• Forecast
  • News Tip
  • Categories
Temperature Precipitation
Estimated read time
2m 54s

Why skipping college means losing $830,000 in income

By Aimee Picchi/CBS News 1:02 PM May 6, 2014

Going to college is a pricey affair for many families, given that annual tuition and room and board now costs almost $23,000, or six times the outlay in 1980. That has prompted even the likes of billionaire and former New York City Mayor Mike Bloomberg to advise students to skip the quad in favor of a trade, like plumbing.

But a new study from the Federal Reserve Bank of San Francisco is calling some of that advice into question, given its findings that college degrees actually gain in value over time and still remain a good investment, even when accounting for higher tuition.

The study, which compared earnings over time from college graduates versus those with only high school degrees, found that the average student recoups her investment in a 4-year program by the time she turns 40. After that, her higher lifetime wages will provide a significant return on her investment. By the time she retires, she’ll have earned $830,000 more than a high-school graduate.

“Although there are stories of people who skipped college and achieved financial success, for most Americans the path to higher future earnings involves a four-year college degree,” wrote associate director of research Mary C. Daly and research associate Leila Bengali in the report, published Monday. “Once the investment is paid for, it continues to pay dividends through the rest of the worker’s life, leaving college graduates with substantially higher lifetime earnings than their peers with a high school degree.”

Interestingly, the study considered the premium that college grads earn compared with their cohorts over time, or how much students graduating in, say, the 1950s and 1960s have earned since graduation day. Premiums pick up over time, which means while there’s an income gap for college versus high-school grads from day one, the disparity is even wider just 10 years after grabbing their diplomas.

For instance, people who graduated college in the 1990s and 2000s entered the workforce earning $5,400 more than people in the age group without college degrees. After 10 years, that gap had grown to $26,800, the study found.

“This evidence tells us that the value of a college education rises over a worker’s life,” the authors note.

But what about the rising cost of college? After all, the cost of an undergraduate degree has surged more than 500 percent since 1985, compared with a 121 percent jump in the consumer price index over the same time. With that out-of-proportion surge, does it still make sense, especially for younger students who are facing those higher costs?

Actually, yes, thanks to those higher lifetime earnings, the study notes. There is a caveat, however: it figures that the break-even point will take 20 years, given an annual tuition rate of about $21,200, which is low for some prestigious colleges. But, the authors add, “there is no definitive evidence that [high-cost colleges] produce far superior results for all students.”

The bottom line? A college degree pays lifelong dividends, but you may want to think long and hard about degrees that cost above the norm.

© 2014 CBS Interactive Inc.. All Rights Reserved.

Latest Stories

  • News

    Local Seahawks fans voice their support for their ahead of Super Sunday

    by on Jan 30, 23:11

    The Seattle Seahawks continue preparing for Super Bowl XLIX in Glendale, Ariz. Fans back in Anchorage are sending a loud message to their favorite team hoping the Seahawks win their second straight championship. Fans staged a rally early Friday night at Flat Top Pizza. It took place after they took part in another event at […]

  • News

    Former NFL player helps teens become successful, avoid troubles with the law

    by Dave Leval on Jan 30, 22:50

    Former defensive end Mao Tosi has tackled many people during his playing days in college and with the Arizona Cardinals. However, being home in Anchorage may provide his biggest obstacle. Tosi created AK Pride 10 years ago, a program in which he teams mentors with kids in a variety of programs ranging from arts to […]

  • News

    Alaska Regional Hospital announces plans for Mountain View clinic

    by KTVA CBS 11 News on Jan 30, 21:48

    The Anchorage Community Land Trust and Alaska Regional Hospital have signed an agreement to open a community health clinic in Mountain View to better serve residents in the area. The clinic would provide primary care services for residents in the Mountain View community, many of whom may not be getting the level of healthcare they […]

  • News

    Mayoral candidates address recent Anchorage violence

    by Kate McPherson on Jan 30, 20:34

    With the recent surge in violent crimes in Anchorage, some of the candidates in the upcoming mayoral race are speaking out against the actions of perpetrators and looking for ways to protect other residents. Candidate Andrew Halcro says the recent shootings in Anchorage need to be addressed with dedicated gang and drug task forces. “When […]

  • Weather

    Evening New Weather – Jan. 30

    by Carlos Faura on Jan 30, 19:23

    Kenai Peninsula and Prince William Sound Lots of sunshine and mild temperatures as a ridge builds into the area. Because of such a stable atmosphere and because there is little wind, conditions are ripe for some fog to develop overnight into the morning hours. It should just be patchy in nature and be gone by […]

  • News

    Last man on the moon lands in Anchorage

    by Lauren Maxwell on Jan 30, 17:40

    The last man to walk on the moon visited Anchorage on Friday, and spoke with students enrolled in the Alaska Native Science and Engineering Program on the University of Alaska Anchorage campus. National Aeronautics and Space Administration (NASA) astronaut Capt. Eugene Cernan, 80, was the invited speaker to help celebrate the ANSEP’s 20th anniversary. He told […]

  • News

    APD releases traffic fatality stats for 2014

    by KTVA CBS 11 News on Jan 30, 17:06

    Anchorage saw an uptick in traffic fatalities last year compared to 2009-2013, according to data released by the Anchorage Police Department Friday. Twenty-three people died in traffic collisions in 2014, which includes all collision types involving vehicles, pedestrians, or bicyclists. Of those, alcohol or drugs were a factor in 15 of the cases. The department […]

  • DayBreak

    Mic Check in the Morning: Jolly Good Fellow

    by Daybreak Staff on Jan 30, 15:04

    With a mix of indie pop and rock, Jolly Good Fellow stopped by Daybreak Friday for a Mic Check in the Morning. Based in Anchorage, the band includes vocalist and guitarist Kyle Harrington, bassist Mapy Preskitt and drummer Brandon Echols. For more information on Jolly Good Fellow, check out their Facebook page. You can also listen […]