College Costs and Benefits ... Go to College ... But Try to Avoid or Minimize Student Loans

Yes, College Is Worth It ---- With Some Caveats briefly discusses the costs and benefits of going to college:

"Soaring student debt loads and high levels of unemployment even among college graduates have led some people to question whether college is worth the money.

New research from the Cleveland Fed provides the latest evidence that the answer is “yes” — but with a couple caveats.

First a bit of raw data, courtesy of the Bureau of Labor Statistics: The unemployment rate for Americans with less than a high school degree was 12.7% in July. For those with a diploma but no college? 8.7%. Some college or an associate’s degree brings the rate down to 7.1%, and a bachelor’s degree or higher brings it down to 4.1%. So, more education clearly leads to better job prospects.

It also leads to better jobs. The median worker with just a high school diploma earned $638 a week in 2011, 39% less than someone with a college degree.

The trouble with those numbers, though, is that they’re extraordinarily broad, lumping together doctors and elementary school teachers and giving no indication of how the benefits of college have evolved over time.

Jonathan James, an economist at the Cleveland Fed, helps disaggregate the data, at least a bit. First off, he distinguishes between the benefits of starting college and finishing it. Unsurprisingly, there’s a big gap. Less obviously, that gap has widened substantially over time.

Back in the 1970s, Americans who’d attended college but didn’t receive a degree earned about 15% more than those with just a high school diploma. For college graduates, the wage premium was about 40%. Three decades later, the premium for college graduates has shot up to more than 80%. For those with just “some college” (but no degree), the premium has stayed relatively stagnant, rising to just about 20%.

That “college graduates” category is still pretty broad, though, so Mr. James takes the next step, splitting out those with advanced degrees. For workers with just a bachelor’s degree, the wage premium over high-school graduates has risen from a bit over 30% in 1977 to more than 60% in 2010. But interestingly, the premium hasn’t grown significantly over the past decade. These days, really getting ahead requires an advanced degree, which boosts earnings some 30% versus having a bachelor’s degree (and by a whopping 120% versus having just a high school diploma).

Of course, all college degrees aren’t created equal, either. An engineering degree, on its own, more than doubles median wages versus a high school diploma. Throw in an advanced degree and the premium is close to triple. Business and economics majors — the most popular field of study in 2009 — can expect to make about 75% more than if they hadn’t gone to college. For communications majors, the wage premium is barely over 50%.

Still, even an arts degree carries a substantial wage premium. That’s one reason it’s worrisome that for the first time in U.S. history, young people aren’t significantly more educated than their parents. 

The recession could accelerate that trend: As the Journal’s Ruth Simon and Rob Barry reported today, even wealthy families are struggling to pay the rising cost of college tuition.

In other words, college may be worth the cost, but that doesn’t mean most families can afford it."

Summing Up

The best path to follow always leads us to seeking and acquiring more education.

Knowledge pays off in lots of ways.

As one old saying goes, "With all thy getting, get understanding."

That said, avoid student loans or at least minimize them to the fullest extent possible.

What you don't borrow doesn't have to be repaid with interest.

That way you can keep what you earn.

Thanks. Bob.