Monday, February 1, 2010

Sheepskins and Fleeces

What's a Degree Really Worth?
THE WALL STREET JOURNAL
by Mary Pilon [abridged]
Monday, February 1, 2010

A college education may not be worth as much as you think.

For years, higher education was touted as a safe path to professional and financial success. Student loans helped parents and students finance degrees, with the implication that in the long run, a graduate would be able to build solid careers that would earn them far more than their high-school educated counterparts.
The nonprofit College Board touted the difference in lifetime earnings at $800,000, a widely circulated figure. Other estimates topped $1 million.But now, as tuition continues to skyrocket and many seeking to change careers are heading back to school, some researchers are questioning the high projections.

The problem stems from the source of the estimates, a 2002 Census Bureau report titled "The Big Payoff." The report said the average high-school graduate earns $25,900 a year, and the average college graduate earns $45,400, based on 1999 data. The difference between the two figures is $19,500; multiply it by 40 years, as the Census Bureau did, and the result is $780,000.

Mark Schneider, a vice president of the American Institutes for Research, calls it "a million-dollar misunderstanding." Dr. Schneider estimated the actual lifetime-earnings advantage is a mere $279,893. He included present-value tuition payments and actual salary data for graduates. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says.

And just like any investment, there are risks; such as graduating into a deep economic downturn. That's what happened to Kelly Dunleavy, who graduated in 2007 from the University of California, Berkeley, with $60,000 in loans. She now works as a reporter for a small newspaper in the Bay Area and earns $34,000 a year. Her father is currently paying her $700 monthly loan payments. "It's harder than what I think I expected it to be," she says.

photo: holy names.com

1 comment:

Jharlan said...

It really depends on how much you paid to go to college. One could make the same argument for High School and give an anecdote about how someone paid $80,000 for high school and is unemployed. Does that mean high school is not important?

Also, With any investment there are risks.