By Drew Schlotter, CFP®, CCFC
Perception vs Reality
As college has gotten more expensive, public opinion has started to shift. People have become more skeptical of the value, with many people emphasizing trade schools or going directly into the work force over spending a home mortgage on four years at a university. Amid the rising costs and public skepticism, what do the jobs numbers and wage data say? Is a college degree a bad investment?
According to a new Wall Street Journal-NORC survey, Americans are losing confidence in the value of a four-year college degree. The poll found that 56% of Americans feel the price of a four-year college degree is not worth the investment, with skepticism highest among those aged 18-34. And even 42% of college degree holders felt their degree was not worth the cost.
The national student debt of $1.7 trillion, and a national graduation rate of only 60% are two contributing factors to the growing skepticism. The trend began in 2008, as a result of the recession when new graduates struggled to launch their careers, and opinion dropped even further during the pandemic.
During the height of the pandemic, schools shut down, classes were moved online, and the residential four-year college experience that is part of the American Dream, suddenly became a nightmare. The schools and professors were not prepared for the overnight shift to online learning, and this led to a poor experience for college students who were suddenly involuntary participants in a giant social experiment. To make matters worse, most schools did not provide discounts, or only did so reluctantly.
With the increasing price of a college education, ballooning national student debt, frustrations with online learning and recent economic challenges, it is understandable that public opinion has shifted away from favoring a four-year degree. That being said, often human emotions, both those of individuals and those of groups, are based on limited perception, and poor logical arguments, not based on reality. So, what do the numbers actually say? Does a four-year college degree provide a good return on investment, or are you better off entering the workforce without a college degree?
It depends… but overwhelmingly, an undergraduate degree (or higher) results in significantly increased lifetime earnings. According to Georgetown University’s Center on Education and the Workforce, in their recent paper The College Payoff, four-year college graduates earn, on average, 66% more over their lifetime than those with only a high school diploma.
|Median Lifetime Earnings by Education Level|
|High School Diploma||$1.6 million|
|Associate’s Degree||$2 million|
|Bachelor’s Degree||$2.8 million|
|Master’s Degree||$3.2 million|
|Doctoral Degree||$4 million|
|Professional Degree||$4.7 million|
In his State of the Union address, President Joe Biden said some new jobs are “paying an average of $130,000 a year, and many do not require a college degree.” What he failed to mention is that high-paying jobs that do not require a college degree make up less than 1% of the UXS economy. In reality, the majority of high-paying jobs are likely to continue requiring a college degree. In addition to higher wages, the unemployment rate for those with only a high school diploma is consistently about double the rate of those with a college degree. During economic downturns, that difference is even greater.
In Part 3, we’ll look at what college-bound families can do to reduce the cost of college (regardless of the family’s financial situation) and improve the value they get from investing in college.