Is a College Degree Worth the Cost?

If you are paying college tuition, watching your bills increase faster than the rate of inflation, you might be asking yourself this question. Over the course of a working life, it’s been estimated that college grads earn from $900,000 to $1.6 million more than workers without a degree. Yet, according to the a study conducted by PayScale for Bloomberg Businessweek, the dollar value of a college degree may be a lot closer to $400,000 over 30 years — and varies wildly from school to school.

Of course, there’s the unquantifiable and undisputable personal value of a college degree, but if we seek to determine the true economic value, rather than simply factor in the extra earnings, we need to consider the debt many students take on in college. I recently read a compelling article by Randy Proto, the President of the American Institute, in the online publication The Huffington Post. His thoughtful analysis supports those who argue that a college degree is still worth the cost, even in today’s uncertain job market.

  • The median debt owed by a Bachelor’s degree graduate is about $20,000, according to a College Board study — less for a public university, more for private schools. Proto compares that to the average debt level people assume when they buy a new car: $25,396, according to Experian Automotive. I agree with his conclusion that a college degree — with its lasting economic, social, and personal value — is worth far more indebtedness than a car, which begins to depreciate the day you drive it off the lot.
  • While post-secondary education adds significantly to lifetime earnings, the economic argument makes even more sense once you examine who’s been losing their jobs in the current downturn. According to data produced by Economic Modeling Specialists, eight out the top 10 occupations that lost the most jobs from 2007 to 2009 were ones that didn’t require a degree.
  • Finally, as Proto points out, according to UNESCO, post-secondary enrollment worldwide has increased by 53 million people from 2000 to 2007. In an increasingly global job market, that’s a lot of competition for jobs.

For those saving for college in tax-advantaged 529 plans, your homework is about to get easier. Starting this fall, Morningstar will offer published reports on the 50 largest 529 plans. The reports will include a Morningstar qualitative rating, analyst commentary, and data on some of the largest options within the plan.

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