• Forecast
  • News Tip
  • Categories
News Alert: Latest updates on McHugh Creek Fire - Read More
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

    Deadly bombing strikes demonstration in Kabul

    by CBS/AP on Jul 23, 17:39

    At least 80 people were killed and another 231 wounded in the Afghan capital on Saturday, when suicide bombers detonated their explosives-packed clothing among a large crowd of demonstrators, officials and witnesses said. In a statement issued by its news agency, Aamaq, the Islamic State of Iraq and Syria, or ISIS, claimed responsibility for the attack […]

  • News

    Firefighters on McHugh Creek Fire confident with progress

    by Eric Ruble on Jul 23, 17:27

    After nearly half an inch of rainfall, sunshine returned to the area of the McHugh Creek Fire Saturday. It remains roughly 815 acres in size, but is now 15 percent contained, according to officials. It was seven percent contained Friday. More than 300 firefighters have been working on the McHugh Creek Fire. Many of them […]

  • News

    Woman drove for days in Alaska with husband’s body in casket

    by Associated Press on Jul 23, 15:18

    A woman who drove her husband’s body on a days-long traveling wake in Alaska and used ice from canneries to keep him cold is not accused of breaking any laws. Officers responded to a call last week to find the body of a 78-year-old man inside an aluminum transport casket. Ketchikan Police Chief Alan Bengaard […]

  • News

    Police: Bicyclist injured in crash with vehicle

    by KTVA CBS 11 News on Jul 23, 13:35

    Updated at 3:25 p.m. on Saturday, July 23 A bicyclist was injured and transported to a nearby hospital after a collision with a vehicle Saturday afternoon. The incident was reported to police at the intersection of Eagle Street and 23rd Avenue around 12:48 p.m., according to an Anchorage dispatcher. The driver remained at the scene of the […]

  • News

    McHugh Creek Fire: Positive prognosis from fire official

    by KTVA CBS 11 News on Jul 23, 11:23

    [RELATED: Updates: McHugh Creek Fire 7 percent contained at 815 acres] Last updated at 5:30 p.m. on Saturday, July 23 The McHugh Creek Fire was 15 percent contained as of Saturday morning, incident commander Tom Kurth said at a Saturday morning community meeting. Roughly 330 firefighting personnel were battling the blaze, which was holding at 815 […]

  • News

    Silver Alert: Missing Kenai man believed to be in danger

    by KTVA CBS 11 News on Jul 23, 10:17

    Last updated at 11:50 a.m. on Saturday, July 23 ANCHORAGE — The Alaska Department of Public Safety and the Alaska Division of Homeland Security have initiated a Silver Alert for a missing 81-year-old man, who is believed to be in danger. The Kenai Police Department reported Oscar Rookard was last seen at his residence at […]

  • Lifestyle

    State health officials investigate salmonella illnesses in Bethel area

    by Charles Enoch / KYUK on Jul 23, 9:50

    This story originated from KYUK Public Media and was republished with permission BETHEL — The Alaska Division of Public Health is investigating salmonella infections in the Bethel area. A team is in Bethel to track down the source of the infection. Louisa Castrodale is an epidemiologist with the state’s Public Health division. “It’s not even the end […]

  • News

    Alasks State Trooper dispatch neglects a report for weeks

    by Davis Hovey / KNOM on Jul 23, 9:44

    On Friday afternoon, family and friends gathered to celebrate the life of local Nome resident John Penetac, Jr. The 51-year-old passed away on July 6. The cause of death is unknown. Earlier Friday morning, around 11:30am, an Alaska State Trooper dispatch reported a deceased man’s body being found near the area known as Cavota Pond. […]