ED470038 2002-00-00 The Value of a

College Degree. ERIC Digest.

ERIC Development Team

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Table of Contents

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The Value of a College Degree. ERIC Digest................................. 1

THE ECONOMIC VALUE OF HIGHER EDUCATION.................... 2

OTHER BENEFITS OF HIGHER EDUCATION........................... 2

COLLEGE ATTENDANCE VERSUS COLLEGE COMPLETION.......3

CONCLUSION.................................................................. 3

REFERENCES.................................................................. 4

ERIC Identifier: ED470038

Publication Date: 2002-00-00

Author: Porter, Kathleen

Source: ERIC Clearinghouse on Higher Education Washington DC.

The Value of a College Degree. ERIC Digest.

THIS DIGEST WAS CREATED BY ERIC, THE EDUCATIONAL RESOURCES

INFORMATION CENTER. FOR MORE INFORMATION ABOUT ERIC, CONTACT

ACCESS ERIC 1-800-LET-ERIC

INTRODUCTION

The escalating cost of higher education is causing many to question the value of

continuing education beyond high school. Many wonder whether the high cost of tuition,

the opportunity cost of choosing college over full-time employment, and the

accumulation of thousands of dollars of debt is, in the long run, worth the investment.

ED470038 2002-00-00 The Value of a College Degree. ERIC Digest. Page 1 of 5
The risk is especially large for low-income families who have a difficult time making

ends meet without the additional burden of college tuition and fees.

In order to determine whether higher education is worth the investment, it is useful to

examine what is known about the value of higher education and the rates of return on

investment to both the individual and to society.

THE ECONOMIC VALUE OF HIGHER

EDUCATION

There is considerable support for the notion that the rate of return on investment in

higher education is high enough to warrant the financial burden associated with

pursuing a college degree. Though the earnings differential between college and high

school graduates varies over time, college graduates, on average, earn more than high

school graduates. According to the Census Bureau, over an adult's working life, high

school graduates earn an average of $1.2 million; associate's degree holders earn

about $1.6 million; and bachelor's degree holders earn about $2.1 million (Day and

Newburger, 2002).

These sizeable differences in lifetime earnings put the costs of college study in realistic

perspective. Most students today-- about 80 percent of all students--enroll either in

public 4-year colleges or in public 2-year colleges. According to the U.S. Department of

Education report, Think College Early, a full-time student at a public 4-year college pays

an average of $8,655 for in-state tuition, room and board (U.S. Dept. of Education,

2002). A full-time student in a public 2-year college pays an average of $1,359 per year

in tuition (U.S. Dept. of Education, 2002).

These statistics support the contention that, though the cost of higher education is

significant, given the earnings disparity that exists between those who earn a bachelor's

degree and those who do not, the individual rate of return on investment in higher

education is sufficiently high to warrant the cost.

OTHER BENEFITS OF HIGHER EDUCATION

College graduates also enjoy benefits beyond increased income. A 1998 report

published by the Institute for Higher Education Policy reviews the individual benefits that

college graduates enjoy, including higher levels of saving, increased

personal/professional mobility, improved quality of life for their offspring, better

consumer decision making, and more hobbies and leisure activities (Institute for Higher

Education Policy, 1998). According to a report published by the Carnegie Foundation,

non-monetary individual benefits of higher education include the tendency for

postsecondary students to become more open-minded, more cultured, more rational,

more consistent and less authoritarian; these benefits are also passed along to

succeeding generations (Rowley and Hurtado, 2002). Additionally, college attendance

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has been shown to "decrease prejudice, enhance knowledge of world affairs and

enhance social status" while increasing economic and job security for those who earn

bachelor's degrees (Ibid.)

Research has also consistently shown a positive correlation between completion of

higher education and good health, not only for oneself, but also for one's children. In

fact, "parental schooling levels (after controlling for differences in earnings) are

positively correlated with the health status of their children" and "increased schooling

(and higher relative income) are correlated with lower mortality rates for given age

brackets" (Cohn and Geske, 1992).

THE SOCIAL VALUE OF HIGHER EDUCA5ION

A number of studies have shown a high correlation between higher education and

cultural and family values, and economic growth. According to Elchanan Cohn and

Terry Geske (1992), there is the tendency for more highly educated women to spend

more time with their children; these women tend to use this time to better prepare their

children for the future. Cohn and Geske (1992) report that "college graduates appear to

have a more optimistic view of their past and future personal progress."

Public benefits of attending college include increased tax revenues, greater workplace

productivity, increased consumption, increased workforce flexibility, and decreased

reliance on government financial support (Institute for Higher Education Policy, 1998).

COLLEGE ATTENDANCE VERSUS COLLEGE

COMPLETION

In their report, College for All? Is There Too Much Emphasis on Getting a 4-Year

College Degree? Boesel and Fredland estimate that around 600,000 students leave

4-year colleges annually without graduating. These noncompleters earn less than

college graduates because they get fewer years of education. More surprising, they

tend to earn less than or the same amount as 2-year college students who have as

much education. Furthermore, 2-year college students show about the same gains in

tested cognitive skills for each year of attendance as 4-year college students. Students

at 4-year colleges also pay more in tuition and are more likely to have student loan

debts than 2-year students (Boesel and Fredland, 1999, p. viii). The authors conclude

that high school graduates of modest ability or uncertain motivation-factors that increase

their chances of leaving college before graduation-would be well-advised to consider

attending 2-year, instead of 4-year, colleges. If they did, they would probably realize the

same earnings and cognitive skill gains at lower cost and with less debt. In order to

maximize the return on their time and monetary investment, students who do choose to

enroll in 4-year colleges should do everything in their power to graduate. (Boesel and

Fredland, 1999, p.ix).

CONCLUSION

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While it is clear that investment in a college degree, especially for those students in the

lowest income brackets, is a financial burden, the long-term benefits to individuals as

well as to society at large, appear to far outweigh the costs.

REFERENCES

Boesel, D., & Fredland, E. (1999). College for all? Is there too much emphasis on

getting a 4-year college degree? Washington, DC: U.S. Department of Education, Office

of Educational Research and Improvement, National Library of Education.

Cohn, E., & Geske, T.G. (1992). Private Nonmonetary Returns to Investment in Higher

Education. In Becker, W. & Lewis, D. The Economics of American Higher Education.

Boston, MA: Kluwer Academic Publishers.

Day, J.C., & Newburger, E.C. (2002). The Big Payoff: Educational Attainment and

Synthetic Estimates of Work-Life Earnings. (Current Population Reports, Special

Studies, P23-210). Washington, DC: Commerce Dept., Economics and Statistics

Administration, Census Bureau. [On-Line]. Available:

http://www.census.gov/prod/2002pubs/p23-210.pdf

The College Board. (2001). Trends in Student Aid 2001. New York: The College Board.

Institute for Higher Education Policy (1998). Reaping the Benefits: Defining the Public

and Private Value of Going to College. The New Millennium Project on Higher

Education Costs, Pricing, and Productivity. Washington, DC: Author.

Rowley, L.L., & Hurtado, S. (2002). The Non-Monetary Benefits of an Undergraduate

Education. University of Michigan: Center for the Study of Higher and Postsecondary

Education.

Schultz, T.W. (1961). Investment in Human Capital. American Economic Review, 51:

1-17.

U.S. Department of Education (2001). Digest of Education Statistics 2001. [On-Line].

Available: http://nces.ed.gov/pubs2002/digest2001/tables/PDF/table170.pdf

U.S. Department of Education (2000). Think College Early: Average College Costs.

[On-Line]. Available:

http://www.ed.gov/offices/OPE/thinkcollege/early/parents/college_cos ts.htm

Wolfe, B.L. (1994). External Benefits of Education. International Encyclopedia of

Education. Oxford; New York: Pergamon Press.

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The mission of the ERIC system is to improve American education by increasing and

facilitating the use of educational research and information to effect good practice in the

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activities of learning, teaching, educational decision making, and research, wherever

and whenever these activities take place.

This publication was partially prepared with funding from the Office of Educational

Research and Improvement, U.S. Department of Education, under contract no.

RR-93-00-0036. The opinions expressed here do not necessarily reflect the positions or

policies of OERI or the department. Permission is granted to copy and distribute this

ERIC-HE Digest.

Title: The Value of a College Degree. ERIC Digest.

Document Type: Information Analyses---ERIC Information Analysis Products (IAPs)

(071); Information Analyses---ERIC Digests (Selected) in Full Text (073);

Available From: ERIC Clearinghouse on Higher Education, One Dupont Circle, Suite

630, Washington, DC 20036-1183. Tel: 800-956-7739 (Toll Free).

Descriptors: College Graduates, Costs, Degrees (Academic), Educational Attainment,

High School Graduates, Higher Education, Paying for College

Identifiers: ERIC Digests, Return on Investment

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