The Numbers Game: Is College Worth The Cost?

According to a new report from the Pew Research Center, 57 percent of Americans say “the higher education system in the United States fails to provide students with good value for the money they and their families spend.”

(Digital Vision)

Does that mean that college isn’t worth it? Not exactly. In fact, given the crappy economy, a college degree is more valuable than ever, a point that Levitt makes in a recent Freakonomics Radio podcast.  The most telling statistic as to the value of college: the unemployment rate among college graduates is less than half (4.5%) than people with only a high school diploma (9.7%). (See the BLS employment status table here.)

Still, it’s an interesting question, particularly given the explosive growth in the price of college tuition over the last 30 years. According to the College Board, a year of tuition at a public college for an in-state student costs an average of $7,605, while a year at a private college costs an average of $27,293. Meaning that (assuming you graduate in four years) a college diploma from a public school costs about $30,000, and about $109,000 from a private school. That’s a lot of coin, but consider this: the difference in yearly income for a person with a college degree and a person with just a high school diploma is $19,550, according to the 2010 Census. So keeping things simple, on average, a public school college degree pays for itself in less than two years, and a private school diploma in less than six. Which is probably why, according to the Pew study, the vast majority of college graduates (86%) say that college was a good investment for them.

The Pew report, conducted in partnership with the Chronicle of Higher Education, offers lots of useful insight into the current state of American higher education. Among some of the more interesting nuggets:

  • Only 19% of college presidents say the U.S. system of higher education is the best in the world now, and just 7% say they believe it will be the best in the world 10 years from now.
  • Adults who graduated from a four-year college believe that, on average, they are earning $20,000 more a year as a result of having gotten that degree. Adults who did not attend college believe that, on average, they are earning $20,000 a year less as a result.
  • Only a quarter (24%) of college presidents say that, if given a choice, they would prefer that most faculty at their institution be tenured. About seven-in-ten say they would prefer that faculty be employed on annual or long-term contracts.



The 4.5% unemployment statistic is misleading - the unemployment stats for college educated adults under the age of 25 is 9.4% - the 4.5% number is heavily skewed towards older generations that did not graduate in a severe recession.

The long term effect of the current generation of grads remains to be seen, but most data points to lower earnings and employment options - creating pressure on the ROI of expensive colleges. I think thats where the 57% number comes in.


I'd be interested in a more nuanced reading of the data. When we're talking about average income between college graduates and high school graduates, does that include recent grads? I'd be interested in knowing what the income difference is between, say, a 25-year-old college grad with three years' experience in the job market compared to a high school grad with seven.

Also, I'd be interested in seeing how this comparison pans out across different degrees. I have no trouble believing that a graduate with an engineering or finance degree is making more money than someone with only a high school diploma, but does this hold true for people who went through the humanities or social sciences?

I'm from Quebec, and our tuitions here are about $3,000 a year for full-time studies, plus another $1,000 for books. I graduated without debt and found my university experience enriching and enjoyable, so much so that I got a Masters degree in history. But I can't say it's provided me much in the way of financial gain. Even now, five years after graduation, I'm still only making $15-16 per hour. It's more than minimum wage, definitely, but it's hardly the $20,000 extra a year the survey would have us expect, unless high school graduates my age (29) are still making minimum wage.


Thomas Maguire

Thanks for this article. I've been wondering for quite some time whether School Loan Debt is the next bubble to burst. The skyrocketing costs of a college education vs. inflation + the massive amounts of debt students leave college with seems unsustainable to me and reeks of the Housing Market of the 2000's.

Greg Sadler

Asking the question "whether college is worth the cost" is a somewhat misleading approach to the matter, since the value-added of going to college depends on three key factors -- all of which depend very much on the patterns of consistent choices students make.

First -- it seems a no-brainer, if you are from, have your kid at, or teach at a good school, but the institution I just left had a 9% 4-year graduation rate last year! -- the college investment is a terrible one unless a student actually graduates.

Second, if a student (or their parents, or the government) is paying the extra money a more prestigious school requires, not only for tuition, but for fees, room and board, etc., they have to take full advantage of the contacts and networking advantage those high-tier schools provide them.

Third, unless the student actually develops the knowledge, skills, and dispositions that a college curriculum is supposed to inculcate (but on its own, without the student committing, does not), and which their degree is supposed to signify (but alas, often does not-- even at upper-tier schools), they have nothing to offer to an employer. Or, better put, nothing that a non-college-grad employee can't provide just as well.

Notice that institutions and professors can make students aware of their roles and how these work (I do that routinely in my Critical Thinking classes, as I write about here:, and they can also structure curricula and college life to promote and support students making the right choices -- i.e. engaging in good practical reasoning. But, ultimately, these three factors are up to the student, making the right choices day after day, following through, taking responsibility. Sometimes that happens, often not -- and in those cases, it is the student who has rendered college a bad investment, for him or her, not per se.


caleb b

Is law school still worth it? Someone needs to write a paper on that. The answer is no, because of oversupply. Law schools continue to turn out the same number of graduates every year, but the number of law grads needed has declined since ’07.

With the debt that is typically acquired to pay for law school, what once was a good bet on economic prosperity is now an almost certain bet on economic hardship.

But…there is hope for recent law grads.
1) The government could inflate away the cost of your student loan debt.
2) At least some of the vast supply of unemployed lawyers will run for political offices and policy changes could install forms of debt forgiveness.
3) You can always drop out of the labor force and have more children (that you can't afford, but may or may not make you happier).


You're forgetting the opportunity cost of attending college. 4 years of full-time school is (usually) 4 years less of full-time employment.

Bob Bevard

You left some significant figures out of your ROI.

You can't simply figure tuition cost and then divide by the difference in earnings (which are suspect to say the least) to show payback. Add in books and fees and extraordinary living expenses associated with college, add in the carrying costs for those investments-either paid interest or lost interest- and then you must also add in the lost earnings for those four years plus potential lost investments/earnings. To be truly fair with the analysis, you must also use the real time spent in College to earn a degree, not four years. Studies show that today it is closer to six.

If you used only $15,000 as in-state public school costs and only $20,000 per year in lost earnings, never mind the carrying or investment costs, you have $35,000 x 6 years which is $210,000. Make private college costs $35,000 for living (many report annual costs of $50,000 or more) and add lost wages of only $20,000 (which is likely way underestimated for someone who would attend a private college) and multiply that by 6 yrs and you have $330,000.

Properly invested in normal times, there is not much likelihood of either group statistically catching up to those dollar amounts. It used to be that the true value of a college education was learning how to think, process, analyze. Unfortunately, that is also no longer true. There is little justification for the current cost of a college education for an average citizen.


Joshua Northey

Good post. To be fair though:

I found the living expenses of college life lower than those of real life and I think that is the norm (for instances $23/month healthcare instead of $400/month)

Another thing is support of you point is this question:
1) Do college graduates have better outcomes because colleges help create the outcomes?
2) Do college graduates have better outcomes because colleges screen for people who will have better outcomes?

Personally I think 2) is at least as strong a factor as 1), if not stronger.


I think this analysis is too simplistic to be meaningful.

Surely the populations of people who go to college and people who don't are different. Maybe people who graduate from college are smarter than average, come from wealthier families (and therefore have more investment income), and are more connected. And maybe it's these advantages that lead to higher income later in life.

Also, it looks like you're saying the average income of a college graduate is ~$20K more than that of a high school grad. But that must be skewed heavily by those people who make a lot of money. So maybe the difference in incomes between the two groups is entirely due to the high earners at the end of the spectrum, and doesn't apply to most people.

I say maybe - I have no idea if these speculations are true, but they illustrate that the data you cite doesn't lead one to conclude that a college degree pays off.



This also fails to distinguish the "high school diploma" group between those who could have gone to college, but choose to pursue a career directly out of high school and those who couldn't/wouldn't go to college due to poor academics, laziness, or both.

Although it would be difficult to reliably test this, I suspect that smart college kids could probably do just as well foregoing college (particularly in humanities/social sciences) as they would with the degree. Obviously, for some fields (engineering, medicine, law) this just isn't practical, but in many areas it probably is.


What about factoring in opportunity costs and the money spent on room & board?


One crucial issue that I think is overlooked in most assessments of the value of college is the inherent selection bias. Saying that a brilliant student who gets into an elite private school makes more than a slacker who doesn't go to college isn't very informative.

I recall a study that looked at college grads from around the time of the Vietnam war, when borderline students opted for college to avoid the draft, and the college benefit was much less pronounced. Given increased college costs its questionable that an intelligent student benefits much from 4-years of not working, crushing debt, and negligible skills increases.

The one exception might be social factors such as building networks of similarly intelligent people that can be valuable later in life.

ken riener

As another reader mentioned, a major determinant of whether a college degree is worth the cost is the graduate's major. A recent report showed that average starting salary for Chemical Engineers is $64,800, while the starting salary for Social Workers is $31,800. Economists, btw, start at $48,800, which, at the margin, is probably break-even, taking account of the time value of money and the lost salary during college years.

Here's the link to the study:`


OK, I'm not an economist but I guessing (hoping?) you are. The statistics you cite are incomplete or irrelevant. First of all, it's not surprising that college graduates have lower unemployment, as the difference between college graduates and high school graduates encompass a few more variables than just that they spent money on college.

Secondly, the cost of a college education is quite a bit more than the tuition. How about lost wages, living expenses and the like.

Lastly, to decide if something is worth the money, you need to consider what else you could have done with the money other than spend it on college. Is there a better investment for the money than tuition and associated expenses?

This article seems naive at best.

Barbara Ray

Readers have raised some valuable points about this post, including oppt't costs and the type of degree or the type of school one attends.

Our colleague Cecilia Rouse at the Network on Transitions to Adulthood ran the numbers a few years back, including oppt'y costs and other factors, and found that a college degree pays itself off in about 10 years. But that was before the current rapid rise in tuition. She's updating the work with fresh data, and will break it down by type of school (private, public, etc.)

A recent study, "Whats It Worth?" by the Center on Education and the Workforce at Georgetown broke down the starting salaries by degrees, which underscores the problem of looking at "college" as a general bucket.

Finally, a report by Demos finds that in certain cases, a two-year technical degree pays off as much as a four-year degree in that field, even seven years later.

The bottom line, college does pay, with some caveats. First, it pays only if you finish (currently about 50% of college freshman don't finish). It also only if you are strategic about the kind of degree you'll get and where you go to get it. If you're going into education (one of the lowest paying fields along with psychology in the CEW study), it makes no sense to rack up big bills at a private school.

We in this country too often think a four-year college is the only option. There are many, many kids who have no interest in four more years of school, but they've heard only one message: go to college. Everyone needs some kind of education after high school, but there are viable alternatives. We just don't hear about them as often, and kids are not shown that path. Too often, that path has a whiff of "loser" to it, when in fact, there are many middle-tier jobs that pay a very solid wage and do not require four-year degrees (think health care field or the trades). We need to talk about those pathways more often, rather than the "college for all" mantra.



A problem here is the view that college and work are separate phases of life. By my junior year, I was making enough as an intern (in computer engineering) to pay all my tuition and living expenses. In my last year of graduate school, with a well-paying internship and some consulting on the side, I made upwards of $50K.


The comparison needs to be between college graduates and people who had the skills & qualifications to go to college but chose not to.

How do people with similar grades & SATs who choose not to go to college do?


WWJAS? (What would James Altucher say?)


Many good points regarding opportunity costs etc. have already been raised, I'd like to contribute this:

I'm afraid I don't have the proper vocabulary to explain exactly what I mean, but there is also what I think of as the mean/mode fallacy at work in many of the discussions I see on this topic. Imagine this simplified scenario based on a real situation in which I once worked:

1 - top employee, $900K / year, has degree
4 - second tier employees, $250K each, 3 have degrees
10 - typical workers with degrees, $35K each
10 - typical workers without degrees, $45K each

Total payroll: $2.7 million

"Typical" pay of worker with degree: $35K,, "Typical" pay of worker without degree, $45K.

Mean salary: $108K
Mean with degree: $142K
Mean without degree: $64K

So people look at those last two numbers and say, "obviously a college degree is well worth it, contributing almost $80K in additional average annual income."

Really what it should say is something like, "a college degree is a very expensive lottery ticket which may or may not play a role in justifying very high salaries to a very few holders while leaving the rest further behind than if they had gone straight to work."

Pursuing a college education is a very risky proposition (I know, I lost the bet) into which we unwisely and over-zealously urge young people.



James Altucher would say the data is meaningless because of selection bias. The people who don't go to college can't be directly compared to people who do go to college because the first group includes mostly people that aren't qualified to go to college in the first place.