Is college worth it these days?

You’ve definitely heard people in your life claim that liberal arts degrees aren’t worth what they used to be, and some might even say  that they’re not worth it at all these days.

• Post-secondary costs have far, far outstripped inflation.
• The sheer number of people holding bachelor’s degrees has inflated the job market.

Despite all that, post-secondary degrees still impart enough lifetime value to make it well worth your while:

• Degree holders experience half the unemployment rate of associate degree holders and college dropouts, and one-third that of high school grads.
• Bachelor degree holders earn twice what high school grads do per hour. Graduate degree holders earn three times more than high school grads.
• The hourly wage increase you get from a BA still outweighs student loan debt by a huge margin.
• Poll data suggests that education raises happiness levels (but we’re focusing on financial return here).

Let’s dive into that to give you a better idea of how it all works together (including the not-so-great parts).

Table of Contents

What would you do with an extra $1,000,000?

You have your entire working life to figure it out, because that’s how much more you’re going to earn with a bachelor’s degree (or higher) compared to working with a high school diploma.

That’s an average, of course; you could end up earning more or less than that over your lifetime. Either way, that’s a pretty great trade-off for the cost of an undergraduate education. Is college worth it for the money alone? Most people would probably say so.

For starters, a bachelor’s degree sets you up to earn twice the hourly wage of a high school graduate. Here’s the breakdown, courtesy of Edsource.org:

• Graduate degree holders make $33 per hour.
• Bachelor degree holders make $22 per hour.
• High school graduates make $11 per hour.
• High school dropouts make $6 per hour.

Here’s what that looks like visualized.

Completing a bachelor’s degree doubles your hourly income, statistically speaking. You can’t ignore that. Even better, you can increase your wage by another $11 per hour with a graduate degree, statistically speaking (do not make that decision for yourself based on this statistical average alone, though!).

Let’s break down the math on that:

The average salary with a graduate degree

• $33 per hour.
• $264 per day (8 hours per day).
• $1,320 per week (40 hours per week).
• $66,000 over 50 weeks (saving 2 for vacation every year).
• $3,300,000 over 50 years.

With a graduate degree, you’ll earn an average of $66,000 per year before taxes.

Is college worth it to double your lifetime earnings? I’d say so.

Again, these are just averages; any statistician will tell you that averages don’t paint the whole picture. But it illustrates the crucial point that, by and large, the bachelor’s degree does pay out over the long term. If you can find a worthwhile graduate program to set you on a professional track, then you might make another million over the course of your career.

When you consider that a 4-year degree can cost about $100,000 ($26,000 per year including residence and fees), then you can see how the extra $900,000 over your lifetime is worth the cost of a bachelor’s degree.

Next, we’ll look at how earning a bachelor’s degree doubles your chances at employment.

Employability is a major concern for everyone, which is what makes getting a bachelor’s degree so important: effectively, it doubles your chances of employment. Even though post-secondary degrees have decreased in market value over the last few decades, and they cost way more than they used to, skipping college altogether is hazardous to your career.

Even though unemployment for recent graduates has risen above levels seen before 2000, it’s even higher for people without a post-secondary degree… by an alarming margin. Take a look at this chart to see the difference, from 1999 to 2019:

The numbers aren’t surprising. High school graduates have an unemployment rate twice as high as bachelor degree holders. Even though college graduates experienced a surge of unemployment from 2.5% to 5% in the wake of the 2008 Recession, high school graduates’ unemployment rate doubled from 5% to about 10%.

In what is currently a strong economy (July 2019, as of writing), you’ll notice that even high school graduates only see an unemployment rate of about 5%. Unfortunately, that isn’t going to last forever.

Why unemployment is a real concern for the future:

A word to the wise: if you’re thinking about dropping out of college, make a plan to finish your degree at some point in the near- or mid-future. The light blue line on that chart represents people with partial college educations, and that group’s unemployment rate is only slightly lower than high school graduates’. Dropping out without finishing increases your chances of unemployment by around 60%!

Is college worth it to improve your employment chances? Absolutely. High school graduates experience roughly double the unemployment rate of college graduates pretty consistently across the board. As frustrating as it may be, that expensive piece of paper hanging on your wall doubles your chances of employment.

It’s not just you. There’s definitely a disconnect between the stories you hear about your parents, aunts, and uncles putting themselves through college vs. what you’re experiencing today.

Back then, in the 1960s, ’70s, and ’80s, it was possible for students to earn enough over 4 months of the summer break to pay for the next two semesters of college. Not anymore though. Here’s what the economics say:

The Consumer Price Index rose by 250% from 1978 to 2015. In that same time period, however…

• Prices on college textbooks rose by 812%.
• Medical services inflated by 575%.
• New homes have become 325% more expensive.

If their costs had remained the same, then they would have also just been 250% more expensive, matching the pace of inflation (instead of being 325%, 575%, or 812% more expensive). Is college worth it if you can’t pay your way as you go?

Tuition itself has become incredibly expensive, too. According to the U.S. Bureau of Labor Statistics, post-secondary education costs have risen 63% between 2006 and 2016 alone—even though cumulative inflation for that period was 19.1%. Check the U.S. Inflation Calculator here, if you’re skeptical.

The data supports it too. If you’ve read the previous page on graduate unemployment, then you’ll recognize this photo below:

It shows how the cost of a college education in America has risen by about $16,600 USD in the last 60-odd years (measured in 2017-adjusted dollars). It has almost tripled.

What you don’t see is the cutlural shift that occurred in that time. Where the nuclear family once had a single breadwinner earning most or all of the household income, most comparable households (2 parents and at least 1 child) likely have two working parents today.

That means—hidden behind the data—it might actually take two parents each paying twice as much as one working parent did in the 1960s, using inflation-adjusted dollars.

That’s an incredible burden for most families, let alone the students out there trying to pay their own way through college. School costs are outpacing inflation at a rate of nearly 3 to 1. “Working harder” isn’t going to solve this problem.

That’s where people get cold feet about earning a bachelor’s degree, and that’s fair. Is college worth it if you need to pay two or three times what it used to cost? Ultimately it will be worth it, but the steep barrier to entry with student debt means that you need a plan in place to off-set at least some of those costs as earl as possible.

The extra income you earn over a lifetime will be worth it, but you also don’t want to impoverish yourself before you’ve even had a chance to begin earning that money.

An extra $1,000,000 and twice the chances at employment are strong reasons to get a bachelor’s degree, but some caveats do come with it. Student debt is one of the biggest elephants in the room when it comes to post-secondary education in North America. Is college worth it if you need to pay down debt for years to come?

Measured in 2014-adjusted dollars (to keep things consistent), the average student debt sat below $10,000 in 1989. Measured in the same inflation-adjusted dollars, it was around $25,000 in 2014.

You’re expected to start paying it off within 6 months of graduation, too, but the data out there says that the average graduate won’t find a job for 7 months or so.

Nice one, America.

 Averages aren’t the whole truth, of course, but that chart illustrates that the system is stacked against graduates who have to pay down 250% more in student loans than graduates from 30 years ago, not counting inflation.

This creates a much higher barrier to entry in today’s job market. If you or your family doesn’t have the funds to pay for college up-front, then you’d have to go into pretty serious debt to pay it off. Many people do, only to get caught in a life-long debt spiral.

Even our Canadian friends aren’t immune to this issue, despite their more reasonably priced tuition. A year of tuition cost York University students $1,000 in 1984, but tuition in just about any Ontario university goes for about $5,000 these days. It would only cost $2,130 CAD if school costs grew with inflation alone (that doesn’t include books, residence, or other fees).

As Rob Carrick (the Globe author of that article) points out, you could work full-time for 12 weeks and your savings still wouldn’t cover the cost of tuition—let alone the cost of books, residence, groceries, or “activity fees” to fund the campus’ third business faculty building.

And that’s in Canada, where post-secondary fees just aren’t as high as America’s.

Students trying to put themselves through college literally just don’t have enough time in the day to pay for those kinds of costs. That’s where people run into one of the core problems with post-secondary education.

The bachelor’s degree is still worth the time and investment in financial terms, but you could be stuck in that kind of trap without a way out at this moment. If that’s you, then the question isn’t “should I get a bachelor’s degree?”

The question is “Is college worth it right now?“

Adjusted for inflation, recent college graduates’ hourly wages have grown only a little since 1979. Compared to 2000, though, those rates are actually lower (but that was also the Dot-Com Bubble, in fairness).

So while recent grads aren’t really getting paid more for all of the new tech skills they need to bring to the workplace compared to 35 years ago, wages haven’t tumbled dramatically, either. In other words, you’re still making comparatively good money when you stick a bachelor’s degree next to a high school diploma.

It’s a lot of doom and gloom when you look solely at the cost of a bachelor’s degree and student loan debt on their own, but you really do earn much more income over the course of your career. An extra $25,000 in student debt barely puts a dent in the $1,000,000 payoff you get over time.

Originally, I set out to discover how you’d pay off a student debt while living alone in one of the country’s largest cities. I started with Chicago, the 8th-most expensive city on the list, and did the math on how much you’d need to save in order to pay off the average student debt with the average earnings for a recent graduate.

Here’s what I found:

• Chicago’s average cost of living per year is $38,605, according to the Economic Policy Institute.
• Earning $20.74 per hour means you’re earning $41,480 per year as a new graduate (also according to the Economic Policy Institute).
• A federal tax rate of 22% and the Illinois state tax rate of 4.95% would be $11,178.86 in annual income tax.
• That would make the new graduate’s annual take-home pay $30,301.14.
• That’s precisely -$8,303.86.

The cost of living alone in Chicago is more than $8,000 above the average annual income for a new graduate, and it’s only the 8th-most expensive city in the country.

That’s nuts. Is college worth it if you can’t even afford to live in some cities?

Look at the chart below—I’m not kidding. Here’s what the cost of living looks like for the 20 largest cities in the United States, as of 2019:

So here’s what I’m doing instead. I’m going to list ways that you can reduce the cost of your education and the student loan debt that comes with it, whether you’re just starting or have already graduated.

How to set yourself up for success during and after college:

You need a simple strategy to keep your debt as low as possible:

1. Saving up as much money as possible before starting college.
2. Keeping living costs low at all times.
3. Minimizing how much interest you pay.

It sounds easy, but it means that you’re going to live like a student for 3-5 years, even after graduation. Here are the guidelines:

You’ll probably work throughout your post-secondary career to pay off part of that debt as you earn your degree. That’s why the average student debt is around $25,000 USD, even though a single year of post-secondary education can cost $20,000.

Student loan interest rates can range from 3.7% to 7%, so let’s say you’re paying off a student loan with 5% principal interest. “Principal interest” just means that the debt grows by 5% of the original amount owed (counted as everything you owe when you graduate).

That debt would grow by $1,650 per year—or $4.52 per day. If you paid $250 per month toward your student debt, then it would take you 193 months to eliminate the debt entirely.

That’s 16 years, not counting the 7.4 months it takes to find that first job (statistically), but only if you continued to pay $250 every month without increasing payments. I was able to save $360 per month on a salary of $29,000 USD out of school, which would have taken that payment period from 16 years down to 9.6 years.

Of course, you don’t stay at an entry-level salary forever, as long as you continue to learn and work hard. Four and a half years into my career now, I actually save over $1,100 USD per month. It only took 3.5 years to get to that point, and 9 months of that was spent unemployed with my first boss badmouthing me to prospective employers without my knowledge. You can do it, too.

Bus is college worth it if takes 10 years to pay down student debt? Yes, but it doesn’t actually need to take that long.

A whole decade seems like forever when your life barely clears two of them, but remember that you’re probably going to be working for 50 years or more. Paying down a student debt for 10 years out of 50—just 20% of your career—leaves you with 80% of those years to make more money than if you’d only graduated high school. And that’s the key.

Always pay more than the minimum required for student debt! Once you pay it off, you can start putting away savings in investment accounts—where interest rates start earning money for you instead of taking it out of your pocket.

You can calculate exactly how your student debt accrues here.

Whether it’s in the trades or in a university, you need to choose a path to set yourself up for financial success for the rest of your life. You can’t stand still with a high school diploma anymore, and as long as you tackle student debt with a plan, you can pay it down.

The final answer is: yes. Not only is it worth it, but it’s the single most effective way to afford the cost of living in America, over the long term. Getting a bachelor’s degree lets you earn an average of $1,000,000 more than someone with a high school diploma, and a graduate degree bumps that up to an additional $2,000,000 compared to high school graduates (on average).

Unfortunately, it’s the short-term and mid-term barriers to entry that make paying off the degree so difficult. The cost of education has risen higher than inflation, and student loans have grown by 250% after adjusting the numbers for inflation.

That impoverishes students as soon as they graduate. It takes about 7 months on average for recent grads to find a job, and they’re making about $20.74 per hour once they get hired. That starting wage isn’t always enough to pay for the cost of living in America’s major cities, unfortunately.

And that’s why students need a plan to pay down student debt. 

You don’t need to be an engineer or a software developer for that degree to pay off, but you do need to find a way to:

• Save up as much as possible before beginning college.
• Borrow from low or zero-interest lenders (like your parents, if possible).
• Live at home to keep expenses (and overall debt) low.
• Reduce the cost of living while away from home, whether attending school or working.

Even with the time it takes to complete and pay off a degree, you still earn another million dollars than if you hadn’t earned the degree. Whenever you ask yourself “is college worth it anymore,” you need to keep those figures in your mind before deciding.

There’s an entire host of additional benefits to getting a bachelor’s degree that aren’t apparent through a financial lens, too:

It just makes sense to finish your degree. If you want to cut down costs even further, then do everything from home, if possible. Stay away from overpriced campus food, and split living costs with other people for as long as it takes after graduation.

If you’re in a position to do it and you’re reasonably sure what you want to do, then get the degree, earn more income, understand the world, and be happier. Even if it takes a while.