Is College Still Worth It?

by TK on March 25, 2021

With surging college tuition and a job market in turmoil, many are wondering if a college education is still worth it.  According to a Pew Research survey in 2011, 57% of Americans say that college is not worth the money.   To answer this question, we must factor in four important points of this analysis: the return on investment, your degree choice, the opportunity cost, and your school of choice.

Return On Investment And College Degree Choice

There is widely quoted number, that on average, people who go to college earn almost $1 million more than those that didn’t over their lifetimes.  However, the number is extremely misleading and should be taken with a grain of salt.  That number does not factor in specific majors.  For instance, someone with a degree in Engineering will get significantly more than someone with an English degree, starting out.  As a matter of fact, someone with an English degree might get paid less than a high school counterpart because of the high school counterpart has at least four years of experience over them, the four years the English major spent in college.  To see what I mean by the disparity in pay between degrees, look at this chart provided by Payscale.  The range of salary for an English major is from $30, 681 to $100,549 whereas the pay for someone with a Mechanical Engineering degree is between $50,161 to $120, 770.  I’m not picking on English majors, you will see the same trend with other Liberal Arts majors, such as History.  The average salary range for a History major is around $31,563 to $111,794.

However, I should also note that the median salary of a 25 to 34 college graduate is around $43,000.  The median salary of a 25 to 34 high school graduate is just under 30.  The median really is a better indicator of how much college graduates make on the aggregate.

Opportunity Cost Of Going To College

Opportunity cost is defined as the loss of potential gain from other alternatives when one alternative is chosen.  So if you choose one alternative, what is loss of potential gain from the other alternative?  The loss of potential gain is four extra years in the workforce where you can be making money.  If someone who did not go to college has been working since high school at a rate of $25,000 a year, they are $120,000 ahead of you by the time the college goer graduates, assuming the college graduate took on $20,000 in college loans.  Remember, this scenario assumes that the salary is flat and the high school graduate did not get a raise all four years, which is unlikely.  However, by the time you graduate, you will have to get a job that pays a fair amount more than $25,000 in order to catch up to the high school graduate.  If you graduate and get a $40,000 job and the high school graduate is still making $25,000, then it will take you 8 years to make up for the four years that you did not work and the $20,000 of school loansassuming both salaries are constant.  However, after those 8 years, the college graduate will not have to make up for “loss time” and everything made from then on is simply more than the high school graduate.  This is a simplistic scenario to illustrate the point of opportunity cost.  In the real world, salaries are not constant and the college graduate may be able to make up ground a lot quicker than 8 years.  However, it may also be the case that the work experience of the high school graduate gives him/her a higher raise than that of a college graduate.

 The Monetary Cost of Going To College

The cost of college varies tremendously between public and private schools.  The tuition at a public university can be $12,000 for a year of schooling where as the same amount of credits at a private school can cost $36,000, tuition alone.  After four years, the person going to college at the public university would have paid $48,000 for their education whereas the person who went to the private college would have paid $144,000 in tuition.  That is almost $100,000 more.  That $100,000 means that you would have to get a significantly higher salary upon graduation in order to “catch up” to those that went straight into the workforce upon graduating from high school.

The Conclusion

College is still well worth it.  However, you really have to analyze why you are going to college.  If you are going to college to prepare for a career that needs a college degree, then you are better off going to college.  However, if you already know what you want to do as a career and do not need a college degree to get there, it may be better to spend those four years gaining experience in that field to further your career.  Peter Thiel, the founder of Paypal, actually offered a $100,000 scholarship to young entrepreneurs to not go to college.  That is because he believes that those people who already know what they want to do should go out there and just do it instead of wasting four years in college.  So if you are one of those that already has a passion and a plan, maybe college isn’t for you.

I should also say that college has a lot of non-monetary benefits such as networking, forming friendships and bonds, and further emotional and mental development.

I went to college and I had the time of my life.  I found a lot of new ideas and grew tremendously in college.  College changed my perspective on a lot of things.  So for anyone that doesn’t really worry about the economic payoff of college, I highly suggest you go to college.  You will have the time of your life .

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