Does a college degree still matter? With rising costs for both private and public universities, a college degree is still extremely valuable.
In a recent interview with Money magazine, Michael Crow, President of Arizona State University, offered his insights on the value of a degree. “Our calculations and those of economists say the return on investment for a college education, in terms of additional earnings, is about 12 percent per year over your lifetime,” Crow said. “The answer is unequivocally yes.”
The economic case for college is clear: college graduates simply earn more money. In fact, they make over $500,000 more over the course of their lifetimes, on average, than those who do not earn a degree. The annual rates of return of investing in an associate’s or bachelor’s degree are two to three times higher than those from investments such as stocks, bonds, gold, treasury bills, and the housing market. That makes a college degree one of the best returns-on-investment around, garnering an annual return of over 12 percent a year. The stock market, by comparison, averages a 6.8 percent annual return, and housing averages 0.4 percent a year.
More education also equates to better employment opportunities, even in the currently difficult job market. In April 2013, according to Bureau of Labor Statistics, the unemployment rate for individuals age twenty-five and older without a high school diploma was 11.4 percent; for high school graduates, 7.2 percent; for individuals with an associate’s degree, 5.0 percent; and for graduates with a bachelor’s degree or higher, unemployment was only 3.6 percent.
But not everyone graduates and completes their degree. Only 58 percent of students enrolled in a bachelor’s degree program in 2004 had gotten their degree by 2010, a full two years after they were supposed to receive it. The other 42 percent spent a lot of money going to college without receiving a degree – and all the benefits that come with it.
So, what happens to students who go to college and don’t graduate? Do they make any more than their peers who didn’t go on to college at all? The answer here is also yes. According to Michael Greenstone and Adam Looney of The Hamilton Project, an economic policy initiative at the Brookings Institute, the returns on going to college without completing a degree are still very high.
On average, college dropouts make $8,000 a year more than high school graduates without any college. That equates to $100,000 more over their lifetimes. Taking into account the cost of going to college without graduating (1.83 years on average, for these students), the return on investment is significantly lower than that for bachelor’s degrees or professional, but still has a higher rate of return than other investments such as stocks, bonds, and real estate.
As the unemployment rate continues to decline, it is important to note that Americans without a college or high school education are still experiencing above-average rates of unemployment. Attaining a college degree is still one of the best investments one can make – and even those who enroll in a two- or four-year program, but do not attain a degree, also experience substantial benefit in employment and earnings. College is worth it.