Is College Still Worth the Cost?

Yes, says the Federal Reserve Bank of New York in an analysis on its Liberty Street Economics Blog. Despite the rising cost of college, the rate of return for a bachelor's degree exceeds the rate of return for other investments.

The average college graduate with a bachelor's degree earns 75 percent more than the average worker with only a high school diploma, say researchers Jaison R. Abel and Richard Deitz—an average of $78,000 for the college graduate versus $45,000 for the high school graduate. The earnings premium has been in the $30,000 to $35,000 range since 2000. The researchers estimate a rate of return for a bachelor's degree of about 14 percent—much greater than the 7 percent rate of return for stocks or the 3 percent for bonds. While the rate of return has declined slightly in the past few years due to rising costs, the researchers conclude: "our analysis suggests that college remains a good investment, at least for most people."

But the rate of return is not as high for some, the researchers warn. In particular, the rate of return may not be worth it for those who do not complete a degree, those who take longer than four years to earn a degree, and "the bottom 25 percent of those who made the investment."

Source: Federal Reserve Bank of New York, Despite Rising Costs, College Is Still a Good Investment