Are College Degrees Worthless?

By Melinda Carstensen

Once believed to be a guarantor of success, college has gotten a bad rap in recent years. But how much does it cost not to get a degree? Despite climbing student debt and a still-bleak economy, a survey still says: big time.

A new analysis by the Economic Policy Institute in Washington revealed college graduates made 98 percent more an hour in 2013 than everyone else. That’s up from 89 percent five years ago, and it’s a record high for the pay gap between college grads and non-grads.

David Autor, an M.I.T. economist who wasn’t involved in the Economic Policy’s report, wrote about the significance of a four-year degree in a paper published recently in the journal Science.

Expanding upon a previous analysis, he calculated real costs in tuition and fees, and then subtracted that value from the lifetime gap between the earnings of college graduates and high school graduates, the New York Times reports. When adjusting for inflation and the time value of money, he found going to college is cheaper than free. Not going can cost a person about $500,000 over a lifetime.

That figure may come as a surprise, considering reports of student loan debt surpassing $1 trillion, a value totaling more than credit card and auto loan debt.

But with the rate of return so high for college degree earners, the average student loan debt of $25,000 is a bargain.

Experts say these findings could encourage students to nab their four-year degrees, and for adults to return to school. Indeed, just attending college won’t increase a person’s chance of earning more — the wage premium for people who went to college but didn’t graduate has remained stagnant.

At the same time, student loan debt is taking its toll on the economy, affecting graduates’ job decisions and the housing industry.

Although the average hourly wage for college students has risen by only 1 percent over the last 10 years, to about $32.60, the average wage for everyone else has fallen by 5 percent, to about $16.50, reported the New York Times.

As Leonhardt points out: “Education is not the solution to all of the economy’s problems.”