• 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

    How Alaska can benefit from US taking chair of Arctic Council

    by KTVA CBS 11 News on Apr 25, 11:56

    The University of Alaska Anchorage hosted a live-stream presentation Friday as the U.S. took over the chairmanship of the Arctic Council, a group of eight nations with Arctic territory and six indigenous Arctic organizations. The goal is to encourage cooperation to protect the Arctic environment while ensuring responsible development. Between retreating sea ice, warming temperatures, shipping, […]

  • News

    Nepal quake: More than 1K dead, history crumbles, Everest shaken

    by CNN / AP on Apr 25, 10:33

      A top Nepalese police official says at least 1,130 people are confirmed dead following a powerful earthquake that struck the densely populated Kathmandu Valley. The quake, with a preliminary magnitude of 7.8, shook four other countries in addition to Nepal. Aftershocks continued to ripple through the region for hours. An avalanche swept across Mount […]

  • News

    More Alaska National Guard emails released

    by KTVA CBS 11 News on Apr 24, 21:12

    The state released thousands of emails related to the Alaska National Guard scandal late Friday afternoon. It’s been more than 5 months since they’ve handed over any of the information they were ordered to give the media last year. In October, a judge ruled that then-Gov. Sean Parnell’s office must provide any correspondence that relates […]

  • Sports

    Thomas Wins 31st Bill MacKay Athlete of the Year

    by Dave Goldman on Apr 24, 20:42

    The junior ran away with it. It’s been said many times in Cody Thomas’s illustrious career. It also described his path on Friday night as the 2014-15 Bill MacKay Athlete of the Year. The New Zealander claimed the honor at the University of Alaska Anchorage’s athletic banquet at the Lucy Cuddy Center. Thomas’ list of accomplishments not only set the […]

  • Weather

    Evening News Weather, April 24

    by KTVA Weather on Apr 24, 20:40

    Kenai Peninsula/Prince William Sound Mostly cloudy skies for southern areas of the Kenai. Most of the area with some rain showers in the mountains, south of Clam Gulch, and on the east side of the Kenai.   Southeast Expect lots of sunshine for northern and central areas with more clouds and a chance for afternoon […]

  • News

    Change in the Guard: new adjutant general’s vision

    by Bonney Bowman on Apr 24, 18:47

    A West Point graduate with 30 years of active-duty experience, new Alaska State Commissioner and Adjutant General Laurie Hummel says she has a vision to make Alaskans proud of the Alaska National Guard once again. She came out of retirement to tackle the challenging position. “If you’re going to go back to work and get […]

  • Politics

    Leaders raise potential of budget vote without reserve draw

    by Associated Press on Apr 24, 18:32

    Legislative leaders have raised the potential of passing a state spending plan without a vote authorizing a draw from Alaska’s constitutional budget reserve fund. House Speaker Mike Chenault said if the House and Senate majorities reach an agreement on education funding, they could finish up the budgets and leave. As of late Friday afternoon, an […]

  • Crime

    Anchorage police seeking potential victims in harassment case

    by KTVA CBS 11 News on Apr 24, 17:08

    ANCHORAGE — The Anchorage Police Department says there may be more victims of a man accused of inappropriately touching children at the Anchor Lutheran School. Adam Wilkinson, 32, worked for the school as a Child Watch employee between 1999 and 2014, and recently entered a guilty plea on a single count of first-degree harassment, police […]