Is College Worth the Money?

In a Brookings policy brief Isabel Sawhill says that for the past few decades, it has been widely argued that a college degree is a prerequisite to entering the middle class in the United States. Everyone assumes that, on average, college graduates earn significantly more money over their lifetimes than those with only a high school education. Brookings’ Hamilton project has estimated that the average bachelor’s degree holder makes $570,000 more over a lifetime than the average high school graduate. What gets much less attention is that the college premium varies widely by the choices students make.

For example, the value of a bachelor’s degree depends heavily on choice of major and later occupation. No surprise here: the highest paid major is engineering. If on the other hand you studied education (but didn’t go on to get a master’s degree), you can only expect to make half of what those engineering majors do.

Not everyone ends up working in the field they studied in college, so it’s also useful to look at earnings by occupation. The highest-earning occupation category is architecture and engineering, with computers, math, and management in second place. The lowest-earning occupation for college graduates is service.

Of course, plenty of people choose to study art or become teachers because they derive intrinsic value from those fields that can’t be measured by a paycheck. Personal preferences and noneconomic benefits are important, too. Few among us would want to live in a world with all programmers and no artists, or all investment bankers and no philanthropists.

But getting into college and choosing a school is only the beginning, Sawhill observes. College isn’t worth much unless you graduate. Part of what sets certain schools apart is how many of their incoming students actually come out with a degree.

Notice that there is a wide range of completion rates within each school selectivity category, particularly for the less selective colleges. Not every student can get into Harvard, where the likelihood of graduating is 97 percent, but students can choose to attend a school with a better track record within their ability level.

Writing in The Wall Street Journal recently, Jack Hough observed that when sizing up a college degree it pays to think like an investor. He says that 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.