College Still Makes Sense, According to Fed Study

Despite the rising cost of higher education and the decline in real wages after graduation, a recent study by the New York Federal Reserve shows that both associate’s and bachelor’s degrees still remain valuable investments.

According to an article in The Wall Street Journal, economists from the NYFR calculated the yearly return on investment, or ROI, to be 15% for graduates of two- and four-year institutions. This figure has remained constant for over a decade and is much higher than the typical return on stocks and bonds.

This being said, the article poses an important question: is a bachelor’s degree from a four-year, flagship public university worth much more than an associate’s degree from a two-year community college?

For example, figures from studies conducted in Indiana show that, one year after graduation, students who graduated in two years from Ivy Tech Community College make larger salaries than those who graduated in four years from the state’s flagship campus, Indiana University.

Although the graduates of the community college may make more money immediately upon entering the workforce—in trades such as nursing, plumbing, and electric—the WSJ notes that this study does not take into account the greater earning potential of a graduate of a four-year institution.

“The earnings of a four-year degree [start] to surpass those of an associate-degree holder five years after graduation, with the gap growing to nearly $7,000 annually after 10 years,” states the WSJ article.

In addition, while the community college graduate in the specific Indiana study made more than the university graduate, that was just one case. In general across the country, the Fed reports that a bachelor’s degree holder, on average, makes about $65,800, while an associate’s degree holder makes about $46,300.

While this study shows important data related to the costs and value of higher education, it is not all encompassing. It does not take into account the non-monetary value of attending a four-year college, such as the personal development that occurs throughout the time spent at school. Plus, it only compares public flagship universities and their community college counterparts without referencing any data pertaining to private universities.

As Boston College students, we know that the cost of attending a prestigious private university is high. We are faithful, however, that doing so will pay off by allowing us good careers and high earning potential, as well as an experience that will shape us into the men and women we want to be. Hopefully, the Fed will soon conduct studies on private universities to reassure us that this faith in the value of our degrees is valid. In the meantime, the key takeaway here is that the cost of higher education is still worth the benefits that it yields after graduation.

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