College Degree Worth an Extra $23,000 per Year

Here's a great piece from Yahoo on the value of a college degree. The details:

How much is a bachelor's degree worth? About $23,000 a year, the government said in a report released Thursday.

That is the average gap in earnings between adults with bachelor's degrees and those with high school diplomas, according to data from the Census Bureau.

College graduates made an average of $51,554 in 2004, the most recent figures available, compared with $28,645 for adults with a high school diploma. High school dropouts earned an average of $19,169 and those with advanced college degrees made an average of $78,093.

Wow! Some good stuff here. My thoughts:

1. Over a 40-year work career, that extra $22,909 equates to $916,360. If a person took that extra money every year and invested it at 7%, they'd end up with almost $4.6 million when they retired. Half of it invested every year at 7% would yield almost $2.3 million at 65 and one quarter of the difference invested every year at 7% would give them an extra $1.1 million. No matter how you look at it, a college degree is well worth the investment.

2. The difference is even greater versus high school drop-outs (of course.) If the difference was invested every year for 40 years, the college people would have accumulated almost $6.5 million more.

3. The 40-year difference between high school drop-outs and high school graduates is pretty startling as well. Invested at 7%, this gives high school graduates almost $1.9 million more. It's a shame that 16-year-olds are making $2 million decisions to drop out of school. They're sentencing themselves to dim financial futures just because they don't like school (in most cases -- I know there are other reasons for dropping out of school.)

4. The difference between an advanced degree and a bachelor's degree is even more than bachelor's degree versus high school degree. At 7%, the 40-year difference is $5.3 million in favor of the advanced college degree holders.

5. Just for fun, the 40-year, 7% return difference between the advanced college degree holders and the high school drop-outs is $11.8 million. Wow.

6. Once again, we see the great monetary value of a college degree. And while you may have to pay $20,000 to $100,000 for it, it's still a great financial investment. Besides, there are lots of steps you can take to minimize the cost of college. For some ideas on this, see Best of Free Money Finance: College and Education Posts.

Comments

[Binary Dollar]

I think for computer science, an advance degree isn't worth more than a bachelor's degree. 2 years of working vs. 2 years of graduate school will bring you to just about the same salary. But if you work instead of going to grad school, you get an extra 2 years of income.

[RSN]

Unfortunately, I'm not sure that plays out for us poor souls who thought we wanted to be professors of philosophy or theology while we were in college. At least I haven't seen my Religious Studies and Philosophy degree amount to a whole lot financially.

I think that's one reason I've been torn between an MBA or starting my own business. I'm beginning to think the only way to get past the level I'm currently stuck at is to do one of these things.

[Matt]

Most people with college degrees will overwhelmingly agree with you. But did this study take into account the quality of the degree or just the average? I think that a degree from say Harvard is worth more than a degree from an unknown local college.

I guess the biggest thing the degree gets you, regardless of quality, is the fact that it will open many doors that would remain closed without one.

[torf]

Binary Dollar: A study was completed years ago that indicated people that were creative and had street smarts had the academic working for them. I left school in grade ten starting a business career at $18.00 a week as an office boy in a newspaper retiring as the President/CEO of a group of very successful TV stations. Excel, hone your creativity and street smarts and take your chances in the business world.

[William]

I believe its more who you know instead of what you know. I ran for a public office with a 2 year degree against an incumbent that only had a GED. Everyone hated her and talked bad about her but when election day came they sure voted for her. "Who you know not what you know or the degree you have".