Whether a college degree is worth the cost is one of the main concerns that families have these days, especially in light of escalating tuition and fees that may leave graduates with debts totaling tens of thousands of dollars from student loans. (Photo : by Dan Kitwood/Getty Images)
Whether a college degree is worth the cost is one of the main concerns that families have these days, especially in light of escalating tuition and fees that may leave graduates with debts totaling tens of thousands of dollars from student loans. Most Americans now don't believe the expense is worthwhile.
However, recent research reveals that, for low- and moderate-income students, most post-secondary degrees pay off in fewer than five years after graduation. Still, this time period can vary greatly depending on a student's institution and program. The research, which focuses on graduates in California-the state with the highest percentage of enrolled college students-was conducted by the nonprofit educational organization College Futures Foundation and the HEA Group.
Given that these students may be more inclined to forgo higher education because of concern that obtaining a post-secondary degree may not pay off, even if a college degree might help them acquire an economic foothold, the study focused on households making $75,000 or less.
California Universities and Return on Investment
According to the data, nearly four out of five California universities and other higher education institutions offer a return on investment to this set of students in less than five years.
However, many students from low- and middle-class backgrounds receive an affordable education that allows for enough of an earnings premium that they can pay down their college education very quickly.
Numerous state colleges in California, which are often less expensive than nonprofit private universities, are among the institutions offering the highest return on investment for low- and middle-income students. The results apply to all students in the United States as public colleges and universities provide less expensive degree programs than private ones, and students may attend these schools nationwide.
The results are consistent with a recent Bloomberg News survey of 1,500 institutions, which discovered that Ivy League schools like Yale and Harvard offer the highest return on investment because of the high wages that their graduates receive. Nonetheless, since public universities offer a higher return on investment due to their lower cost of attendance, students who are not accepted into one of the Ivies are sometimes better off attending state schools than expensive private universities.
Even though many students take out loans to pay for their college education, graduates usually receive greater salaries, which benefits them in their careers. According to data from the New York Federal Reserve Bank, the average college graduate now earns almost $60,000 yearly, compared with $36,000 for persons with only a high school diploma, despite Americans' growing pessimism about the value of higher education.
That premium college pay can add up to a significant lifetime financial benefit. For example, a recent survey indicated that baby boomers with bachelor's degrees have about $600,000 in median retirement savings, while those with only a high school education have approximately $75,000 saved.
The investigation used data from the United States to assess a school's return on investment. The Department of Education's College Scorecard will examine the earnings premium of 731,000 low-and moderate-income graduates in California.
The research then examined the net cost of completing a degree for students, calculated by multiplying the years needed to acquire a degree by the tuition and other fees, less any scholarships and grants. The time it takes to get a return on investment may be determined by comparing the earnings premium college graduates receive to the net cost of acquiring their degree.
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