Skip college? Not if you want to make more money

Doubtful about a four-year college degree? Making money is still your best bet.

Backlash against college as a common stop on the road to adulthood has grown over the past decade. Critics say four-year degree programs without a clear path from classroom to career haunt most students with five-digit debt.


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Nearly half (46%) of all households surveyed in November and December 2020 by Gallup of the Carnegie Corporation of New York said they would prefer their children to attend an alternative to four-year institutions – even when there is no financial Don’t be an obstacle But when you compare the value of a four-year degree with other credentials—a high school diploma, certificate program, and associate degree—it still gives workers an advantage in the labor market and leads to average lifetime earnings. .

A Bachelor’s Degree Is Usually a Good Investment

According to the New York Federal Reserve, if a college degree is an investment, it’s a good one. The annualized return at the four-year normal degree is about 14%, well above the range of “good” returns for stocks (about 7%) and bonds (3%).

In dollar terms, according to 2019 data from the New York Federal Reserve, graduates with a bachelor’s degree will earn an average of $78,000 annually compared to high school diploma earners, who receive about $45,000 annually.

However, “on average” doesn’t mean that the return on your education, or the premium of college earnings, will always be a benefit. Where you go to school, how much you borrow, what you study, and where you live after school all help determine your return. Many of those factors are influenced by your race, ethnicity and gender.

Your ability to repay the loan affects the value of your degree

Student loan debt is difficult to avoid and even more challenging to repay. According to federal statistics, college costs rose 117% from 1985-86 to 2018-19. According to the Federal Reserve Bank of St. Louis, wages haven’t picked up during the same period, rising only 19% during the same period.

However, loans are still the primary vehicle for families without funds to obtain a college degree. For your degree to be worth it, you have to earn enough to justify it. That means taking on debt that won’t put you underwater — a manageable student loan payment is about 10% of your discretionary after-tax income.

To get the best returns and be able to repay loans, it’s important to graduate — many borrowers who take out loans in default but have no degree.

“It’s a worst-case scenario — you’re incurring some of those costs, but with very little benefit,” says Jonathan Rothwell, Gallup’s chief economist.

demands of your major affairs

What you study in school will affect the type of job you get, your earnings, and your ability to pay off debt.

According to a 2015 data report from Georgetown, median earnings in mid-career are those holding bachelor’s degrees in science, technology, engineering and math, or fields such as STEM ($76,000), business ($67,000) and health ($65,000). in the highest. The university’s center for education and the workforce.

The same report found the lowest median mid-career earnings among those who had bachelor’s degrees in fields such as the arts, humanities and liberal arts ($51,000), as well as teaching and serving roles such as social work ($46,000). She was too.

To estimate earnings, graduation rates, typical student loan loads and other factors at individual schools, use the Department of Education’s College Scorecard tool. You can search and compare loans as well as earnings by fields of study.

Where you live after graduation also matters

A conservative non-profit think tank, Thomas B. According to the results of a May 2020 study for the Fordham Institute, where you live after earning your degree also affects its value.

“In general, a college degree is a good investment, but the return is unprecedented in terms of metropolitan areas,” says John Winters, an associate professor of economics at Iowa State University who conducted the study.

In cities, graduate degree holders earn an average of $95,229, an 86.2% premium compared to an employee with a high school diploma and a 55.7% premium compared to an associate degree holder.

Winters says this is mainly because cities have higher concentrations of jobs in fields that often demand that workers have four-year degrees, such as technology, finance and marketing. Workers in these fields earn higher wages, leading to a higher return on investment for the degree.

However, Winters’ findings also mean that having a four-year degree is less important if you want to live in a smaller metro or rural area. Bachelor’s degree holders in non-urban areas have a median income of $67,893, putting their salaries at a 46.4% premium over high school diploma holders and a 29.6% premium over associate degree holders.

Earning a degree does not guarantee equity

In some ways a college degree can increase income and racial inequalities, such as student loans and the ability to repay that debt, says Marshall Anthony Jr., a senior policy analyst at the Center for American Progress, a public policy research organization.

“A college degree usually doesn’t work the same for everyone,” says Anthony

According to federal statistics, black borrowers take out a higher amount of loans than white borrowers — about $25,000 more on average.

In 2016, among those with a bachelor’s or higher degree, Asian full-time, year-round workers aged 25–34 had a higher median annual income ($69,100) than their white peers ($54,700), and racial/ethnic There was a median income for both groups. According to recently available data by the National Center for Education Statistics, their blacks ($49,400) and Hispanic ($49,300) were higher than their peers.

Higher debt and lower wages also mean that Black borrowers will earn more interest over time: Four years after graduating from college, Black graduates have $28,006 in student loan debt compared to White graduates, at $28,006, According to a 2016 Brookings Institution study.

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