As the cost of attending college continues to rise and graduates find it increasingly harder to pay off student debt, more and more media reports have pondered the question: Is college worth it?
The latest story in this week's Wall Street Journal takes aim at the subject by debunking an oft-quoted statistic: The amount of money college graduates can earn over a lifetime as compared to people with only a high school degree.
Back when I covered K-12 education, I went to a pre-college workshop for sixth graders and their parents. I remember the teachers projecting a bar graph on a screen, using a laser pointer to explain the huge financial benefit of a college education. It seemed to excite at least a few of the 12-year-olds in the audience.
I don't recall the exact figures they cited in that workshop, but the Journal reports that for years, the figure has been cited at $800,000 or more – that's the difference between what you could earn over your lifetime if you got a bachelor's degree versus just a high school diploma.
The information apparently came from a 2002 Census Bureau report called "the Big Payoff." Scroll to page 10 of the document and you'll see the table. Using census data from 1998 to 2000, the report estimated lifetime earnings by adding up the average earnings for workers at each age, from 25 to 64. The result: High school graduates earned $1 million over their lifetimes, while college grads earned $1.8 million – all in 1999 dollars. Hence, the $800,000 figure.
Stories and editorials in papers from the Seattle Times to the Evansville Courier & Press frequently quoted the lifetime earnings difference when talking about the value of college degree.
But, as the Journal points out, the $800,000 figure left out several important factors that affect actual earnings:
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.
Other researchers and policy experts have chipped away at the "million-dollar misunderstanding," too. Sandy Baum, senior policy analyst for the College Board, told USA Today she estimates the lifetime "earnings premium" for a college graduate is $450,000 in today's dollars, or $570,000 for workers with graduate degrees.
At least one university, the University of Wisconsin-Madison, has actually devised a more personalized "payback calculator" that allows a prospective college student to plug in her expected major, her family income and other characteristics that might influence her financial-aid package.
The bottom line: There's no magic math that can tell you exactly what you'll earn if you get a degree. But most experts agree that your earning potential will rise significantly. And Baum told USA Today that students should think about the average salaries in their chosen fields before taking on more debt than they can handle.
"If you think you want to be a preschool teacher, you should be more hesitant about borrowing than if you think you're going to be an engineer," Baum said.
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