By Betsy Prueter
A recent Economic Letter from the Federal Reserve Bank of San Francisco examines the value of attending college by comparing annual earnings of college graduates with earnings of individuals with only a high school diploma. The letter concludes that college is, in fact, “worth it”, considering that for the average student, tuition costs can be recouped by age 40 and lifetime earnings for a four-year degree are roughly $800,000 more than for nongraduates.
Other notable findings: – In 1980, individuals with a four-year degree earned about 43% more than those with a high school diploma. In 2011, college graduates earned about 61% more than those with a high school diploma. – Data shows that the average earnings of a college graduate have increased consistently since the 1950s and 60s. – Individuals who graduated college in the 1990s-2000s have significantly higher earnings five to ten years after high school graduation than non-college graduates. – The initial gap in earnings between college graduates of the 1990s-2000s and nongraduates was about $5,400 per year; while the gap 10 years after graduation was over $26,000 per year. – The report argues that this is due to the fact that college graduates start with higher earnings upon completing college and experience more rapid growth in salaries. – The report also points out that college graduates are more likely to be employed (nearly twice as likely) and are more shielded from poor labor markets which contributes to their higher lifetime earnings. – 20 years after high school graduation, the gap in earnings between a college graduate from the 1990s-2000s cohort and a non college graduate is projected to increase to $28,650 per year. – If an individual continues to work until the average retirement age of 67, a college graduate will have accrued $830,800 more in lifetime earnings than a high school graduate.