Is a college degree worth the time and money?

College costs continue to climb faster than inflation. Students are graduating with five (or six) figure student loans. Is it worth dedicating 4 years of our lives to rack up this debt? Does a college degree pay off financially over the course of the average graduate’s life?

The numbers

The more education a person has, the more money they make over their lifetime. A person with a bachelor’s degree makes 66% more than a person with just a high school education. A person with a Master’s degree makes 97% more, a doctorate increases your earnings by 158%, and a professional degree results in 178% higher earnings. That’s a lot of money.

But the question is not whether going to college results in higher average incomes. The answer to that question is obviously yes.

What we want to figure out is if college is worth the investment. There are actually two different costs to get a college degree – the obvious financial cost of tuition, books, etc, plus the lost income from attending college for 4 years instead of working.

Cost of college – financial

This includes tuition, fees, books, and other expenses. I’m not including room and board, as you’d need to pay those expenses whether you’re working or going to school. According to, in-state tuition plus books and fees is $14,363 for 1 year, which works out to $57,452 for 4 years. Some schools are more expensive, some are less expensive, but I live in Southern California and UCLA is a great school, so I’m going to use it in this example.

Of course, most students don’t pay the “list price” for college. Less wealthy students usually receive need based assistance. Students with good grades or athletic prowess will receive merit based scholarships or grants. Since financial aid varies from student to student we’ll ignore it for now and just remember that this is a “worst case” analysis of the cost of college.

If you skip college you save that $57,452. If that money was instead saved and invested, then at 8%/year for 40 years, the $57,452 saved by not going to college becomes $1,248,117.21 at retirement.

That’s a pretty big number, but there’s still another cost to account for.

Cost of college – opportunity cost

The second cost of going to college is the opportunity cost of not working for those 4 years. The average high school graduate makes $30,000/year, or $120,000 for the 4 years the college student is in school.

If we again assume 8% returns, this works out to be $2,606,942.58 after 40 years.

Benefit of college – higher income

The average college graduate makes $49,900. That’s $19,900 more than the high school graduate. If we assume that both the college graduate’s income and the high school graduate’s income increase at the rate of inflation, then this difference will also increase at the rate of inflation. For example, if over time the high school graduate’s income doubles to $60,000 and the college graduate’s income doubles to $99,800, the difference between them has also doubled, to $39,800.

Studies have shown that the percentage increase in income from having a college education has actually increased over the years. This is probably because in the past there were large numbers of good paying manufacturing jobs available to those without college degrees. Now that those jobs have largely been shipped overseas the typical jobs available to high school graduates are lower paying.

Benefit of college – lower unemployment

In addition to a higher salary, unemployment drops linearly with educational attainment. Last year workers with a high school degree had 5.4% unemployment rate, those with a bachelor’s degree were at 2.8%, and those with a professional degree had a mere 1.5% rate of unemployment.

This is a significant factor, as unemployment can devastate a family’s finances. Given the abysmally low savings for most families in the US, it would only take a month or two of unemployment to wipe out all savings for most families. The fact that a degree halves your chances of unemployment is significant and removes a significant amount of risk from a family’s finances.

To capture the financial impact of unemployment I’ll reduce the average high school graduate’s income by 5.8% and the average college grad’s income by 2.8%.

The calculations

Since I’m a math geek I’ve put all of these numbers into an Excel spreadsheet so I could run the numbers and see if, in fact, college makes financial sense. If it DOES make financial sense I wanted some way to quantify the value.

Here is the table I put together.

Not going to college College Value of college degree
Year Cumulative value of saved tuition + 4 years earnings Additional yearly income w/ college degree Cumulative value of college degree
1 $170,972.00 $18,503.75 $19,984.05 -$150,987.95
2 $184,649.76 $19,058.86 $42,166.34 -$142,483.42
3 $199,421.74 $19,630.62 $66,740.72 -$132,681.02
4 $215,375.48 $20,219.54 $93,917.08 -$121,458.40
5 $232,605.52 $20,826.13 $123,922.67 -$108,682.85
6 $251,213.96 $21,450.91 $157,003.47 -$94,210.49
7 $271,311.08 $22,094.44 $193,425.74 -$77,885.34
8 $293,015.96 $22,757.27 $233,477.65 -$59,538.31
9 $316,457.24 $23,439.99 $277,471.06 -$38,986.18
10 $341,773.82 $24,143.19 $325,743.39 -$16,030.43
11 $369,115.72 $24,867.49 $378,659.75 $9,544.02
12 $398,644.98 $25,613.51 $436,615.12 $37,970.14
13 $430,536.58 $26,381.92 $500,036.80 $69,500.22
14 $464,979.51 $27,173.37 $569,386.99 $104,407.48
15 $502,177.87 $27,988.58 $645,165.61 $142,987.74
16 $542,352.10 $28,828.23 $727,913.35 $185,561.25
17 $585,740.27 $29,693.08 $818,214.94 $232,474.68
18 $632,599.49 $30,583.87 $916,702.72 $284,103.24
19 $683,207.45 $31,501.39 $1,024,060.44 $340,853.00
20 $737,864.04 $32,446.43 $1,141,027.42 $403,163.38
21 $796,893.16 $33,419.82 $1,268,403.02 $471,509.86
22 $860,644.62 $34,422.42 $1,407,051.48 $546,406.86
23 $929,496.19 $35,455.09 $1,557,907.09 $628,410.91
24 $1,003,855.88 $36,518.74 $1,721,979.90 $718,124.02
25 $1,084,164.35 $37,614.31 $1,900,361.75 $816,197.39
26 $1,170,897.50 $38,742.73 $2,094,232.84 $923,335.34
27 $1,264,569.30 $39,905.02 $2,304,868.89 $1,040,299.59
28 $1,365,734.85 $41,102.17 $2,533,648.74 $1,167,913.89
29 $1,474,993.63 $42,335.23 $2,782,062.69 $1,307,069.06
30 $1,592,993.12 $43,605.29 $3,051,721.42 $1,458,728.29
31 $1,720,432.57 $44,913.45 $3,344,365.65 $1,623,933.08
32 $1,858,067.18 $46,260.85 $3,661,876.63 $1,803,809.45
33 $2,006,712.55 $47,648.68 $4,006,287.33 $1,999,574.77
34 $2,167,249.56 $49,078.14 $4,379,794.70 $2,212,545.14
35 $2,340,629.52 $50,550.48 $4,784,772.80 $2,444,143.28
36 $2,527,879.88 $52,067.00 $5,223,786.98 $2,695,907.09
37 $2,730,110.28 $53,629.01 $5,699,609.26 $2,969,498.99
38 $2,948,519.10 $55,237.88 $6,215,234.91 $3,266,715.81
39 $3,184,400.63 $56,895.01 $6,773,900.32 $3,589,499.69
40 $3,439,152.68 $58,601.86 $7,379,102.35 $3,939,949.68

Here’s what the numbers mean:

  • The first column is obvious – these are the 40 years in an average person’s career.
  • The second column is the savings from not paying for college plus the income from 4 years of working instead of attending college. For the first year this works out to
    • Cost of attending college + (4 years of work –  unemployment rate), or
    • $57,452 + (120,000 – 5.4%) = $170,972.00
    • This number is then assumed to be invested and earning 8% returns per year for the next 40 years. So in year two the value is $170,972 + 8% = $184,649.76
  • The third column is the difference between salary of the average person with a college degree and the salary of a person with a high school degree, or
    • (College graduate salary – unemployment rate) – (high school graduate salary – unemployment rate)
    • Year one = ($49,900 – 2.4%) – ($30,000 – 5.4%) = $18,503.75
    • This number is then increased by 3%/year to account for inflation
  • The fourth column is the total of taking the additional income earned by a college graduate and investing it @ 8%, or
    • (Previous year’s total + this year’s additional income) + 8% gains, or
    • Year one = (0 + 18,503) *1.08 = $19,984.05
    • Year two = ($19,984.05 + $19,058.75) + 8% = $42,166.34
  • The final column is just the difference between the sum of the value of the college degree vs. the money saved from not attending college


As expected, a student would be better off early in their career by not going to college. The money saved by not going to college, plus the earnings for 4 years of work are significant – at the end of the first year the non-college graduate is $150,987.95 wealthier.

In the second year the college graduate only makes up $8,504.53 of ground. The college graduate is still behind the high school graduate for the first 11 years! That means it takes until around age 35 for the average college graduate to catch up to the high school graduate. However, at this point the college graduate is making significantly more money than the high school graduate and is rapidly pulling away. By year 25 the college graduate is $816,197.39 ahead, and by retirement the college graduate is almost $4M ahead of the high school graduate in lifetime earnings!

A few other things to consider

  • This assumes the college graduate receives NO scholarships or grants
  • This assumes the high school graduate makes the average high-school only salary in his/her first year of work. This is obviously unrealistic, as a brand new worker would be on the low-end of the wage scale, not at the average
  • This does not take into account the value of a college degree likely resulting in a more fulfilling job in addition to a more lucrative one
  • This does not take into account the intrinsic value of an education – learning more about the world around us, being exposed to new and interesting ideas, etc.
  • This assumes the value of an average degree. The numbers are likely to be better with a STEM degree and worse for a liberal arts degree.

I was actually surprised that it would take 11 years for the average graduate to catch up to a high school graduate, but I was also surprised at the magnitude of the difference by the time retirement rolls around.

The somewhat sad aspect of all of this is that a person who forgoes college will initially think they made the right decision. Until they are in their mid 30’s they’ll be ahead of their peers who went to college. Then suddenly the college grads catch up. By the time they are in their 50’s the college grads are practically lapping the high school grads. If you’re a high school graduate you’ve suddenly gone from doing well relative to everybody else to being left in the dust. It’s no wonder that a lot of people feel the economy isn’t working for them.

What are your thoughts on college? Are there any other financial benefits of college that I’ve missed?


6 thoughts on “Is a college degree worth the time and money?

  1. Unless someone believes that their opportunities at 18 to 20 is likely to best for a foreseeable future, going to college is the better choice. The connections you make, the friends you’ll meet are likely to be your lifetime friends and helpful to your future career as well. It doesn’t make much sense to go to immense debt to get a 4 year degree, but the glorification of the college dropout succeeding as multimillionaire entrepreneur is the exception. If someone truly doesn’t believe in a 4 year degreee, then at least go to a trade school and learn a valuable skill. That’s what I’d tell my kids once they’re older.

    1. The dropout millionaire is clearly an exception, not the norm.

      I wonder what would happen if you analyzed what would happen if you took a pool of college bound kids and instead had them enter the workforce. My thinking is this – is college actually adding value to the kids? Or is it that college acts as a filter by only accepting the smart, hard-working kids who did well enough in high school to get into and succeed in college?

      1. College definitely does act as a filter, but my guess regarding your hypothetical scenario is that it’d depend on which college bound kids they sample. If they take several hundred Ivy league or Cal Tech/MIT bound kids, majority of them would do very well and significantly outperform their peers as a group career wise regardless of whether they actually attend and graduate from college. However, if you take random sample of state college bounds students, then I would think graduating from college would help their careers immensely. I think most people are not self motivated and disciplined enough to work hard academically, especially at a young age when they’re exposed to so much temptations and distractions.

  2. That’s good to know that people with degrees experience lower unemployment. Education must look valuable to employers. I’ve been thinking about going to school since I’m working a dead-end job.

    1. On one hand, you’d think that because higher education result in higher salary, the higher education/higher salary demographic would be the first to get cut in a recession.

      But after further thought, I think what’s more likely at play here is that, during a recession, unemployment spikes. Companies have tons of applicants for any open job. Companies need a way to weed out applicants to get the number down to something more manageable. Filtering on education is one reasonable, easy, and defensible way to do that.

      It’s also true that, in general, a person with an education can always do a job that doesn’t require the education, but not vice-versa. That is, if needed, a physicist could do a janitor’s job with a brief amount of trading, but a janitor couldn’t do a physicist’s job without many years of additional education (in effect, getting a BS in Physics).

  3. I find that most people who aren’t involved in Government or STEM fields are less successful when they wait to enter a field.
    I feel there are a few reasons for this.

    I’ll take my high school educated brother who works for a Gas company, and one of my college educated friends with a Master’s degree from USC.

    My brother makes more than my friend for two reasons. One is the field in which they work. My brother worked his way up from a meter reader to the manager of the northern region of a Gas company with room to advance. My friend struggles in his production company along with his lawyer wife because both fields have too many people with too many degrees. Hopefully one of you economics majors can explain what happens to value when supply exceeds demand.

    The other thing is time put into the field in which one wishes to work. My friend and his wife struggle just to pay their mortgage after their massive loans. They are the low men on the totem pole , so to speak, because of the delay in entering the work force so they will have to wait even longer than the several years spent getting their degrees.

    My brother’s steady check along with his investments and limited debt allowed him to accrue wealth. My friend and his wife hope to eventually accrue wealth.

    The fact is my brother already had his foot in the door earlier for even further advancement. After all, he has a proven record and most employers realize that his 50+ hours in the field means he is much more educated in what needs to be done than a college kid with less than 20 hours of theory in areas unrelated to the job. My friend and his wife didn’t have quite the lead needed to gain the experience to earn.

    Some would argue that in the end my friend will make more, but seeing what lawyers and production companies make on average proves that thought wrong. Plus I would mention my brother , along with many of the technicians such as I once was, make more than the few senior engineers and marketing specialists with degrees.

    Having worked with engineers myself it is definitely not true that you can teach someone with a degree to do the job of someone with actual technical skills.

    One is book learning with no real skill, and the other is skill and practical knowledge which can’t be taught without putting in the hours.

    Watching engineers trying to work with their hands, and explain why something should work as opposed to watching what the linemen do to make it actually work is entertaining at least.

    I have a degree myself which lead to a low paying job, but then I changed careers where I made much more. I was not hired because of my degree as proven by the numerous other technicians hired without degrees. My entry level technician job paid more than my friend’s wife made at her law firm for the record.

    The other thing nobody talks about is that it is much easier to go back and get a degree if you feel the need to use it for advancement than getting experience.

    I wonder how they prove those with degrees experience less unemployment when in reality the majority of jobs do not require degrees?

    Do the government employes with degrees want to prove their worth by skewing data perhaps?

    Or maybe it’s because so many people have degrees that have nothing to do with their jobs, like myself, that it seems to have a correlation when in reality it doesn’t?

    Invest wisely whether it’s in time spent forging a career or time spent learning theory in the classroom. Philosophy majors make less than bus drivers, and CEO’s make more than fast food workers.

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