Benefits of College Still Outweigh the Costs
June 30, 2014
Despite rising college tuition and lower real wages for college graduates, the economic returns of a bachelor's degree and an associate's degree still outweigh college costs, according to the Federal Reserve Bank of New York.
Analyzing the economic costs and returns of college since 1970, the Federal Reserve found that both degrees earned a rate of about 15 percent over ten years -- despite the fact that student loan debt has risen and good jobs for graduates have become harder to find. The college degree premium remains because the wages of those with only a high school diploma have also fallen:
- Between 1970 and 2013, adjusting for inflation, those with bachelor's degrees earned an average of $64,500 per year, associate degree earners have averaged about $50,000 per year and those with high school diplomas have averaged $41,000.
- Between 2001 and 2013, the average wage of workers with a bachelor's degree declined 10.3 percent and the average wage of those with an associate's degree fell 11.1 percent.
- For those with only a high school diploma, the average wage dropped 7.6 percent.
- Adults with a bachelor's degree have retained a 75 percent wage premium over those with high school diplomas only. Similarly, Americans with an associate's degree earn 20 percent more than high school graduates.
Along with these wage differentials, the study looked at the economic costs of college, including tuition and opportunity costs. Considering the full set of costs and benefits, the returns from graduating from college still outweigh its costs, the study concluded. Because the wages of high school graduates have also been falling, the college wage premium has remained near an all-time high, while the opportunity costs of attending college (rather than working with only a high school diploma) have declined due to the drop in high school graduate wages.
Source: Jaison R. Abel and Richard Deitz, "Do the Benefits of College Still Outweigh the Costs?" Federal Reserve Bank of New York, Vol. 20, No. 3, 2014.
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