Skip to comments.College: 'Best Investment' or Big Risk? (The financial return for a 4-year degree may surprise you)
Posted on 05/07/2012 2:35:03 PM PDT by SeekAndFind
College is the best investment you can make, President Obama told students last month at the University of Colorado.
As a metaphor for the benefits of education, that statement is fine. But taken as a claim about the financial returns of a college degree, it poses two problems.
The first is that students and their families still lack sufficient data to estimate long-term returns for specific college degrees the way investors do with stocks and bonds.
The second problem is one of investment risk. Stock investors can manage risk by buying a diverse basket of shares, but a college student bets on a single asset: himself.
That makes it crucial that students and their families understand the factors that affect the risk and return of a college investment in order to swing the math in their favor.
College brings higher pay: $1,053 a week for the median bachelor's degree holder last year, versus $638 for a high school graduate with no college, says the U.S. Bureau of Labor Statistics. Last year's unemployment rate was 4.9% for college grads versus 9.4% for those with no college.
The College Board, a not-for-profit association, calculated in a 2010 report (based on 2008 data) that a typical student who enters a four-year college at age 18 and borrows his way through earns enough by age 33 to make up for his costs, including foregone wages and loan interest.
If a bond paid for itself that quickly, the return would be between 5% and 6% a year. That's a handsome payoff; stocks have historically returned around 7% a year after inflation. And it says nothing of college's other benefits, such as enlightenment, fun and higher job satisfaction.
Two big caveats: The College Board math assumes everyone goes to a public college. Those usually cost less than private ones -- often a lot less -- and that skews returns higher. The report also doesn't account for dropouts or extra college years. Only 56% of students who enroll in a four-year college earn a bachelor's degree within six years, according to a report last year by the Harvard Graduate School of Education.
PayScale, a Seattle data firm, examines the links between pay and variables like colleges and majors. Its analysis, which also ignores dropouts but accounts for students who take longer to complete their degrees, finds an average yearly return of 4.4% for degrees from 853 schools. That assumes students get financial aid, as most do.
“what the hell do you want the other 85 percent to do?”
What does the 99.999999% of us who can’t shoot golf like Tiger Woods do? We make less money doing something else that the world needs. Let them get their hands dirty and learn a trade. Competent welders are in great demand. And while we are at it, let’s quit subsidizing do-nothing majors. The US is rapidly coming to the point where we can no longer afford that luxury
here in Fl it is 40 hours cont ed every 2 years
“I wonder whether you might be an engineer”
Yes, 34 years in the field, and proud of it.
“All they had to do was switch majors”
No, all they have to do is learn to do something that people need. My neighbour is no intellectual giant, but he makes a pretty good living for his family doing backhoe work. And there is NOTHING wrong with that.
Government schools do not cost less, they cost more when all the various taxpayer subsidies are added in. The price is cheaper, not the cost. We'd all be wealthier and better off without them.
A great many people find programming as complicated as learning to speak Sanskrit or boring as hell. You have to have a certain kind of mindset to program for years without your head exploding.
If you don’t know the locations of the headquarters of the major oil companies in the US, you need to get out more.
“here in Fl it is 40 hours cont ed every 2 years”
Try getting a job in nursing if you haven’t worked in 3 years and all you have is your continuing ed...you won’t get an interview, let alone a job. Not in Arizona, where my RN/BSN wife is threatened with being fired every few weeks.
She’s trying to get training in a specialty so she can find work elsewhere. As a med/surg RN in Tucson, she has applied at the other hospitals and let’s just say the phone isn’t jumping off the hook...
“If you dont know the locations of the headquarters of the major oil companies in the US, you need to get out more.”
I worked in the “oil patch” and grew up in the “oil patch.”
Was hoping you were simply friendly and neighborly enough, to reveal which oil patch state or location you had in mind.
BTW a lot of the petroleum engineering work and geology work does NOT occur in the “headquarters” and some of it does NOT require a four year degree.
It occurs in field, regional offices.
No ROI, but you do get issued a Victim Card with the diploma. It can come in hand if a big, mean conservative ever expects you to accomplish something.
This is going to be difficult for you to understand because it is obvious that your focus as regards education is that it is a job-training endeavor, but some people wish to acquire knowledge as regards how their civilization came to be and to get the “polish” that comes with a college education, and some add to that by acquiring useful degrees (I’m sure you would take issue) in such fields as education, economics, nursing, and the like). Granted, some study art and I’m sure that bothers the hell out of you, but then again, your focus is on the paycheck. Good, keep it there.
I have nothing more to say. Adios.
Education isn’t a useful degree. It is an indoctrination program for liberalism. The mot uneducated idiots are those claiming degrees in education.
Im just about to graduate with a major on Womens Studies? Does anyone know what kind of ROI I might get for this degree?
Not sure about women’s studies but I did quite well majoring in men’s studies. My return on investment was absolutely wonderful after the divorce.
Good article. College is an investment, and often not a good one. I graduated with a Chemical Engineering degree, and have spent the last 14 years wondering the food industry. Very blessed to do it.
Many aren’t that lucky. My wife has a lot of debt outstanding, and with a teachers salary that wasn’t a good investment. I know of a large number of classmates who have left the field, and still have a huge amount of debt.
The parents need to sit down and be frank with their children about schooling, their own ability, and cost.
True, but if you aren’t going to get a degree that pays well, why are you at school?
That is the issue. There was an article about fashion majors working for FREE in order to get a foot in the door. Most don’t.
Why do we have that many fashion degree majors?
You will probably be surprised to learn that I volunteer at my local classical music station, and I attend the theatre about once a month. I just don’t regard it as the primary thrust of civilization. This is stuff you do after the real business is taken care of. The Chinese don’t send their people over here to study art history. We need to start doing something that we can trade them for TV sets, because one of these days they are going to stop taking our IOUs.
I think most fast food places offer a 10% discount on their food for their employees.
Ah. Thank you. And all of those years, wasted!
At this point, I’ll believe just about anything. Seriously, after 40 years in the game, I am starting to understand... a little. My son, 15 years old, is just starting. Maybe I can impart some wisdom. I have already given him words of advice from Bill Cosby. First step to understanding is to admit that you don’t understand.
You know... that makes sense.