What College Really Pays

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For years, despite the rising cost of college, the increasing burden of undergraduate debt, and the difficulty college graduates have finding professional jobs, there’s been one number that explains why college is worth it: $800,000. That’s the difference between the lifetime earnings of a high school graduate and a college graduate. But that number might be false. According to an article in yesterday’s Wall Street Journal:

The problem stems from the common source of the estimates, a 2002 Census Bureau report titled “The Big Payoff.” The report said the average high-school graduate earns $25,900 a year, and the average college graduate earns $45,400, based on 1999 data. The difference between the two figures is $19,500; multiply it by 40 years, as the Census Bureau did, the result is $780,000.

Of course, as is often true with averages touted by policy organizations, that $800,000 was never a real number; it was a metaphor for the importance of college and a professional career. The trouble is, especially with the focus on education debt, many are now starting to think the metaphor was misleading.

One problem is that $800,000 doesn’t account for income taxes or occasional unemployment. It also doesn’t account for education debt

Mark Schneider of the American Institutes for Research decided to look at the numbers again. According to the article, Schneider:

Estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says.

Of course that $279,893 figure Schneider arrived at in 2009 isn’t a small amount of money, but it’s pretty far away from $800,000.

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[Niels Bohr 72]

My debt in loans was a mere 20k. Schneider is wrong about his estimates. My sister paid off her loans in less than three years. She went to a private university. Her loans were around 40k.

280k is a bit much. Schneider is basically giving the perception that it's not worth it to get a college degree.

Heck, my first job was 55k/year. I paid off all my loans in less than a year.

[scandal 951]

I'm not sure about the averages, but I do know my own personal circumstances.

I know my present salary, and the history of my earnings throughout my career in the workforce (1991-present). I can also project forward to the likely end of my career based upon that earning history, and sum up the probable earnings of my entire career, since I'm now roughly at its midpoint.

If I didn't have my university education (BSc Physics, MSc Computer Science) and was competing in the workforce with no more than a high school diploma, I think I can accurately predict that I'd be earning less than half of my present salary, best case. Probably much lower than that. Accumulated over my working career the delta between college and no-college is well into 7 figure territory.

Stay in school, go to college.