With many college graduates unable to find full time employment and a new crop ready to come up, many of them are starting to wonder where they will find a job. It wasn’t long ago that a college degree all but guaranteed you a stable career and higher earning potential. Now, many are not seeing the same returns they once did. So is a college degree worth it in today’s economic terms?
How do you quantify who earns more?
One area to look at is recent graduates from the past 5 years when the Great Recession began. The data shows that of those people who graduated college – nearly 90% were employed – when compared to people who did not graduate college who were employed at 64%. These figures do not show whether these graduates were employed in a field related to their degree or not. But, another telling fact is that college graduates are earning almost double that of people without college degrees. This advantage will likely stick with them throughout their working careers.
Another way that we assess the value of receiving a college degree is to compare the rate of return from investing in a college degree versus using the same amount of money for investment opportunities. College degrees are obviously expensive. Tuition, books and housing all add up to well over $100,000 for a four year degree. This is only average as some colleges cost considerable more.
So let’s say you have a recent high school graduate who has $100,000 to invest in their future. Is college the right option or would you use that money for something else? Would investments such as stocks and bonds outweigh the lifetime earnings that a college degree would bring?
The correct answer is, technically speaking, investing in a college degree. A college degree has a rate of return of 15% a year for $100,000 invested. Compare this with the average returns on the stock market at 6.5%, along with the rate of corporate bonds at 3% and other stable investments and you’re not even close.
Higher Rates of Return
A better rate of return translates into higher lifetime earnings as well. Over their lifetime, the average diploma holder will earn over $550,000 more than the average person with a high school diploma. So the incentive to receive a college education is high.
Some high school students would do well to invest in technical or trade schools that offer specialized skills which will keep them employed throughout any recession. There are opportunities out there for everyone and remember – many people who never graduated college have become successful in different fields. Think of the Bill Gates’, the Paul Allen’s and the Larry Ellison’s of the world. Not having a college degree never stopped them and it should not deter anyone from achieving their dreams.