Tuesday, August 25, 2015

Does College Pay?

There has been a great deal made out about the increase in the cost of going to college, just like the cost of gasoline.  So is it worth it?  Not in terms of things that I think are also important - such as developing critical thinking skills and develop the ability to ask and find solutions to solve current and new problems or the knowledge that can be gained by being exposed to new ideas and alternative points of view.  No, here we are just thinking about the return of a college degree in terms of future income.  Suffice it to say the general answer is yes, but not always.  Two interesting articles have looked at exactly this and concluded that college is beneficial financially on average, with some degrees such as engineering having a better return than other degrees like education.  Additionally, even within majors future earnings are highly variable.

Economics majors in the 90th quantile earn about 3 times as much as economics majors in the 10th quantile.  The other study uses payscale.com data and finds similar results.  Using the payscale.com data in-state on campus economics majors without financial aid have the highest annual ROI in the US (tied with Wisconsin).  In-state on campus economics majors with financial aid are 6th among all colleges in the nation with an annual ROI of 14.3%.

For more details here is an interactive chart on costs and returns to college.  Note the the University of Iowa has a 10.9% annual return overall and economic majors with a higher ROI of 14.3% (with financial aid or 11.7% without financial aid).

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