Skeptical about a four-year college degree? It’s still the best choice for making money.
Over the past decade, the backlash against college as a common stop on the road to growing up has increased. Critics say four-year degrees put most students in five-figure debt with no clear path from the classroom to careers.
Nearly half (46%) of all families surveyed by Gallup for Carnegie Corporation of New York in November and December 2020 said they would prefer their children to attend alternatives to four-year facilities – even if there weren’t any financial obstacles.
But when you compare the value of a four-year degree to other credentials – a high school diploma, certificate courses, and associate degrees – it still gives workers an edge in the job market and, on average, results in a higher lifetime income.
BACHELOR’S DEGREES ARE TYPICALLY A GOOD INVESTMENT
According to the New York Federal Reserve, if a college degree is an investment, it’s a good one. The annual return on a typical four-year deal is around 14%, calculating well above the threshold for “good” returns for stocks (around 7%) and bonds (3%).
In dollars, graduates with a bachelor’s degree make an average of about $ 78,000 a year, compared to a high school graduate who earns around $ 45,000 a year, according to 2019 New York Federal Reserve data .
However, “Average” does not mean that the return on your education or college income premium will always be a profit. Where you go to school, how much debt you take on, what you study, and where you live after school – all of these will determine your return on investment. Many of these factors are influenced by your race, ethnicity, and gender.
YOUR ABILITY TO PAY DEBT WILL AFFECT THE VALUE OF YOUR DEALS
Student loan debts are difficult to avoid and even more difficult to repay. College costs rose 117% from 1985-86 through 2018-19, according to federal data. Wages, meanwhile, did not keep pace, rising only 19% over the same period, according to the Federal Reserve Bank of St. Louis.
However, loans are still the primary tool for wealthy families to get a college degree. In order for your studies to be worthwhile, you need to earn enough to justify it. That means you have debts that won’t submerge you – a manageable student loan payment is roughly 10% of your disposable income after tax.
To get the best return and repay debts, closing is critical – many defaulting borrowers may have debts but no closing.
“That’s the worst-case scenario – you pay some of those costs, but with very, very little benefit,” said Jonathan Rothwell, senior economist at Gallup.
INQUIRIES FOR YOUR MAIN AFFAIRS
What you study in school will affect the type of work you can get, your income, and your ability to repay debts.
According to a 2015 data report by Georgetown, average mid-career earnings are highest among those with a bachelor’s degree in fields such as science, technology, engineering, and math, or STEM ($ 76,000), business ($ 67,000) $ 65,000) and Health ($ 65,000) have the University’s Education and Labor Center.
The same report found the lowest mid-career median income among those with bachelor’s degrees in areas such as arts, humanities, and humanities ($ 51,000) and teaching and ministry roles such as social work ($ 46,000).
Use the Department of Education’s college scorecard tool to estimate income, graduation rates, typical student debt loads, and other factors at individual schools. You can search and compare earnings and debt by major.
WHERE YOU LIVE AFTER YOUR STUDIES IS ALSO IMPORTANT
Where you live after graduation also affects value, according to a May 2020 study by the Thomas B. Fordham Institute, a conservative nonprofit think tank.
“In general, college degrees are a good investment, but the return on investment when it comes to cosmopolitan areas is phenomenal,” said John Winters, associate professor of economics at Iowa State University who conducted the study.
In cities, undergraduate graduates earn an average of $ 95,229, an 86.2% premium compared to an employee with a high school degree and a 55.7% premium compared to an associate degree.
According to Winters, this is mainly because cities have a higher concentration of jobs in areas that often require a four-year degree, such as engineering, finance and marketing. Workers in these areas earn higher wages, resulting in a higher return on investment for deals.
However, Winters’ results also mean that having a four-year degree is less important if you want to live in a smaller metropolis or rural area. Undergraduate graduates in non-urban areas have a median income of $ 67,893, which is a 46.4% premium compared to high school diploma holders and a 29.6% premium compared to associate degree holders.
ACHIEVEMENT OF DOCUMENTS DOES NOT GUARANTEE EQUITY
In some ways, college degrees can exacerbate income and racial inequalities, such as student debt and the ability to repay that debt, says Marshall Anthony Jr., a senior policy analyst at the Center for American Progress, a public policy research organization.
“A college degree doesn’t usually work the same for everyone,” says Anthony
Black borrowers tend to take on larger debt – about $ 25,000 more than white borrowers, on average, according to federal data.
In 2016, Asian full-time employees aged 25-34 had a higher average annual income ($ 69,100) than their white counterparts ($ 54,700) among those with a bachelor’s degree or higher and an average income for both races were higher than their Black ($ 49,400) and Hispanic ($ 49,300) counterparts, according to the latest available data from the National Center for Education Statistics.
Higher debt and lower wages also mean black borrowers amass more interest over time: four years after graduating, black graduates have $ 52,726 in debt compared to white graduates, according to a 2016 study by the Brookings Institution at $ 28,006.
_________________________-
This article was made available to The Associated Press by the personal finance website NerdWallet. Anna Helhoski is a writer at NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.
SIMILAR LINKS:
NerdWallet: Is Student Loan Worth It? A calculator for college affordability https://bit.ly/nerdwallet-student-loans-college
Georgetown University Center for Education and the Workforce: The Economic Value of College Majors https://cew.georgetown.edu/cew-reports/valueofcollegemajors/
US Department of Education: College Scorecard https://collegescorecard.ed.gov/
Anna Helhoski of Nerdwallet, The Associated Press
