By Austin Birchell
The Federal Reserve of New York recently published a report entitled Despite Rising Costs, College Is Still a Good Investment, in which the economic benefits of a bachelor’s degree are contrasted with its costs in order to estimate the return on the degree. The study finds that although the rising costs of a bachelor’s degree have reduced the return slightly, the return is still a good investment.
Among the findings:
- In recent years, the average college graduate with just a bachelor’s degree earned about $78,000, while the average worker with only a high school diploma earned $45,000.
- The typical college graduate earns a premium of well over $30,000, or nearly 75 percent, over a 40-year work life.
- Although the price of tuition has increased, degree holding premiums still allow for a good return.
- The economic return on college ranged between 8 and 9 percent until the early 1980s, then boosted to almost 16 percent following the technology-fueled economic expansion of the 1990s, where it remained, through the Great Recession.
- Over the past several years, this return appears to have declined slightly, drifting down by roughly 2 percentage points to just under 14 percent.
- At roughly 14 percent, the return to a bachelor’s degree largely exceeds other investment benchmarks, such as the long-term return on stocks (7 percent) or bonds (3 percent).
The report also contained several noteworthy graphs including one that shows trends in wage premiums between college graduates and those with only a high school diploma and one that shows trends in bachelor’s degree returns over time.
