Is It Worth It?

This time of year is one for families and their college students to reflect on their journey, and increasingly on how much that journey has cost. According to the College Board’s annual survey of college costs, in AY2018/19, published tuition and fees for private institutions was $35,830; for publics, $10,230. This doesn’t include Room and Board, books, and living expenses.

The question on everyone’s mind is, Is it worth it?

The Federal Reserve Bank of New York thinks so, according to its latest research.

We find that the average rate of return for a bachelor’s degree has edged down slightly in recent years due to rising costs, but remains high at around 14 percent, easily surpassing the threshold for a good investment. Thus, while the rising cost of college appears to have eroded the value of a bachelor’s degree somewhat, college remains a good investment for most people. 

Jaison R. Abel and Richard Deitz, “Despite Rising Costs, College Is Still a Good Investment,” Federal Reserve Bank of New York Liberty Street Economics (blog), June 5, 2019, https://libertystreeteconomics.newyorkfed.org/2019/06/despite-rising-costs-college-is-still-a-good-investment.html.

That 14% return is down slightly from a high of 16% in the 1990’s and early 00’s, but compared to other benchmarks for ROI, that’s still vastly outperforming. Compare for example the benchmark return for long-term stocks is 7%, and for bonds, 3%. Quite a deal!

But “worth” is relative to each individual, and to the particular stage of life they’re in. As the authors continue:

In fact, once the costs of attending college are considered, it is likely that earning a bachelor’s degree would not have been a good investment for many in the lowest 25 percent of college graduate wage earners. So while a college degree appears to be a good investment on average, it may not pay off for everyone. 

But that’s just considering the “worth” of a college degree in terms of earnings over a lifetime. What else does college bring? And something frequently forgotten in today’s discussion about college: “worth” is meaningful to our country as well. (what do studies say about college education and an informed citizenry? on health of our population? on longevity?)

Measuring “worth” becomes a bit easier now that the Department of Education has released its latest College Scorecard data which for the first time provides information on the cost of a degree in a particular program. More on that later………….

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