Skeptical of the four-year college degree? It's still your best bet to make money.
Backlash against college as a common stop on the road to adulthood has mounted over the past decade.
Critics say four-year degree programs saddle most students with five-digit debt without a clear path from classroom to career.
Nearly half (46%) of all families surveyed in November and December 2020 by Gallup for the Carnegie Corporation of New York said they would prefer their children attend alternatives to four-year institutions – even when there were no financial barriers.
But when you compare the value of a four-year degree with other credentials – a high school diploma, certificate programs and associate degrees – it still puts workers at an advantage in the labor market and leads to higher lifetime earnings, on average.
If a college degree is an investment, it's a good one, according to the New York Federal Reserve.
The annual return on a typical four-year degree is around 14%, it calculates, well above the threshold of “good” returns for stocks (around 7%) and bonds (3%).
In dollar terms, graduates with a bachelor's degree will earn on average about $78,000 annually, compared with a high school diploma earner who receives around $45,000 annually, according to 2019 data from the New York Federal Reserve.
However, “on average” doesn't mean that the return on your education, or college earnings premium, will always be a gain. Where you attend school, how much debt you take on, what you study and where you live after school all help determine your return. Many of those factors are influenced by your race, ethnicity and gender.
Student loan debt is difficult to avoid and even more challenging to repay. College costs rose 117% from 1985-86 to 2018-19, according to federal data. Wages, meanwhile, didn't keep pace, growing only 19% during the same period, according to the Federal Reserve Bank of St. Louis.
However, loans are still the primary vehicle for families without wealth to obtain college degrees. In order to make your degree worth it, you have to earn enough to justify it. That means carrying debt that won't put you underwater – a manageable student loan payment is around 10% of your discretionary after-tax income.