The payback for getting a college degree seems to be taking longer. According to analysts at Goldman Sachs Global Research, the breakeven point for college costs moved from eight to nine years since 2010. Dismal wage growth for many careers–but not all–could be the cause.
So, is a college degree still worth it?
The College Wage Premium
A 2014 report from the NY Fed tells us that with college grads’ wages trending downwards, tuition has been heading in the opposite direction. Still though, college grads get a 15 percent return from that degree and enjoy a sizable wage premium over workers with nothing beyond a high school diploma. The NY Fed estimates more than a $1 million premium for college graduates over high school graduates during their working lives.
The College Opportunity Cost
We usually equate the cost of college to tuition:
But even more so, it is about opportunity cost and what we sacrifice during those four extra years of school. Below, the opportunity cost to which the NY Fed refers is a delayed job that would have paid $96,000 over four years. They added that $96,000 to a tuition estimate of $26,000 to get a total college cost of $122,000.
And, the college wage premium does depend on your major:
Our Bottom Line: Education and Technology
For Harvard economists Claudia Goldin and Lawrence Katz, the college wage premium relates to supply and demand. Looking back at the 20th century, they tell us that in 1915 the college wage premium was high. But then it narrowed until the early 1950s and widened dramatically after 1980. During most of the periods when the premium dipped, the growth in the supply of workers with more education exceeded the growth in the demand for them. Correspondingly, when the spread widened, the growth rates flipped.
Their conclusion? Technology will create winners and losers unless workers’ skills are flexible and the educational infrastructure expands sufficiently.
So yes, a college degree is worth it.