With student debt soaring at a time when jobs are scarce, the precise financial value of a college degree has come under intense scrutiny. Add one more discouraging calculation to the list.
For years, back-of-the-envelope estimates suggested that a bachelor’s degree translates into lifetime earnings of more than $1 million on top of anything one earns with just a high school diploma. The College Board later estimated the value was $800,000. Two years ago, a sobering and widely read report further downgraded the figure to $280,000.
Now at least we seem to be moving the right direction. In a report on college savings plans, the College Saving Plans Network cites research in the Los Angeles Times putting the value of a four-year degree at $570,000. Whew. That’s better. But it may still disappoint families laying out $200,000 for four years at a private school or for students graduating with tens of thousands of dollars in student debt.
Despite this crushing reality check, and some cogent arguments that the price is simply too high to be worthwhile, families continue to invest heavily in higher education. Assets in 529 college savings plans hit a record $165 billion last year. That’s up 5% from the previous year and it was not simply the product of investment gains in a recovering market. Nearly $20 billion of new money flowed into these accounts.
More than half of the nearly 11 million 529 plan accounts received contributions last year, the CSPN report notes. That is a record number of accounts—up nearly 7% since 2010. Meanwhile, the report states that students with their name on a college savings account are six times more likely to attend a four-year university.
(MORE: Inside the Jobless Generation)
A large part of the college value proposition has to do with employability. In the U.S., 62% of jobs require a degree beyond high school; that share will rise to 75% by 2020. In 2010, 90% of college grads from 2008-2010 were employed while only 64% of peers not attending college had jobs.
The college value question continues to attract the attention of researchers. Some have looked at career incomes of graduates from private vs. public and from brand name vs. less competitive universities. Others have looked at the values of specific degrees and of graduate degrees and specific M.B.A. programs. Interestingly, no one’s calculus attempts to place a value on personal growth. At these prices, I suppose you’re expected to go find yourself at a poetry reading.