Going to college still a smart investment - Arizona Range News: Editorials

Going to college still a smart investment

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Posted: Wednesday, August 28, 2013 12:00 pm

Much has been written in recent years about the increasing cost of higher education and growing levels of student loan debt held by graduates. Despite some scary and often misleading headlines, education continues to pay and the investment is well worth it.

According to the U.S. Bureau of Labor Statistics, the unemployment rate in the United States for people 25 years old and up was 6.8 percent in 2012. For those with less than a high school diploma, it was nearly double that at 12.4 percent. For those who earned a high school diploma or GED, unemployment was 8.3 percent. For those with some college (but no degree) it was 7.7 percent.

Here’s where a college degree comes in. In 2012, the unemployment rate for those with an associate degree (like those offered by Cochise College) was 6.2 percent. For those with a bachelor’s degree it was 4.5 percent.

For those with a master’s degree, the unemployment rate last year was 3.5 percent. For those with a doctoral degree, such as a Ph.D., it was 2.5 percent. For those with a professional degree, such as medical doctors or lawyers, the unemployment rate was only 2.1 percent. In fact, during the Great Recession and slow recovery of recent years, those with the highest levels of education were virtually unaffected in the labor market.

More education not only decreases your likelihood of becoming unemployed, but also increases the amount of money you earn. For those with less than a high school diploma, median weekly earnings in 2012 were $471. This jumps nearly 40 percent to $652 for those who complete high school or earn a GED. It increases another 12 percent to $727 for those who go to college but don’t finish.

Those who complete an associate degree (such as Cochise College graduates) see their earnings grow another 8 percent to $785 a week. For those with a bachelor’s degree, earnings jump by more than a third to $1,066. Those with a master’s degree see earnings increase an additional 22 percent to $1,300. For those with a doctoral degree, earnings jump another 25 percent to $1,624. Those with a professional degree see median weekly earnings climb to $1,735—more than a third higher than the master’s degree level.

According to The College Board, a not-for-profit membership association of more than 6,000 schools, colleges, universities, and other educational organizations, the average published cost of in-state tuition and fees for two years at a community college in the United States is $6,260. Books and supplies are about $2,400, for a total cost of $8,660 for an associate degree. According to BLS, a graduate with an associate degree will earn $6,920 more than a high school graduate in a year. So the entire cost of an associate degree can be recouped through higher earnings in about 15 months. Those with an associate degree will earn $275,000 more in their lifetime than high school graduates—enough to pay for their education, a nice home, and a few other things.

For a bachelor’s degree, the average cost for tuition, fees, books, and supplies for all four years at a public university is about $39,420. According to BLS, a graduate with a bachelor’s degree will earn $21,530 a year more than a high school graduate. So the cost of a bachelor’s degree from a public university can be recovered in less than two years. It can pay for itself even faster for students who do the first two years at a community college—such as those who do two years at Cochise College followed by two years at University of Arizona. Over their lifetimes, those with a bachelor’s degree earn $860,000 more than high school graduates—enough to pay for their education, a nice home, and lots of other things.

There are, however, other costs associated with going to college, including opportunity costs such as foregone income while attending. But these days, most colleges offer flexible schedules including evening and weekend classes, combined with off-campus opportunities such as online courses. So it’s easier now to simply give up television, video games, and hanging out with friends—instead of giving up work—in order to go to college. There’s also the cost of room, board, and transportation, but those must be paid regardless of whether one attends college.

For those who finance education through student loans, that can drive up the cost—particularly for graduates who opt for a long-term repayment plan. However, increased earnings would allow for much faster repayment, and minimization of interest costs, if the graduate decides to put all the additional earnings toward paying off the loans. Many choose longer repayment due to traditionally lower interest rates on student loans and other potential uses for increased earnings, such as savings, investment, increased quality of life, or paying off other, higher interest debt.

An important consideration is that not all college graduates earn the median wage for their education level. In fact, half earn less and half earn more. Generally, those who major in math, science, and career fields tend to earn more than those who major in arts and humanities.

Another consideration is that most students don’t pay the full published price for education due to financial aid and other assistance. According to The College Board, the average published price of tuition and fees for public four-year colleges is about $8,655 a year, but the average net price after financial aid and other assistance is about two-thirds lower at $2,910. This means education can pay for itself even faster.

The question should not be whether you can afford to go to college, but whether you can afford not to. If you want to earn more money and reduce your chances of being unemployed, register for classes now. Fall classes at Cochise College begin August 19!

Dr. Robert Carreira is director of the Center for Economic Research at Cochise College. If you have any questions on the economy, please contact the CER at (520) 515-5486 or by email at cer@cochise.edu. Check out the CER’s website at www.cochise.edu/cer.

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