Maybe That College Degree Is Not As Valuable As You Thought

It seems that previous estimates were wrong. That is the gist of a WSJ article titled What's a Degree Really Worth? An often cited figure is that you earn, on average, $800,000 more in your working life if you have a college degree compared to having only a high school diploma. Here are what seem to be the key exerpts:

"Mark Schneider, a vice president of the American Institutes for Research, a nonprofit research organization based in Washington, calls it "a million-dollar misunderstanding."

One problem he sees with the estimates: They don't take into account deductions from income taxes or breaks in employment. Nor do they factor in debt, particularly student debt loads, which have ballooned for both public and private colleges in recent years. In addition, the income data used for the Census estimates is from 1999, when total expenses for tuition and fees at the average four-year private college were $15,518 per year. For the 2009-10 school year, that number has risen to $26,273, and it continues to increase at a rate higher than inflation.

Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in a report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says."

But $279,000 is nothing to sneeze at. The one thing that is not clear is if they took into account that the high-school-diploma-only people are earning money earlier and that they can save that money and earn interest. My guess is that this issue is a minor one since you won't be able to save much in these cases.

The part about tuition prices and inflation is interesting. The Consumer Price Index rose 28.8% from 1999-2009. Total expenses for tuition and fees at the average four-year private college rose 69.3%.