Commentary: College degree is still worth the cost
This article first appeared in the St. Louis Beacon, Nov. 6, 2012 - The College Board has released its most recent survey of the cost of college. As headlined in the New York Times, “Report says college prices, once stable, are up again.” More bad news, right?
Not so fast. The report notes that, while the sticker price of a college education has risen, the price actually paid by students (or, more likely, their parents) has risen less rapidly. Across most universities, nearly two-thirds of students get some kind of break on tuition. As reported by the College Board, the sticker price for tuition, fees, room and board at public four-year colleges and universities averaged $17,860 in 2012. The net price, however, was only $12,110.
Perhaps you are thinking that $12,000 is nothing to sneeze at. Note that this price includes room and board. Back of the envelope calculations quickly reveal that it would be difficult to live for a full school year, approximately 30 weeks, for much less. Staying in the local motel at $50 a night would cost a little more than $11,000. And, even with the “free” breakfast buffet, adding one more meal a day would quickly elevate that cost of living.
Instead of arguing that $12,000 a year for college really is a bargain, what about the case that a college education should be viewed as an investment and not merely consumption. Using statistics from the College Board’s most recent (2010) compilation of the benefits of a college degree, does investing in a college degree, even as expensive as it is, pay off?
Let’s consider the payoff to a college education across several broad areas.
Earnings. College graduates, on average, enjoy a significantly higher stream of earnings during their working life. Individuals with a college degree have expected lifetime earnings that are nearly two-thirds greater than someone with a high school diploma. Those with an associate’s degree or some college also improve their earnings potential, raising it by 25 percent above the high school graduate.
Based on 2008 data, the College Board estimates that average college graduate will earn about $1.13 million over their working life, assumed to be from age 22 to 64. The estimated cumulative earnings for the average high school graduate are about 70 percent of that figure, or a little over $797,000.
Given recent concerns about unemployment, more education also makes you more employable. Even during the worst of times, college graduates fare better in the job market. In 2009 the unemployment rate for those with a bachelor’s degree or higher stood at 4.6 percent compared with a 9.7 percent unemployment rate for those with only a high school degree.
Health. It is well known that education is an important factor in improved health. Educated individuals are more likely to keep up on the latest health news and take it to heart. Smoking rates among those with a bachelor’s degree or more was 9 percent in 2008, compared to 27 percent for the average high school graduate.
Exercise rates also rise with educational attainment. Twenty-nine percent of the average adult high school graduates engage in vigorous exercise. For college graduates the figure jumps to 52 percent. This difference helps explain the fact that obesity rates among different education levels are so different. The obesity rate among adults with only a high school degree was 38 percent in 2008, compared with a 25 percent rate among those with a college degree.
The price of a college degree has increased, but so has the return, not only to the individual, but also to society. From higher lifetime earnings to a healthier population, education creates positive spillovers that we should not ignore.
Rik Hafer is a distinguished research professor in the Department of Economics and Finance at Southern Illinois University Edwardsville and a scholar at the Show-Me Institute.