Is Your Degree Worth $1 Million -- or Worthless?

We've been talking a lot about the value of education lately here at Free Money Finance and have received some very worthwhile comments. That's why this article from Money Central really caught my attention. It gets to the heart of the issue, namely what is a degree worth. It opens with this summary:

Look before you leap into spending a small fortune on an associate's, bachelor's or graduate degree. If money is your motivation, learn which ones really pay off.

And if, as we all know, some bachelor’s and master’s degrees are much more lucrative than others, which are the best investments? To find out, I sat down with my handy-dandy financial calculator to play with some numbers.

Here are some of their overall conclusions:

Associate’s degrees are a slam dunk. These two-year degrees seem to result in a massive payback, compared to their relatively low cost, for a high school graduate.

Ditto, usually, a bachelor’s degree. Any bachelor’s degree you get at a public university is likely to pay off handsomely, as well. If you’re attending a private college, though, you might want to steer clear of education degrees.

Some degrees are a step back. Thinking of a master’s degree in a liberal arts or social sciences field? Let’s hope you’re in it for the love of learning, because on average there doesn’t seem to be any financial payoff.

Professional degrees rule. There’s a reason why people borrow tons of money to attend law and medical schools. The return for a professional degree is huge.

The author goes on to explain how she ran her calculations (I won't bore you with the details here, but let's just say she's doing it the right way) -- taking the costs of degrees and then comparing them to the expected increases in income over a lifetime. Here are the specifics of what she came up with:

[Here's] the increase in lifetime income from a two-year Associate degree:

• Average $116,550
• Liberal arts $63,667
• Business $92,908
• Social science $79,013
• Computers $148,695
• Science $104,521
• Engineering $192,660

As you can see, the average increase in income from an associate degree, compared to what a high-school graduate would get, is about $116,550 today.

Subtract the average cost of tuition and books at a two-year school -- about $2,500 -- and you’re way, way ahead. AA degrees in engineering and computers have the biggest payoff.

Bachelor's degree results:

• Average $308,588
• Liberal arts $243,883
• Business $349,028
• Social science $210,080
• Computers $443,180
• Science $283,286
• Engineering $497,930
• Education $108,461

The remaining tables show the present value of the increase in income compared to a bachelor’s degree holder. Here's the information for a Master's degree:

• Average $180,010
• Social science Less than 0
• Business $375,780
• Science $136,873
• Engineering $362,092
• Education $106,388
• Liberal arts Less than 0

Does this mean you should never pursue a master’s degree in English or an advanced social studies degree? Of course not. But I wouldn’t go up to your ears in hock to pay for it. Here's the data for a Professional degree:

• Average $716,927
• Law $748,865
• Medicine $977,601

Speaking of hock, huge student loan debts are often the price of a law or medical degree. The good news is that it seems to pay off. The $100,000 or more you borrowed for med school pales next to the $1 million present value of the payoff.

Pretty interesting stuff, wouldn't you say? She concludes with some advice that I can endorse from my experience:

You’ll probably be happiest, though, if you don’t dig yourself deeply in debt for a field that traditionally doesn’t pay well. Make sure the size of your investment, in time and money, bears some relation to your eventual reward.

This is what worked for me when I got my MBA and it's pretty solid advice. Something you should consider if you're planning a career move or thinking about going to (or going back to) school for a college degree.

Comments

[DS Dan]

I want to clarify something about Ph.D programs (although it may apply only to science/engineering programs).

First, people typically do Ph.D's to get a certain type of job (research/teaching job instead of a code-monkey/pointy-haired-boss job), not to make more money.

That said, at a good school, you will pay NO money out-of-pocket for your education--it is covered by grants (which your advisor applies for), fellowships (which you apply for), or through teaching work (if neither of the above are possible). But you do lose 5-6 years of job income.

[mmb]

That's interesting. I noticed liberal arts is pretty much at the bottom and engineering at the top in 3 of the lists. I have a Bachelor's degree in engineering but it could very well have been in liberal arts. I was torn between the two. And then one day my mom said, "You can always read books on your own but you won't know how to design a bridge without some help." That's what decided me. I never knew the actual $ advantage of my decision until today.

[Youngmiser]

One thing definately evident today is that if a person does not go to college and get some kind of degree, that person will be severely disadvantaged.

Also one thing to note about getting a further degree in a liberal science is whether the person wants to do it for their own self interest and accomplishment. However when doing that, be sure the money is there and do not borrow.

[Tim MMF]

Great article! I wrote an article similar to this recently... Yours clearly breaks it down, nice work. I find it hard to believe that the benefit of a Master's in social science is zero or less. I know for me, a Bachelor's in Political Science will snag me a job in the $40-50k range but with a Master's will bump me up to $60-80k and a PhD. will put me in the $90k+ range. Of course, political scientists are the highest paid social scientists but still... Professors need at least a Master's degree and they get paid well. I've always wondered about that. Anyway... great post!

[susan]

It appears that the author gathered the data far from my area of the country. As an educator, my bachelor's degree is worth $43,000/year. My master's is worth $45,000 per year and if I would pursue a PhD, I would make $48,000 per year.

If you don't believe this, go to www.wcboe.k12.md.us, link to human resources and link to the teacher salary scale.

[Jared "i teach the Engrish"]

In regards to what Tim MMF said, teachers get paid differently. Most districts pay teachers more with the amount of education. That is why I received my MA English. However, I would have a very hard time going to work in a place other that teaching or publishing and demanding the same pay/benefits that I recieve as a teacher.

[Eugene]

I want to thank the author for the great article. It's been a bit difficult for me lately to motivate myself to pursue a higher education. Now, after reading the article and doing some additional research I am sure that I'm on the right track. Education seems to be one of the best investments one can make during his/her life.