Yes! Your College Degree is Worth the Student Debt, Says Study

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Is studying for a college degree still a sound investment even with the burden of student debt? Well if you believe the Federal Reserve Bank of New York, then the answer is a definite yes.

According to a new study conducted by 2 economists, Richard Deitz and Jaison Abel, the return on investment for a bachelor’s degree is around 14-15 per cent and has remained constant since 2000, which is “easily surpassing the threshold for a sound investment”. So if you are a college grad with an undergraduate diploma, the there is no reason for you to worry about your student loan payments because it is all worth it, as per the study.

Really? Is a college degree still worth it?

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However, if you still regret going to college due to your crippling student debt, then you will have a lot of company. A 2013 Wells Fargo Retirement Survey found that around 31 per cent of Millennials repent their decision of spending so much money on college education. They believe that getting a job after their high school would have been a better option. But the NY Federal Reserve Bank says that although college education can be expensive, but throughout their careers college graduates will certainly recover much more than the money they invest in earning their degrees.

But the fact remains that since the past few years, college tuition has been gradually rising along with falling wages and increasing unemployment rates.

So how can college be a better option?

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How can the rate of return remain constant over a decade?Here’s how. In reality, the wages of workers without a college degree have been falling even faster than their peers who have pursued college education. Hence, in this scenario you need to choose “the lesser of two evils”: skip college and earn very low wages throughout your career with high probability of staying unemployed for extended periods; or pay high college tuition and have a promising career but with a heavy student debt. In this bargain, college degree wins. In fact you can increase your earning potential even more with a post graduate management diploma.

The economists who conducted the study said, “Despite the recent struggles of college graduates, investing in a college degree may be more important than ever before because those who fail to do so are falling further and further behind”.

The report states that “Over the past four decades, those with bachelor’s degree have tended to earn 56% more than high school graduates while those with an associate’s degree have tended to earn 21% more than high school graduates”. The study shows that if you get a college degree then you will probably earn almost $1m more in your lifetime. With an associate degree you can earn around $325,000 more than high school graduates, over the course of your life.

But what about underemployed college grads? Does college make sense even for them?

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It’s true that almost a third graduates with bachelors or associate degrees are employed in jobs that do not need college level education. But the New York Fed study claims that even for such workers, college is worth the money they put in. Workers with college degree tend to earn higher salaries than those with just a high school qualification. Furthermore, they have lesser chances of being unemployed when compared to their peers with high school degrees.

The report notes, “Employers are willing to pay a premium for college graduates relative to those with just a high school diploma, even in jobs that are not typically considered college-level positions”.

An undergraduate Diploma on the other hand provides better opportunities for the students in terms of higher education as well as employment options. Thought there are both online and on campus options available but it more reasonable to take up the online option due to many reasons. An undergraduate diploma online gives the students an option of taking up a job even if they might consider themselves underemployed. This is because they will be gathering work experience while studying. Also this diploma will help them advance to their final year of undergraduate degree thereby putting forward a chance to attain a degree faster and try for higher positions justifying their qualifications.

The Federal Reserve Bank of New York study by Jaison Abel and Richard Deitz was prepared by collecting data from The College Board, the Education Department and the Bureau of Labor Statistics. The findings of the study confirm the results of a Pew Research Center report which was released earlier in 2014. The Pew study Revealed that young professionals with college degrees have lower rates of unemployment and earn higher wages than their high school educated friends.

If you are looking get the most out of your bachelor’s degree or associate’s degree and maximise your return on investment, then pursuing technical training degrees like computers, math or engineering will be your best choice. The rates of return on computer and math are around 18 per cent and 21 per cent respectively, says the New York Fed report. On the other hand, degrees in agriculture, leisure, hospitality and liberal arts will offer “below-average returns”.


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