The Value of a College Degree is $1 Million -- Can Be Much More if You Work At It

MSN says that the value of a college degree is $1 million. The details:

The Census Bureau has taken a new stab at answering the age-old question: Just how much is a college degree worth? The answer: $1 million.

That is a rough average, of course, but data collected in an extensive Bureau study suggests that a college degree is worth about $1 million in additional lifetime earnings compared with a comparable worker with only a high school diploma.

This is for a bachelor’s degree. Advanced degrees earn more:

A master’s degree typically adds about $500,000 to lifetime earnings, according to the report, while a professional degree in medicine or law can easily add another $1 million on top of that.

For those interested, here's the entire study. Their summary:

The results of this analysis demonstrate that there is a clear and well-defined relationship between education and earnings, and that this relationship perseveres, even after considering a collection of other personal and geographic characteristics.

Note that this is an analysis of income differences only. One thing it appears they DON'T factor in is the cost of the degree (it appears they do factor in the time lost in school where the non-college grad can continue to work/earn, but I could be mistaken), so college expenses need to be subtracted out. Still, this gives a pretty compelling case for the value of a degree.

That said, these are AVERAGE results. Who wants AVERAGE results? Not me. I'd prefer well above average results, thank you very much. How do you get them? I'm glad you asked. ;-) Here's what I would suggest:

• Go to a good school (not a "great" one, whatever that is anyway) that offers a history of strong post-graduate salaries in your field. In other words, a good payback given the cost.


• Try to minimize costs/debts while in school by getting scholarships, working, graduating early, etc. If you want specific suggestions, see Examples of How to Pay for College Without Borrowing.


• Get a degree in a field that pays well (or at least has decent salaries). Doing what you "love" is over-rated. I contend that very few people actually "love" what they do anyway -- otherwise they would do it for free (this, by the way, is called a "hobby".) I suggest you instead get a career that you like -- one that's a good fit for you AND lets you earn a decent income. Now if doing what you "love" can make you some good money, then go for it. But my experience is that things people "love" doing don't pay very well.


• Once you graduate, you then work at growing your career to maximize your lifetime earnings. Doing this will make the difference between earning the average lifetime income and one that is millions of dollars more than that.

That's how you make way more than the average for a college graduate. Then, if you want to become wealthy, add these steps:

• Control your spending. As your income goes up, your spending should go up at a much slower rate. Doing this allows your gap -- the difference between income and spending -- to grow.


• Use this gap to save and invest. Save as much as you can for as long as you can. Invest the money so it grows. Low-cost index funds are my investment of choice.


• Throughout your life, avoid the money mistakes that can kill your finances.

If you do all of these things, the odds are dramatically in your favor that you'll end up quite wealthy.

Feel free to pass this article on to a high school or college student you know. ;-)

Comments

[Brent]

Does that 1 million include the cost of college and all the interest that goes with it as most people choose to do?

1 million isn't that much if you figure you will work 30+ years, its less than 33k a year. Take out taxes and you aren't living a grand lifestyle.

There must be a bunch of people with worthless degrees bringing that figure down.

[Sunil l Entrepreneurship & Personal Finance]

just had this conversation with my wife's cousin who is getting ready to go to school. it started with his question: "is going to an expensive (good) university still worth it?"

[Old Limey]

It's not so much about the university that you attend - it's all about the nature of the degree you obtain.

All branches of Engineering worked very well during my generation.
The newer field of Computer Science has been great for the current generation.
Medicine, Healthcare, and Law have always been good.

For a Masters degree, the MBA has been good for people trained in Science and Engineering that want to move up the management ladder rather than the technical ladder.

The world of Business has obviously generated boatloads of millionaires but I have no knowledge of its best career paths. I have heard that attending one of the few top Business schools however can help a lot in making very useful contacts that can further your career later on.

Some fields such as Education, Medicine, Psychiatry, Physics, and Chemistry require a Doctorate if you want to reach the highly paid positions and these days that involves many more years of very expensive education.

[texashaze]

To add to Old Limey's point, I've got a BS and MS in a specific type of engineering and estimate it will earn me $3 million in revenue ABOVE what I would have made in my lifetime without it. My degree is from a small/mid sized public university. I worked through college to pay for it but did borrow a small sum which was paid back quickly.

[jim]

Yes engineers make more than social workers. And yes unfortunately too many people really do get degrees in fields that don't pay well and have little demand.

Also consider that not all high school graduates are alike either. Mixed in among the average HS diploma holder there are many people in higher paying skilled trades and small business owners etc. And many older people in jobs in fields they got into before college diplomas were as common.
Unless you have a desire and aptitude to go into a better paying high school diploma level career field then I'd say that the lifetime earning capability of a HS grad. is really going to be lower than they figure.

I mean sure if you have a mechanical inclination maybe you can make decent money as a plumber or auto mechanic. But if you don't have that kind of inclination... then what kind of decent paying job are you going to get with just High School??

What if your skills and interests involve working with children? Whats your choice there for a decent paying job with no college? Off hand I can think of daycare worker for $8-$10/hr. Then I run out of ideas. On the other hand if that person goes to college and gets a teaching degree then they could make $40k a year. Sure thats not what an engineer makes and may be less than the plumber. But this person isn't interested in those fields and thats not their aptitude. While this persons choice to go to college isn't going to increase their wages by $1M total it may move them up $500k.

You have to look at an individuals aptitudes and what that gives them for choices. We can't all be petroleum engineering doctorates.

[Old Limey]

Wake up America!

There's a lot of people in the USA that need to wake up and realize that without a good education there's a strong possibility that they are going to have a pretty miserable life without any hope of a comfortable retirement.

If you don't believe it then check out America's ranking in secondary education among the 33 major industrialized countries - we are near the bottom in Reading, Math, and Science.

Then check out the statistics on the percentage of high school dropouts. It's around 20% overall for the country but much higher for states with high percentages of blacks and hispanics.

Without all of the high paying union jobs in construction that we used to have, where do these dropouts earn the money it takes to exist? These days you need a college degree for many occupations that dodn't require them in the past. Those that are very talented in a segment of the entertainment world can do really well, but that's a very small minority.

[Kelly@GoodMoneySense]

As a college senior this information is both promising and discouraging. While an college education may earn you $1 million over a lifetime more than someone who never went to a University, I can't help but be overwhelmed with the amount of debt I'm going to be in post-graduation (maybe I should have read that list about how to pay for college without loans). This country has a major problem in the way our higher educational institutions run. In so many other places throughout the world, University is FREE to young adults, and I can't help to be jelous and angered by that. The cost of an education at a collge level is certainly worth going, however like you said, many people will not end up doing something they "love" anyway, leaving them in major debt, with a miserable job and a list of things they wish they would've done differently.