Is College Worth It? The ROI of Higher Education in Today's Economy The sky-rocketing cost of higher education in the US may put you in a dilemma over the sheer necessity of a college degree. It's easy to find yourself torn between...

The sky-rocketing cost of higher education in the US may put you in a dilemma over the sheer necessity of a college degree. It's easy to find yourself torn between student loan debt and escalating college fees!

Have you been wondering whether a college education is worth the investment? As much as 81% of college students still consider a degree a necessity. However, just 42% of the families are confident about funding a college degree.

No wonder the number of high schoolers deciding against a college degree is shooting up. A report reveals that the number of undergraduate candidates enrolling in college dropped by 5.1% compared to the figures a couple of years ago. This implies around 1 million students have decided not to go for a college education.

Well, if you happen to be a high schooler wondering whether to pursue a college degree, this guide should clarify the situation. Remember, a college education delivers its ROI throughout life, but only under certain conditions.

ROI on college education: Check what the numbers speak

A study published in 2021 reports the estimated ROI for approximately 30,000 bachelor's degrees in the US. This report calculated the ROI by subtracting the cost of a college degree from the increment in lifetime earnings. Based on these assessments, the report reveals some interesting numbers.

• The median ROI on a bachelor's degree for candidates graduating in time is $306,000. However, some degrees generate greater ROI by millions of dollars, while others don't deliver much value.
• Considering the probability of dropping out of college, the ROI for a bachelor's degree dips to $129,000. Besides, more than 25% of graduate programs deliver negative ROI.
• Among engineering programs, about 80% deliver an ROI of more than $500,000. However, for psychology programs, this share is just 1%.
• Elite institutions such as Penn and Caltech deliver the highest ROI throughout their lifetime. However, some Ivy League degrees have delivered negative ROI. This implies that attending an esteemed college doesn't define success.

Historically, investing in college education has yielded a multiplicity of benefits. This includes faster promotions, better career opportunities, and higher living standards. According to the Economic Data Initiative, the ROI of a bachelor's degree over a couple of decades is 38.1%, while the lifetime ROI is estimated at 287.7%.

Student loan debt versus ROI on education

Now that we have already discussed magical figures let's look at how the student loan debt burden stands.

• Currently, around 45 million US residents carry a debt of $1.75 trillion. People presently have more education loan debt than auto loans, consumer durable loans, or personal loans. As much as 45% of these debt-ridden citizens don't consider a college education worth its value. Yet one must always consider the alternative thought processes of others.
• 1% of college students in the US graduate with more than $100,000 in debt, while 10% graduate with a debt burden of over $40,000. Naturally, this delays their mid and long-term financial planning, including retirement.
• The student loan debt for 60% of college graduates equals 60% of what they earn annually. Naturally, the debt burden haunts graduates right up to their late thirties or early forties.
• The debt issue sometimes aggravates due to missed payments or delays in loan repayments. This affects their credit scores, further impeding their ability to qualify for other loans.

Consequences of student loan debt in career planning

Student loan burdens have implications beyond finances. Graduating with high student loan debt is the last thing you would want. Let's look at the adverse consequences of graduating with student loan debt.

Delayed financial independence

The burden of student loan debt often leaves no option for college graduates but to continue living with their parents. This eventually delays their financial independence, marriage, and other career milestones.

Just 20% of millennials own their homes. Most millennials in the US state that their home ownership was delayed by as many as seven years or more owing to student loan debts. 41% of student loan borrowers had to wait for their retirement savings, while 40% acknowledged purchasing their cars much later. 29% of the borrowers delayed their home purchases, while 15% had to postpone their marriage by a few years.

Less than 30% of male and 50% of female borrowers started living independently outside their parent's homes after finishing school. In comparison, 65% of men and 77% of women had achieved these milestones by the 30-year milestone in 1960.

Unsuitable jobs

Do you know that many college graduates are employed in professions where their job profiles don't need those degrees? The Department of Labor reveals that 17 million college graduates are employed in such positions.

These positions include parking lot attendants, janitors, bartenders, and taxi drivers. To make things worse, college graduates in such professions receive 30% to 40% less weekly payments than those engaged in occupations requiring college degrees.

A college degree doesn't guarantee a job

While students consider a college degree to spin magic, many of the unemployed people in the US are college degree holders. Around 4.1% of recent college graduates were out of jobs in December 2022.

In 2019, the unemployment rate of this population was 4%. This exceeded the average rate for all workers. This included the ones without a college degree, which constituted 3.6%.

So, why reel under the student loan burden when you can go without it? The answer lies in being right with the choice of your major and deciding whether your profession requires a college degree in the first place.

Have you considered the hidden cost of a college education?

The U.S. Government Accountability Office report reveals that only 9% of US colleges provide an accurate estimate of the price of attending college. As much as 41% of the institutions don't help students with any price estimate.

As a high schooler, it pays to identify the hidden cost of attending college. Have you considered expenses beyond your tuition fees and coaching classes? As you embrace a new life in college and start living away from your parents, you need to factor in additional expenses like housing, meals, eating out, recreation, socialization, attending concerts and movies, club memberships, and transportation.

Unless you make a realistic estimate of these costs, it's easy to find yourself debt-ridden on your graduation day.

Do college graduates earn more than high schoolers?

Yes! The Bureau of Labor Statistics reveals that bachelor's degree holders enjoy 67% more earnings than the ones who quit education after high school. This earning quotient goes a long way in prompting high schoolers to continue their college education.

However, there's a twist that college students hardly get to grasp. Some bachelor's degree programs can land jobs where you can earn twice or thrice as much as high school graduates. However, some programs can fetch you low-paying jobs where the income is close to high schoolers.

Therefore, it pays to evaluate your major and its corresponding salary trends before enrolling for college. A recent study published by the New York Federal Reserve shows that the highest-paying majors in college are associated with engineering. Whether or not a college degree is worth going for depends on your major, academic offerings, alumni networks, job placements, and the cost of education.

What are the best colleges for maximizing ROI on education?

High schoolers habitually eye a position in the top colleges, considering their degrees the secret key to better careers. While your estimated income is tangible, earning a college degree delivers several intangible benefits. How do you assess your learning experience, enhanced social skills, independence, and soft skills that you imbibe while working with teams? It's impossible to quantify these benefits in terms of dollars.

The 20-year ROI of the United States Merchant Marine Academy's Service Academy stands at 21%. The overall cost of a four-year degree at this institute is $27,200.

Again, you have Brigham Young University-Idaho and the in-state program of SUNY Maritime College jointly occupying the second position with 13% ROI. However, completing a four-year course at SUNY Maritime College costs $103,000, while you need to shell out $48,700 for the former.

The results are different when you consider graduates' overall income and subtract the education cost. As per this calculation, Harvey Mudd College and Massachusetts Institute of Technology (MIT) rank in the top positions based on the 20-year earnings of its graduates.

Students graduating from Harvey Mudd College made $1.16 million in these 20 years, while MIT graduates made $1.18 million. Merchant Marine Academy is placed in the third position, with a net return in 20 years of around $1.15 million for graduates.

Regarding income, The U.S. Military Academy and SUNY Maritime College ranked fourth and fifth, recording returns worth $1.12 million and $1.04 million, respectively.

You might be wondering why Ivy League heavyweights like Yale University or Harvard University don't make it into the top five. This is because these institutes are expensive, and students need to shell out a high cost of attendance. The median annualized return on investment is 4% for private institutions and 6% for public colleges.

What are the most promising majors to maximize ROI?

Now that you know that your major largely determines your ROI on college education, let's look at the highest-paying majors. The National Association of Colleges and Employers (NACE) listed the top-paying undergraduate majors in the US for the academic year 2022.

• Engineering: $73.922
• Computer Science: $75,900
• Social Sciences: $61,173
• Math & Natural Sciences: $66,760
• Agriculture & Natural Resources: $57,807
• Business: $60,695
• Humanities: $50,681
• Communications: $55,455

Knowledge is the key!

As you enter college, it's natural to wonder whether your degree would do any good. College degree holders have historically enjoyed better lifestyles with better career prospects. So, there's no denying that your college degree will continue to deliver ROI throughout your life. Let not the unemployment figures or poor job prospects dampen your spirit.

Strategic financial planning and career planning are necessary as you embrace your college life. Consider the major you want to pursue and evaluate the current market. Accordingly, schedule your time and take on a job or part-time employment while in college. Don't let student loan debt get the better of you. Master the art of debt management while in college to set yourself on the path of financial independence.

FAQ

Which is the best bachelor's degree major in terms of pay?

Current employment and salary trends in the US reveal that majoring in engineering fetches the best salary in the industry, followed by computer science, mathematics, and business studies.

Which college in the US is the most expensive?

Harvey Mudd College was the most expensive US college in 2022, with a sticker price of $77,500 a year. This is a Claremont-based private institution. Primarily, the students enroll here for science and engineering majors. More than 70% of students at Harvey Mudd College receive some financial aid.

Can I skip college education?

Whether or not you should skip college education depends on the profession you are eyeing. Many skilled employees in the US complete their high school and go for a diploma. Even high schoolers have plenty of job opportunities open that offer decent pay.

However, the problem with skipping your college education is the lack of career progression. Although your initial pay looks quite good, you might face stagnation after five or ten years. This, however, is not the case for all professions.

How do I repay my student loan?

Develop a realistic repayment plan once you decide to take a student loan to fund your college education. Start repaying your debt while in college, pooling funds through your job or side hustle. Use up the grace period in case you received a federal student loan. The faster you clear off your student loans, the earlier you can plan your long-term finances.

Can I find a high-paying job if I complete my college degree?

Although students expect to land a high-paying job after a college education, there's no guarantee. Find out whether the job you are eyeing requires a college degree in the first place. Next, consider the salary you may think is "high-paying."

Check out the industry trends to know the average annual pay of graduates in the same profession. This will help you understand whether the major you want to do would fetch you a decent job.

Featured Image Credit: Photo by Emily Ranquist; Pexels; Thank you!

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