I’d be willing to guess that most people who have a college degree and work professionally would say everybody needs to go to college to succeed. Certainly, that is the opinion of a recent Forbes article on the value of higher education.
Indeed, studies have shown that over the course of a career, a college graduate typically earns about $900,000 more than someone with just a high school diploma. The prospect of better job opportunities and higher pay over the long term is one of the reasons students and their families are willing to take on debt in the short term
A college degree undeniably improves job prospects. Currently, the unemployment rate is at a historic low—even for those without a college degree, it’s just 3.5 percent. But for college graduates, the rate drops to 2.2 percent. A college degree becomes even more critical during a recession, when jobs are harder to come by.
Another factor to consider in weighing the value of a college diploma is “degree inflation.” It means that jobs you could once have obtained without going to college now require a degree. I certainly know people who have become successful without going to college, but it’s becoming harder to do.
Nevertheless, a college degree is not quite the panacea it may appear to be.
Sheila Bair, former chair of the FDIC, recently pointed out that the income premium for a degree depends on what you major in. Another pertinent fact to keep in mind: fewer than 60 percent of students who start college actually graduate. If you rack up a lot of loans and then drop out, you end up with no degree and a lot of debt.
Doing a financial analysis for a college degree may surprise you, especially if you’re considering a private college, where the average four-year cost is $160,000. If you skipped college and invested that amount at 5 percent over a 40-year career, it could yield over $1,000,000—more than enough to make up the difference in earnings compared to those who got a diploma.
Of course, going to college isn’t something you do just to make more money. It’s also about learning life lessons and becoming a well-rounded person.
But to Ms. Bair’s point, if a family can’t afford to pay for a private or out-of-state college without incurring a mountain of debt, choosing an in-state public college may be a course worth considering.