The Bureau of Labor Statistics (BLS) has an interesting graphic on its website. On one side is a chart showing the unemployment rate in 2009 by level of education. Although the average unemployment rate for all categories of workers was 7.9 percent, the figures varied widely. For example, for those who did not graduate from high school, the average unemployment rate was 14.6 percent. For those who earned a Bachelor’s degree, their unemployment rate was 5.2 percent. The unemployment rate was even lower for those with graduate degrees.
On the other side of the graphic is a second chart showing median weekly income by level of education. The figure for all workers in 2009 was $774. However, those who did not finish high school earned just $454 dollars per week. Those who graduated from college earned $1,025 per week. Those with graduate degrees earned even more.
The implication is clear: Education Pays. In fact, that is the title the BLS chose to place on the graphic. That’s all well and good, but it is at least a little misleading. The charts simply tell us that more education is correlated with higher pay. Contrary to the title, they do not tell us that education pays. This is because the charts say nothing about the cost of an education.
Clearly, if you could attend a top-notch college for free, you should do so. Just as clearly, if you have to shell out $5 million, you should find something better to do with the money. In other words, there is a point where the cost of a college education is simply not justified.
These days, a student can expect to pay an estimated $45,000 per year just for tuition, fees, and books at some of the more prestigious universities in the nation. Yet that’s not all it takes to go to college. There is also the opportunity cost of forgoing four years of employment. According to the BLS, those who choose college over work will sacrifice about $95,000 in income over four years (or about $71,250 after taxes). So, if college costs remain steady and if a student is lucky enough to graduate in four years (both increasingly unlikely events), the investment comes out to $251,250 after taxes.
Because the BLS tells us that this college-educated student can expect to earn an additional $571 per week ($428 after taxes), it will take more than 11 years to break even on the investment.
That may not sound like much when you consider that the average working career is close to 40 years. But does it really make sense to spend one-fourth of one’s career earning enough money just to pay back the investment in a college degree? Perhaps it makes better sense to attend a cheaper university.
Of course, some will argue that students who go to prestigious private schools can expect to earn more money than students who attend state universities. There is some truth to this. Therefore, our 11-year payback period might be an overestimate. Nonetheless, students who have to pay full fare because they don’t qualify for financial aid might want to think twice about their choice of schools. They are probably better off graduating at the top of their class from a state university than simply being an also-ran from a prestigious private school. That’s something to consider as high school seniors put the finishing touches on their college applications and weigh their acceptances this spring.