As tuition costs continue to rise, it is important to evaluate whether a college education provides a return on investment that is worth the significant financial commitment. And indeed, perceptions of the value of college have changed dramatically over the past decade. This article delves into the multifaceted question of whether college is worth paying for tuition.
The answer is “it depends.”
Perceptions of the value of universities in the United States have changed.
The way people think about university education has changed significantly over the past decade.
A poll a decade ago found that 96% of parents who identified as Democrats and 99% of Republican parents expected their children to go to college. Also, 75% of young people feel that a university education is very important.
Today, sentiment towards universities is not so positive. Currently, only 41% of young people think a college degree is very important, and only about one-third of Americans say they have confidence in higher education.
This translates to an approximately 50% decrease in positive feelings toward higher education.
So, does a college degree actually increase your income?
The decline in positive feelings toward university education may be due to political as well as economic reasons.
But statistically speaking, there’s actually little debate: getting a college degree increases your income.
Data consistently shows that people with a college degree tend to earn significantly more over their lifetime than those without a degree. The income gap between college graduates and high school graduates is widening, reinforcing the economic advantage of higher education.
Recent analysis According to a study by William R. Emmons, Anna H. Kent, and Lowell R. Ricketts of the Federal Reserve Bank of St. Louis, families with a college degree earn (on average) 175% of the income of families without a college degree. .
In other studies, the numbers were significantly higher.
Other benefits of a college degree
As your income increases, you will have more opportunities to save and invest, which should increase your wealth.
Additionally, college graduates typically have lower unemployment rates, greater job security, and access to a wider range of job opportunities. Many high-paying professions, such as medicine, law, engineering, and finance, require a college degree as a minimum qualification.
Additionally, earning a four-year college degree has been shown to improve your health, increase your chances of becoming a homeowner, and lower your risk of facing debt problems.
Demand for college-educated workers is increasing
Despite the risks associated with obtaining a college degree, the need for college-educated workers is expected to continue to grow. And given that need, wages for college graduates should continue to exceed those for workers with only a high school diploma.
2018 report by consulting firm korn ferry And more recently, Douglas Holtz Eakin, chief economist on President George W. Bush’s Council of Economic Advisers, predicted a shortage of 8.5 million college graduates by 2030.
But are the increased income and job opportunities worth the high cost of college?
College graduates earn more than those without degrees, and the demand for college-educated workers appears to be increasing. However, many people have to take on large amounts of debt to obtain a diploma.
The cost of attending college has risen steadily over recent decades, leaving many prospective students and their families wondering if the investment is really worth it. As the cost of admission continues to rise, it is important to evaluate whether a college education provides a return on investment that is worth the significant financial commitment.
Do college graduates increase lifetime assets? Are there any “welfare benefits”?
the study Douglas Weber, an associate professor of economics at Temple University, evaluates all income, assets, and debts to determine how much net worth, or “return to wealth,” college graduates accumulate over their lifetimes compared to high school graduates. I decided it would be.
And this research reveals a complex story. The likelihood and extent to which a college education will lead to wealth depends on a variety of factors, including:
- Major field. Although her STEM graduates have higher starting salaries immediately after graduation, liberal arts graduates have higher salary growth throughout their careers and often earn more than her STEM graduates over their lifetimes. However, regarding wealth, Weber discovered that:
- A liberal arts/humanities graduate who attended a private school (and paid average tuition) has about a 50/50 chance of having a positive net present value of their college investment.
- STEM and business majors are very likely to pay off, even with high college costs.
- How much debt do you have:
- 96% of college graduates earn more than the average high school graduate without college costs, but that drops to 87% for those paying $50,000 a year.
- 74% of college graduates earn at least $500,000 more than the typical high school graduate without college costs, but that drops to 56% for those paying $50,000 a year.
- It doesn’t matter whether you actually graduate or not.
- Taking a course alone doesn’t seem to improve your return on assets, and can have negative effects if you don’t graduate with debt.
Wealth benefits less now than in previous generations, especially for Black families.
Additional analysis by researchers at the Federal Reserve Bank of St. Louis shows that while recent college graduates have lower net worths than previous generations across all races and socio-economic backgrounds, the net worths are more pronounced among black graduates. It turns out that there is something.
for example:
Among the families of white bachelors are:
- In the 1930s, college-educated households owned 247 percent more assets than non-college-educated households.
- The 1940s Group owns over 195%
- In the 1980s, the group owned just over 42 percent.
For black families:
- In the 1930s, the wealthy premium reached 509%.
- In the 1960s cohort, this dropped to 177 percent.
- statistically indistinguishable from zero for both the 1970s and 1980s cohorts
Paul Tough, author of several books on education, writes: new york times“For wealthier families in this country (and their children), the rules of the higher education game are clear, and the benefits are almost always worth the costs. For others, the rules are increasingly opaque. , the benefits become increasingly uncertain, and the idea of just giving up without playing always seems appealing.”
How debt hinders college graduates from building assets
Although researchers are not sure, they theorize that debt may prevent graduates from participating in wealth-creating steps such as saving for retirement, buying a home, or starting a business.
So, is a university education worth it?
As the data above shows, whether a college education (and the debt incurred) is beneficial is complex and depends on you (or your child). The benefits of a college degree depend on a variety of factors.
Below is a list of some considerations.
- Is there a possibility of graduating?
- Do you want to establish professional networks and professional connections?
- Which university will you attend?
- How much does it cost?
- Will I incur debt?
- how much?
- What is the direct lifetime cost of that debt? What is the interest rate? How long will it take to pay it off?
- What is the long-term cost of that debt? Is it delaying retirement savings and homeownership?
- What is the opportunity cost of having to use funds to pay off debt instead of saving for the future? (The cost is especially high if you have one.)
- What is the opportunity cost of paying tuition if you don’t take on debt? How else could you spend that money?
- How much can you potentially earn with your degree? How does the university you attend affect your income? (You might want to look into it) Post-Secondary Value Commission It provides information on net prices, completion rates, and post-graduation earnings for most colleges in the United States. )
- How will you use your degree?
- How does your racial and socio-economic background impact the type of college you attend and your networking opportunities after college?
At the end of the day, the decision to attend college with or without debt is a very personal one and depends on a person’s unique circumstances, goals, and values. Carefully weigh these tradeoffs, conduct thorough research, and seek advice from a financial advisor or college counselor to make informed decisions that align with your long-term aspirations and financial well-being. It is essential that you consider asking for.
Try out “what if” scenarios with NewRetirement Planner
You can run and compare “what if” scenarios at any time in NewRetirement Planner to assess the cost of college and university debt. Have your potential students develop a basic financial plan and run through different scenarios, such as:
- debt level
- tuition fee
- Income level and salary start and end dates
- Retirement savings and investment levels
- ability to buy a house
And if you’re considering financing your education or taking out student debt, make similar comparisons in your own plans.
Analysis is not perfect because it is impossible to predict the future. But it will be an interesting and very educational experiment.
