Study Finds a College Degree Remains a Solid Investment

Blog Post: Despite Rising Costs, College Is Still a Good Investment

Source: Federal Reserve Bank of New York

Authors: Jaison R. Abel and Richard Deitz

A new study from the Federal Reserve Bank of New York shows that a bachelor’s degree tends to give individuals a substantial wage premium in the labor market, concluding that there is “no doubt” about the value of a college education.

The study looked at average wages adjusted for inflation and other labor market changes over time. In recent years, the average college graduate with a bachelor’s degree earned $78,000, compared to $45,000 for those with only a high school diploma. This means a typical college graduate earns a premium of well over $30,000, or nearly 75 percent.

While the cost of college has increased in recent years, earning a degree easily exceeds various investment benchmarks at 14 percent, compared to the long-term return on stocks (7 percent) or bonds (3 percent).

“Thus, while the rising cost of college has eroded the return to a bachelor’s degree to some extent, our analysis suggests that college remains a good investment, at least for most people,” the authors conclude.

Notably, they found that while the recent strong labor market has boosted the wages of those with a high school diploma, the wages of college graduates have gone up by as much or more, keeping the college wage premium near an all-time high.

To read the full results from the study, see this blog post.