A College ROI

We need only look at the British coastline to see why the seemingly simple is really more complex. Below, for Great Britain, a distant view reveals a smooth border. However, moving closer we see an increasing number of smaller and smaller inlets. Ultimately, a coastline that appeared finite becomes infinite:

Similarly, deciding if college is worth it, we have to take a closer look.

The Value of College

It depends on whether the college helps students climb the income ladder.

When he assessed mobility, Harvard Professor Raj Chetty selected the low income students in the bottom quintile that wound up in the top quintile. Consequently, low income students at Cal State and Pace could expect a rosy future:

It depends on a student’s opportunity cost.

As economists, we know that the opportunity cost of a decision is the next best alternative. Because choosing is refusing, opportunity cost is what we did not do. With college, our opportunity cost can refer to the wages we could have earned. Recent low unemployment has helped to boost the wages of workers without a college degree:

It depends on whether you are above or below the median college cost estimates.

Citing college costs, many studies focus on the median–the middle number between the greatest and least.  As a result, except for the people that represent that midpoint, the rest of us are either higher or lower:

It depends on how long you take to graduate.

If you attend college for six years instead of four, the return is much lower. Not only do you miss out on the wages you would have earned but also, you sacrifice two years of experience and reduce earnings that could be compounding as savings:

In the past, also assessing the value of college, we looked at majors, and signaling. For each, also, it all depends on a closer look.

Our Bottom Line: The Return to College (and elsewhere)

However, we can find some consistency. Yes, the return to college varies. Almost always, though, it is a plus;

But still if you are in the 25th percentile of college wage earners, that plus is 2.5%.

And Pew Research tells us that just one in four of us believes a bachelor’s degree is necessary for getting a good job.

My sources and more: Creating the ideal tension, Liberty Street Economics said a college education was worth it here, and not worth it here. But then we also had some skepticism from The Atlantic, from Raj Chetty,  and from Pew. And finally, NPR took us to people that chose the alternatives.

Please note that our section on the British coastline was in a past econlife post.