Is Higher Education Worth the Money?

Jim Wolfston:

Promoters of higher education often point to differences in lifetime earnings to justify the price of higher education. Pay for an education today, and the "investment" will pay for itself over the student's lifetime. Not only will the student make more money, but his or her career will be far more satisfying.

But with the cost of higher education skyrocketing, many families are beginning to question whether a college degree is worth the price. The arithmetic is persuasive. At the stock market's historical 9% annual return (nominal return over the past 50 years), $100,000 not invested in a four-year college education would be worth over $3 million in 40 years. That return would handsomely eclipse the nominal lifetime earnings difference of $1 million often quoted for college vs. high school graduates. Put aside the fact that the four-year degree is being slowly replaced by the five-year degree, which bumps the cost of higher education even higher.

Posted by Jim Zellmer at July 7, 2011 4:11 AM
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