless, the statistics show that college, for most people, loans and all, is one of the most lucrative investments you can make.


Holly Donaldson

Holly Donaldson, CFP® runs an hourly and fee-for-service financial planning practice virtually from her Tampa Bay, Florida office. She also works with clients throughout the U.S. (except Texas) interested in retirement and tax planning advice without product sales or investment management. Holly is the author of The Mindful Money Mentality: How to Find Balance in Your Financial Future (Porchview Publishing, 2013) and publisher of the award-winning monthly e-letter, "The View From the Porch."

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