by Pete Mazzaccaro
As high school seniors around the country graduate, a lot of talk has circled back to a question that’s ever more popular. It’s a subject I’ve touched on in this space several times: Is a college degree worth it?
The unconventional wisdom is that rising costs of American universities, which have led to higher rates of student debt and increasing instances of student loan defaults, may not provide the return on investment we believe they should. Creative, hardworking people can certainly succeed without a college degree, right?
Popular examples here are plentiful. Steve Jobs, Bill Gates and Mark Zuckerberg are all college dropouts who’ve made billions. And nearly everyone has a friend or two who fits the bill – a hard-working guy who went into landscaping or software design out of high school and runs a successful small business. Why go $200,000 in debt when you don’t need to?
Recent research about this question, though, cuts through a lot of the anecdotes and paints a pretty clear picture of how valuable college is. It’s not just a smart idea, according to the data. It’s pretty much the best investment you can make.
A May 27 post by the New York Times’ David Leonhardt looked at that data and found some amazing research out there.
One paper by an MIT economist found that the cost of not going to college was roughly $500,000. That’s right. Just getting a four-year degree is worth approximately half a million dollars in realized earnings over the course of a lifetime for most Americans.
Another study cited by Leonhardt is one that shows that the earning gap between high school grads and college grads has increased steadily since 1980. When Ronald Reagan became president, college grads earned about 64 percent more than high school grads. Today, college grads earn 98 percent more than their high school educated peers.
Leonhardt sums up the research well: “The decision not to attend college for fear that it’s a bad deal is among the most economically irrational decisions anybody could make in 2014.”
So why the talk of college being a such a bad investment? Here Leonhardt also makes a few worthy points.
While unemployment for college grads is actually fairly low – at just over 3 percent – the country is still in the tail end of an economic downturn that has made things worse for a lot of Americans. In research by the Economic Policy Institute, the earnings gap between those who have earned a degree and those who haven’t has less to do with rising wages for college grads and more to do with falling wages for everyone else.
According to the Institute, over the last decade, average hourly wages for college grads have grown 1 percent. For everyone else, the average wage has fallen 5 percent.
“To me, the picture is people in almost every kind of job not being able to see their wages grow,” Lawrence Mishel, the Institute’s president, told Leonhardt. “Wage growth essentially stopped in 2002.”
So for all the high school graduates and their parents who have labored over selecting the right college – you’ve clearly made the right choice. Entering the work force out of high school clearly comes at a cost in earnings over a lifetime. It may be hard to think about that debt now, but it’s worth it.