Going To College Still Worth Every Penny: ‘Better Returns Than Stock Market’

NEW YORK — Is a four-year college education still worth it? In an era of increasing skepticism towards the value of higher education, combined with skyrocketing tuitions and a changing job market, a new study is providing a beacon of hope for future college students. Researchers from New York University and Rutgers University evaluated the economic returns of pursuing higher education, revealing that, despite the challenges, obtaining a college degree still pays off in the long run.

Published in the American Educational Research Journal, the investigation examined the financial outcomes of 5.8 million Americans, shedding light on the landscape of higher education’s economic benefits. By comparing the lifetime earnings of individuals holding a bachelor’s degree against those with only a high school diploma, the study unveils a compelling argument in favor of higher education.

At the heart of their findings, researchers discovered a significant financial advantage for college graduates, with an estimated annual return on investment (ROI) of 9.88 percent for women and 9.06 percent for men. This figure represents the average yearly financial gain one can expect from their degree over the course of their career, compared to the initial and ongoing costs of college education.

“Our cost-benefit analysis finds that on average a college degree offers better returns than the stock market,” says study co-author Liang Zhang, a professor of higher education at the NYU Steinhardt School of Culture, Education, and Human Development, in a media release. “However, there are significant differences across college majors and the return is higher for women than men.”

This extensive research, based on data from the U.S. Census Bureau’s American Community Survey spanning from 2009 to 2021, not only considered earnings but also weighed the costs associated with obtaining a degree. These costs include tuition fees, the potential earnings lost by not entering the workforce sooner, and the financial aid that might offset some expenses.

Diving deeper, the analysis pointed out that not all degrees are created equal. Fields such as engineering and computer science stand at the pinnacle of financial reward, boasting median returns exceeding 13 percent. Meanwhile, degrees in education and the humanities are found on the lower end of the spectrum, offering returns of less than eight percent.

However, the study also emphasizes that the economic payoff from a college degree varies across gender and racial lines, with female and minority graduates experiencing slightly higher returns than their male and White counterparts, respectively.

The study observed, though, a slight decline in the rates of return over the examined period, a trend attributed to the escalating costs of college education outpacing the earnings growth of graduates. Researchers state that prospective students should consider their choice of major carefully, balancing personal interests with economic pragmatism.

“Our findings suggest that selecting majors with high returns is a sound financial decision, but at the same time, if a student has decided to pursue a major with a lower return, they may want to consider pursuing additional training or education to improve their labor market prospects,” explains Zhang.

From a policy standpoint, researchers argue for targeted financial support for students in essential but less lucrative majors, ensuring that society continues to benefit from a diverse range of skills and knowledge.

“Given the substantial gap in returns across college majors and the anticipated job growth in the information technology and health sectors, these trends will likely continue before reaching a new equilibrium,” concludes Zhang. “That would have a profound impact on higher education as an industry and on individuals who are making decisions about where and what to study.”