NY Fed says Higher Ed still good investment

A college degree is still a good investment, despite rising tuition costs and falling wages, according to a new study from the Federal Reserve Bank of New York.

The return on both a bachelor’s degree and associate’s degree has held steady at about 15 percent for more than a decade, “easily surpassing the threshold for a sound investment,” economists Jaison Abel and Richard Deitz wrote in the report. That’s primarily because wages for people without college degrees have also fallen, keeping the college wage premium at an all-time high, and lowering the opportunity cost of going to school — that is, it’s a better alternative than not going to school.

“Indeed, once the full set of costs and benefits is taken into account, investing in a college education still appears to be a wise economic decision for the average person,” the authors wrote.

The study analyzed the economic returns of a college degree since the 1970s. Between 1980 and 2001, the average wage jumped 31 percent for a worker with a bachelor’s degree. By contrast, wages fell 10.3 percent for those workers between 2001 and 2013. Meanwhile, the sticker price for bachelor’s or associate’s degrees has tripled, the study found.


Not surprisingly, the return varies significantly across majors, with engineering majors earning up to a 21 percent rate of return, while education majors earned just 9 percent. Still, that’s better than the 7 percent annual return investors in the stock market have earned since 1950, the report pointed out.