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Financial Planning > College Planning

Is College Really Worth It?

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In the anguished debate over the value of a college education vs. high costs and declining opportunities, a new Pew Research Center study weighs in resoundingly on the side of higher education.

“On virtually every measure of economic well-being and career attainment—from personal earnings to job satisfaction to the share employed full time—young college graduates are outperforming their peers with less education,” reports the 66-page Pew study, which was released earlier this week.

Indeed, the report, entitled The Rising Cost of Not Going to College, goes farther in stating that the disparity in economic outcomes between those with and without college educations “has never been greater in the modern era.”

The report, likely to provoke a heated response from college skeptics, demonstrates this conclusion by contrasting the economic performance of “millennial” generation full-time workers, ages 25 to 32.

In constant dollars, those with just high school diplomas make just $28,000 a year compared to their early boomer counterparts in 1979, who earned over $32,000 annually; the slope goes steadily downhill from there.

In contrast, an opposite upward slope marks the path of college graduates with bachelor’s or higher degrees from the silent generation, who in 1965 earned nearly $39,000 a year vs. their contemporary 20-something counterparts who earn $45,500, again, in constant dollars.

What’s more, far fewer college-educated millennials are unemployed (3.8%) compared to high school graduates (12.2%), living in poverty (5.8% vs. 21.8%) or living in their parents’ homes (12% vs. 18%); and a greater percentage are married (45% vs. 40%).

Those with two-year degrees fall consistently between those with college or high school degrees in all these categories.

College has conferred many other advantages on millennials, according to the Pew Study, including a career path rather than just a job (86% of college grads vs. 57% for those with high school degrees); the training needed to advance in their jobs (63% vs. 41%); job satisfaction (53% vs. 37%); and the feeling that their education prepared them for their professional lives (46% vs. 31%).

Past Picture

One of the key conclusions of the Pew report, however, is that a mere high school education delivers less than it did in previous generations. In constant dollars, early boomers circa 1979 enjoyed a median household income of over $50,000 compared to millennials who bring in just under $40,000; suffered a 7% poverty rate compared to 22% today; and had an 87% likelihood of lifetime employment compared to 82% today.

An overwhelming percentage of college graduates then and now believe their college degree did or will pay off, despite the financial investment; and the study shows a hierarchy of college graduates positively evaluating their academic preparation, with science and engineering students rating themselves most prepared, followed by business students and last social science/liberal arts/education majors.

The study’s stark contrast between the fortunes of college and high school graduates is sure to receive criticism from those who see higher education as costlier and less rewarding than in the past.

Richard Vedder of Ohio University’s Center for College Affordability and Productivity has published colorful statistics showing that  the number of janitors with bachelor’s degrees now surpasses 115,000 or that 15% of cab drivers have such degrees today (vs. less than 1% in 1970).

In a widely referenced 2012 article for Bloomberg Businessweek, Vedder took the “college premium” argument head on, saying that that the $1 million-plus increased lifetime earnings was not traceable to the degree itself but to the higher intelligence and better work habits of college graduates.

He added that more than 40% of higher ed students exit college without a degree, even within six years, but with higher debt and lost working years. Vedder also warned against misinterpreting averages, saying:

“A non-swimmer trying to cross a stream that on average is three feet deep might drown because part of the stream is seven feet in depth. The same kind of thing sometimes happens to college graduates too entranced by statistics on averages,” he wrote, noting widely varying outcomes between, say, engineering and ethnic studies majors.

Finally, he invoked changed market conditions, with a higher supply of college graduates meeting reduced growth in professional employment, and argued that high school students should select a path in line with their past preparation and future opportunities.


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