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Do College Graduates Really Earn More Money Over Their Lifetime

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Once again a popular website has published a story about how much more money college graduates earn over their lifetimes than workers with only a high school diploma.

“The difference between a bachelor’s degree and a high school diploma is at least seven figures over a lifetime”, says Christina Couch from Bankrate.com in her article “The Million Dollar Difference of a College Degree“.

Using data from a Georgetown University study, Couch cited several examples where college graduates did “earn” substantially more than their non college educated counterparts. In fact, of the 5 distinct job categories that were profiled in the article, all of them earned at least 1.3 million more in lifetime salary.

Unfortunately, the article fails to consider the opportunity cost of the actual college education expense itself. Instead of paying $75,000 over four years for tuition, room and board, what if you decided not to go to college and went straight into the work force (as this article suggests is possible).

What would that $75,000 grow to over your working lifetime (starting at 18 years old and retiring at 65 = 47 working years) if you instead invested it in a mutual fund earning a realistic 7% return on investment.

A quick entry into Excel reveals this investment would grow to $1,803,428! In other words, you’d actually make $500,000 more over your lifetime by not going to college assuming you can gain employment in the jobs profiled without a college degree as Couch’s article does.

Things are not always as cut and dry as they seem!


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{ 4 comments… add one }

  • CF September 7, 2012, 12:11 am

    That’s assuming you were able to get a job at age 18 that you’d be happy with for the next 40-odd years! I don’t think I was qualified for anything worthwhile when I was 18 :) I think the difference between going to trade school versus college or university is more interesting. I suspect many people would be better off going to a technical institute rather than a 4 year college.

  • Joyce September 22, 2012, 6:46 pm

    I think these calculations, like most else in life, should add in the caveat of ‘it depends’… Meaning will a college education be worth the cost, well, it depends on the field of study / post-college career options, school selected, etc.. For example, my degree is in Electrical Engineering and I got it at one of the best public colleges (so it’s about as economical as possible for a high-paying degree) and I was able to immediately get a high-paying job, which over-time has gone up in value exponentially. So for me, it was a fantastic value that I’ve never regretted. However, if I would have gotten the degree at a private university without a significant scholarship the value would have been good, but not nearly as good. Or if I would have gotten a different degree, perhaps liberal arts major, I likely would have been MUCH better off just going right into the work force. So, it depends on other variables…

  • Cato December 18, 2012, 10:10 pm

    If you went straight into the workforce, there would be NO $75k to invest, as you would have foregone college and no one would be loaning you $75k to stick into the stock market. Terrible analogy, somewhat akin to the Fallacy of Broken Windows. There are no opportunity costs here. You either go – or you don’t. Take college, but learn something practical that you can apply immediately in the workforce upon graduation.

  • Free Money Minute September 12, 2013, 3:52 pm

    Interesting way of looking at it. This assumes you have $75k laying around to invest now. Most people incur debt, get scholarships or grants and do not pay for the entire college bill for quite a few years after graduating. You do have a point though, why not get right into the workforce and start putting money away right away. You can take advantage of any tuition aid programs your employer offers to get a degree while you are working.

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