With college costs soaring and new graduates struggling to land jobs, is higher education still worth the money?
Yes, according to an analysis by one recent college graduate who has studied the issue carefully.
Sarah Millar, who is now gainfully employed as a research analyst at ConvergEx Group in New York, examined the topic in a new report combining empirical data with her own experience as a 2011 graduate of Trinity College in Hartford, Conn.
"Did I just waste the last four years of my life?" Millar writes. "Sure, I enjoyed my time at Trinity, but I could have used that time — and money, for that matter — to actually start a career."
(Millar points out that she wrote a 200-page senior thesis, in English and Spanish, on democratic transitions in Spain and Portugal — which, if nothing else, raises questions about the exacting standards of her alma mater.)
The good news is that college pays off, Millar concludes, citing data from a variety of government and private sources.
The average take-home pay of college graduates is nearly twice that of their high school counterparts: $38,950 vs. $21,500. Even factoring in student-loan payments, college graduates make more in their first year of work than those with only high school diplomas. And history shows that a college graduate can expect his or her income to increase 2.2% annually over a lifetime vs. 1.9% for the high schooler.
The advantage of college shows most clearly in the vastly different unemployment rates of the two groups: 4.4% in November for collegians compared with 9.6% for those with only high school diplomas (and an abysmal 13.8% for those who never finished high school).
Over 40 years, the college graduate's earnings would top that of a high-school counterpart by more than $1 million. Financially speaking, college is worthwhile as long as the total four-year cost is less than $715,000, which, at least at the moment, it is.
"The bottom line of this analysis is that college pays, literally and figuratively," Millar writes.
But Millar details the high price of higher education.
College costs have climbed an average of 6.4% a year since 1981, far surpassing the 0.4% annual rise in income growth, Millar writes.
Students (or more likely, their parents) shelled out an average of $73,500 in tuition payments over the last four years. And when measured againt the $84,500 earned by those who entered the workforce four years ago, the college graduate is $158,000 in the hole. Add in student loans and the deficit can top $200,000.
For the sake of comparison, someone could purchase a Subway or a Tasti D-Lite franchise for about the amount spent on college, Millar writes.
She points out two factors to consider when deciding on college: the name brand of the school itself and the intended course of study.
Average starting salaries of new graduates generally are higher at big-name schools such as Caltech ($69,600) or Princeton ($56,900), Millar writes. The average for a UCLA grad is $49,200. More examples can be found here.
Perhaps more important is what a student majors in.
"A poetry major from UPenn may not fare as well as an electrical engineer from Penn State," Millar writes.