Despite doubts about the value of a college degree given rising costs and changes in the economy, a recent analysis of 5.8 million Americans by New York University shows that getting a degree is still a good investment, though the payoff varies depending on what you study and who you are.
The study looked at how much people earn over their lifetimes with and without a college degree. It found that, on average, women with degrees earn about 9.88% more than women with only a high school diploma, while men with degrees earn about 9.06% more than men with just a high school diploma.
Boosting earnings
In simple terms, this means that going to college is likely to boost your earnings by around 9 to 10% each year throughout your career.
The researchers took into account things like how much college costs, any financial aid students received, and the earnings they missed out on by not working full-time while studying.
They used data from 2.9 million people with degrees and 2.9 million people with only high school diplomas, all aged between 18 and 65, collected from 2009 to 2021 by the US Census Bureau’s American Community Survey.
So, despite concerns, the study suggests that, for most people, investing in a college education still pays off in the long run.
“Our cost-benefit analysis finds that on average a college degree offers better returns than the stock market,” the researchers explain. “However, there are significant differences across college majors and the return is higher for women than men.”
The best returns
Analyzing 10 broad fields of study, the study discovered that engineering and computer science majors led the pack with the highest median returns, topping 13%. Following closely were business, health, and math and science majors, with returns ranging from 10% to 13%. Meanwhile, majors in biology, agriculture, and social sciences saw returns hovering around 8% to 9%. On the lower end, education and humanities and arts majors yielded returns of less than 8%.
Interestingly, female graduates generally outperformed male graduates in both overall college education and specific majors. For men in majors like education and humanities and arts, returns were less than 5%. However, these differences don’t necessarily imply that female graduates earn more than male graduates overall throughout their lives. Instead, it suggests that the earnings gap between college and high school graduates is wider for women than for men.
Furthermore, college graduates from racial minority groups tended to enjoy slightly higher returns compared to their white counterparts, though the disparities weren’t as significant as those seen between genders.
A modest decline
Despite the generally strong rates of return observed from 2009 to 2021, the study noted a modest decline over the period. When divided into three intervals, the rates of return dipped from 10.12% for women and 9.33% for men in 2009-12 to 9.48% and 8.83%, respectively, in 2017-20.
“The slight decline in returns is likely attributable to the faster increase in college expenses compared to the earnings growth of college graduates relative to that of high-school graduates,” the authors say.
“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,” they continue.
They think that differences in earnings between college majors will probably stay the same or get bigger as technology progresses and changes the types of skills that are in demand.
“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,” the authors conclude. “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.”
