Is a College Degree ROI-Positive?
For the past 50 years, a four-year college degree has been seen as ROI-positive because of the increased earning power it affords. However, recent research has shown that has changed and many people struggle to earn the money back that was originally spent.
A study by the Conservative Texas public policy foundation found that graduates of public universities and colleges aren’t earning even half of what they owe. The study looked at how many people borrowed versus how much they are earning in their jobs.
Research by Third Way found that based on students’ incomes and what they paid for college, about half will recoup their costs within five years. However, nearly a quarter will take 20 years or more to recoup the cost of college.
Not all graduates are equal either. The Hechinger Report found that bachelor’s degree programs in fields such as science, engineering, and health show quick returns almost universally because they have higher-paying salaries than other jobs. Unfortunately, that isn’t true for all higher education. Students who major in the arts and religion are among the most likely to be earning less. They earn a shade more than a high school graduate.
If your goal is to be an entrepreneur, a liberal arts degree is unlikely to be ROI-positive. A business degree would be a better choice.
Of course, there are other benefits to higher education but if it doesn’t pay off financially, rethink your path. “If you’re going to be spending money for college you should at least think about how much the education is worth in the long run,” says Richard Eden Senior Vice President of David Lerner Associates, “Will you be able to earn enough from the degree or qualification to justify the cost of the school? Or are there other motivating factors to going to college?”
The ROI-positive factor and student debt are gaining attention. Another report on the cost and return of a college education conducted by the Bipartisan Policy Center, a think tank in Washington, D. C calls for the federal government to consider whether an institution provides students with a positive return on their time and money before allowing it to receive federal financial aid.
Make sure that you have done your sums. Work out how much you will spend on college and what you can expect when you graduate. Depending on the results and your financial goals, you might go to college at all. It is possible to get an education or qualification in a different way. It all depends on what you really want out of life. How you get there is your decision.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances.