6/1/2016
IS COLLEGE
REALLY WORTH
IT?
June 8 – 10, 2016
Sonja McMullen
Director of Business Development
Sallie Mae
AGENDA
• Value-Added
• College Earnings Advantage
• Benefits vs. Costs
• Education, Earnings and Unemployment
• Arguments For and Against College
• Conclusion
OUR RESEARCH
• Brookings Institution: Beyond College Rankings – “The
Value Added Approach to Assessing 2 Year and 4 Year
Schools 2015”
• Federal Reserve Bank of New York: Current Issues in
Economics and Finance “Do the Benefits of College Still
Outweigh the Costs?”
• ProCon.Org: “Is a College Education Worth It?”
• CNBC.Com: “In Spite of the Cost, Is College Worth It?”
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How Value-Added is Calculated
Brookings: Beyond College Rankings - The Value Added Approach to Assessing 2 Year and 4 Year Schools 2015
Overview of Brookings’ Report
“Beyond College Rankings”
Typical bachelor’s degree holders earn $580,000 more and associate’s
degree holders earn $245,000 more over their careers
Brookings: Beyond College Rankings - The Value Added Approach to Assessing 2 Year and 4
Year Schools 2015
Federal Reserve Bank of New York: Current
Issues in Economics and Finance
“Do the Benefits of College
Still Outweigh the Costs?”
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Overview of findings – Federal
Reserve Bank of New York
• The average college graduate earns enough “extra” to
recover the cost of attending most colleges in fewer
than 15 years
• Over the past 40 years, the college earnings premium
has averaged about $20,300 per year
• During the recession, college graduates faced
unemployment rates about half as high as those for high
school graduates
Source: Federal Reserve Bank of New York: Current Issues in Economics and Finance “Do the Benefits of College Still
Outweigh the Costs”
College Earnings Advantage
Average Annual Wages by Education (1970 to 2013)
Over the past four decades, those with a bachelor’s degree have tended to earn 56
percent more than high school graduates while those with an associate’s degree have
tended to earn 21 percent more than high school graduates
Federal Reserve Bank Current Issues in Economics and Finance “Do the Benefits of College Still
Outweigh the Costs?”
Average Annual Wages Compared to
Opportunity Cost of Not Attending College
•
•
Over the 4 year period that is typically required to earn a bachelor’s degree, a student would have paid $26,000 in
tuition and would have forgone nearly $96,000 in wages.
 The total economic cost of a bachelor’s degree was $122,000.
Despite entering the work force at a later age though, workers with a bachelor’s degree earn over $1 million more
than high school graduates during their working lives
Federal Reserve – Do the Benefits of College Still Outweigh the Costs?
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Will the Benefits Cover the Costs?
•
•
•
Subtracting the costs from benefits yields a net return on college of over $420,000
Students paying $9,000 in annual college tuition for four years can break even and
begin earning additional returns in nine years
When tuition reaches $45,000 per year, which covers nearly all public colleges, the
costs can be recouped in 17 years
- For those who graduated at age 22, the investment is paid in full before age 40
Federal Reserve Bank Current Issues in Economics and Finance “Do the Benefits of College Still Outweigh the Costs?”
Is a College Degree Really Necessary?
No matter where a person starts, going to college increases the chances of moving up the
economic ladder
• Graduates from the bottom 20 percent are over six times as likely to reach the top
than those who don’t go to college
• The impact is also striking for those born into the second lowest 20 percent; their
chances of getting to the top are five times higher with a college degree
ProCon.Org:
“Is a College Education Worth It?”
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Correlation Between Education,
Earnings and Unemployment
College graduates have more and better employment opportunities
College graduates are more likely to have health insurance and retirement
plans
• 70% of college graduates had access to employer provided health
insurance compared to 50% of high school graduates in 2008
ProCon.Org: Is a College Education Worth It?
Arguments for College
• College graduates make more money
– On average, a college graduate with a bachelor’s degree earned
$30,000 more per year than a high school graduate, or about
$500,000 more over a lifetime, as of April 2013.
– Earning an associate's degree (a 2-year degree) was worth about
$170,000 more than a high school diploma over a lifetime in 2011.
– The median income for families headed by a bachelor's degree
holder was $100,096 in 2011—more than double what a family
headed by a high school graduate would earn
• More and more jobs require degrees
– Approximately 63% of jobs will require some college education or a
degree
ProCon.Org: Is a College Education Worth It?
Arguments for College
• College allows students to explore career options
– 80% of college students complete internships before
graduation, giving them valuable employment experience
before entering the job market
• College education has a high return as an investment
– Return of 15% per year as an investment, larger than the
stock market
– 86% of colleges graduates believe college was a good
investment
• College exposes students to diverse people and ideas
– The community of people on a college campus means
students are likely to make diverse friends and business
connections, and, potentially, find a spouse or a mate.
ProCon.Org: Is a College Education Worth It?
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Arguments Against College
•
Student loan debt often forces college graduates to live with
their parents and delay marriage, financial independence,
and other adult milestones
– In 2013, student loan borrowers delayed retirement saving
(41%), car purchases (40%), home purchases (29%), and
marriage (15%)
– Less than 50% of women and 30% of men passed the
"transition to adulthood" milestones by age 30
– In 1960, 77% of women and 65% of men completed these
milestones by age 30
ProCon.Org: Is a College Education Worth it?
Arguments Against College
•
Many recent college graduates are ‘un’ or ‘under’ employed
– The unemployment rate for recent college graduates was 8.8%
in February 2013, down from 10.4% in 2010, but up from 5.7%
in 2007
– According to the Federal Reserve Bank of New York, 44% of
recent college graduates were underemployed in 2012.
•
Many people succeed without college degrees
– According to the Bureau of Labor Statistics, of the 30 projected
fastest growing jobs between 2010 and 2020, five do not
require a high school diploma, nine require a high school
diploma, four require an associate's degree, six require a
bachelor's degree, and six require graduate degrees.
ProCon.Org: Is a College Education Worth It?
•
•
Arguments Against College
Tuition has risen quicker than income, making it difficult for
the average American to pay for college without incurring
debt
– The average cost for a 4-year degree (including room and
board) increased 130% for private schools and 131.4% for
public schools from fall 1982 to fall 2012, while median
family income increased 10.9%
The total cost of going to college also includes the cost of
missing opportunities to make money at a job
– The total cost of going to college means more than tuition,
fees, and books; it also includes an opportunity cost which
equals at least four years of missed wages and
advancements from a full-time job-- about $49,000 for a 4year degree and $20,000 for a 2-year degree.
ProCon.Org: Is a College Education Worth It?
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CNBC.COM:
“In Spite of Cost, Is College Worth It?”
In Spite of Cost, is College Worth it?
CNBC Report of February 2015
• Having a degree—especially in a tough economic
environment—certainly makes a difference to employment
and lifetime earnings prospects, experts say. Research from
the Bureau of Labor Statistics shows a high correlation
between joblessness and earnings, and those with less than
an associate's degree fare worse on average than workers
with post-graduate credentials.
• However, Gallup recently partnered with Purdue to survey
more than 30,000 college graduates across the country. The
2014 study arrived at a common conclusion: the name of a
college or university has little to no influence on a
graduate's job prospects.
CNBC.com
In Spite of Cost, is College Worth It?
•
•
•
•
An advanced degree could earn a worker as much as $2 million more over
their lifetime than someone with a high school diploma, according to
Georgetown
Even having limited post-secondary education without having a formal
degree can add as much as $250,000 to lifetime earnings
71 percent of recent grads that are now working full time accredit their
success to internships or job experiences while in college
According to Gallup's findings, where a student went to school "hardly
matters at all to their current well-being, and their work lives in
comparison to their experiences in college," the report said. "When it
comes to finding the secret to success, it's not 'where you go,' it's 'how you
do it' that makes all the difference in higher education."
CNBC.com
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CONCLUSION FROM
INDEPENDENT STUDIES
Conclusion from Independent Studies
• While all of the studies provide different talking points, the
conclusion is the same in that the benefits of a college
degree outweigh the costs
– College graduates tend to earn more annually than their high
school counterparts
– Even with the increase in tuition, the payment to income
ratio has remained relatively flat over the past few years
• 3 of the 4 sources were conducted by Federal entities,
whereas the third source was conducted by an
independent, nonpartisan entity.
QUESTIONS?
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