The Value of Higher Education: Research and Resources

As the rising cost of college and increasing student debt levels continue to garner public attention in the media and on Capitol Hill, the value of a higher education has been closely scrutinized. In recent months, several research reports have examined the long-term financial benefits of a higher education—and uniformly concluded that individuals with some form of higher education reap significant fiscal benefits. Following is a list of the most recent studies, along with a brief summary of their findings. In addition to the list below, NASFAA has guides on understanding financial aid, qualifying for it, and cutting college costs.

Updated: 12/10/2014 

  • "Does College Matter?," by the Federal Reserve Bank of San Francisco: The economic benefits of a college degree continue to outweigh the costs of obtaining a degree, even in the face of constant changes in higher education, according to a series of essays from the Federal Reserve Bank of San Francisco (FRBSF). Data show that the “boost to earnings from a college degree is large and persistent” and “leads to greater economic opportunities over a lifetime,” according to the essay written by Mary C. Daly, senior vice president and associate director of research at FRBSF, and Yifan Cao, a research associate. New college graduates begin with earnings only slightly higher than high school graduates – about $5,000 to $6,000 more – but over time the gap increases. According to the authors, the income gap increases to over $25,000 per year after 15 years. The average college graduate in 2011 earned about $20,000 more annually than the average high school graduate and the college earnings premium has averaged about $20,300 annually over the last four decades. And while the recent economic recession impacted young Americans and recent college graduates, the value of a college degree and the insurance it can provide was proven, the authors write. College graduates fared better in both employment and pay during the recession, with less severe pay cuts and unemployment rates about half as high as those for high school graduates.(April 2015) 
  • "Illinois Community College System Economic Impact Study," by the Illinois Community College Board: A community college education in Illinois offers an average annual return rate of 14.2 percent and increases workers' earnings even during a recession, according to a study from the Illinois Community College Board. The study shows a 57 percent increase in the number of state community college graduates between 2000 and 2012. Graduates of Illinois community colleges can expect total lifetime earnings of over $570,000, which is 44 percent more than those who do not complete a community college program. In addition, students who completed their community college coursework in fiscal year (FY) 2011 saw a 25.3 percent increase in earnings over their earnings before enrollment. The study also examined the economic benefits of community colleges, showing that nearly 9 in 10 student stay in Illinois to work in the 5-year period after completion. State community colleges generated $3.1 billion in total economic output and nearly 51,000 jobs in FY 2012. (December 2014) 
  • "Economic Confidence, Education, And Student Debt," by HPS-CivisScience: While some feel burdened by student debt when it comes to making career and consumer decisions, going to college continues to be worth it, according to a study by HPS-CivisScience. The study found that individuals who attend college, including those who borrow, have greater economic confidence, particularly among those who graduate. Using the HPS-CivicScience Economic Sentiment Index (ESI), the study's authors report that college graduates have an ESI that is five points higher than people with only some college and eight points higher than people with just a high school diploma or less. And while student debt can impact confidence in consumer and career choices like buying a house, the study found that those who completed their higher education were slightly more economically confident than non-completers. "Overall, these findings confirm intuition that all else equal, student debt may impact consumer and career decisions," according to the report. "But regardless of the debt, going to college is worth it." (October 2014) 
  • A College Education Saddles Young Households with Debt, but Still Pays Off” by the Federal Reserve Bank of Cleveland: A college degree is likely to have a considerable impact on household earnings, favoring the college graduate in the long-run, despite the rapidly rising cost students and families incur according to researchers Daniel Carroll and Amy Higgins. The report looks at average student loan debt, median wages, and skill premium for people with a college degree, some college, or high school diploma/GED; it finds that higher education normally awards sizable benefits in the labor market. “In 2010, the median young household headed by a college graduate earned $42,693 in wage income while the median non-college household earned only $26,429, a premium of 61.5 percent,” it states. Although students will have a substantial amount of college debt initially, it balances out and pays off in the end. “In many professions, a college degree combined with work experience opens the doors to senior-level administrative positions and higher salaries,” the authors’ state. (July 2014) 
  • “Do the Benefits of College Still Outweigh the Costs?” by the Federal Reserve Bank of New York: A college education still remains a good investment, regardless of rising tuition and falling wages. Economists Jaison R. Abel and Richard Deitz analyze data from the past four decades specifically looking at the costs, benefits, and economic return of a college education. “With the costs of college rising, and the benefits in doubt, many are wondering whether earning a college degree still pays,” it states. The findings show that either a bachelor’s degree or an associate’s degree tend to outweigh the cost with a return of around 15 percent on both degrees over the past decade. Although students forgo employment and its monetary benefits while pursuing a college education, the rates of return once the average college graduate starts working (for each type of college degree) remain well above 7 percent. “When we put all the pieces together, the good news for college graduates is that the return to college remains high on average, regardless of one’s college major,” the authors’ state. (June 2014) 
  • "Is It Still Worth Going to College?" by the Federal Reserve Bank of San Francisco: Completing a college degree continues to be a worthy investment, with the average college graduate earning over $800,000 more than the average high school graduate by retirement age, according to a report from the Federal Reserve Bank of San Francisco. "Data from U.S. workers show that the benefits of college in terms of higher earnings far outweigh the costs of a degree, measured as tuition plus wages lost while attending school," the report states. For example, the average student paying annual tuition of about $20,000 can recoup the costs of schooling by age 40. "Once the investment is paid for, it continues to pay dividends through the rest of the worker’s life, leaving college graduates with substantially higher lifetime earnings than their peers with a high school degree. These findings suggest that redoubling the efforts to make college more accessible would be time and money well spent," the report concludes. (May 2014) 
  • "Survey: Education Requirements for Employment on the Rise" by CareerBuilder: Twenty-seven percent of employers reported their educational requirements for hiring have increased over the last five years and 30 percent said they are now hiring college-educated employees for positions previously held by those with only high school diplomas, according to a survey by The survey included a representative sample of 2,201 hiring managers and human resources professionals across industries and company sizes. The survey found that 33 percent of employers are sending current employees back to school for an advanced degree, and 81 percent are at least offering partial funding. In addition, 20 percent of employers are now targeting employees with master’s degrees for positions previously held by those with a bachelor's degree. Those surveyed cited two reasons for the shift in hiring practices: 58 percent said they’re able to get degree holders “because of the tight labor market," and 55 percent said “skills for my positions have evolved, requiring higher-educated labor.” (March 2014) 
  • "Higher Education Earnings Premium: Value, Variation, and Trends" by The Urban Institute: Although many continue to question the value of a college education, the data "remain clear: even at current prices, postsecondary education pays off for most people," the report's author writes. However, there is considerable variation in outcomes among people with similar levels of education and across types of credentials, including growing gaps in earnings and education categories. The report focuses on the complexities underlying discussions surrounding higher education and return on investment, including discussions on which groups are used for comparison, variations among states and occupations, and the tendency to focus on recent college graduates. Other variations discussed include earning premiums over time, the differences between having some level of higher education other than a bachelor's degree, the difficulties in predicting how the credentials students earn today will payoff in the future. "Investments in education after high school are not guarantees" and the "variation in outcomes means that it is always possible to find people for whom going to college does not pay off, or at least not as well as they had hoped it would," the report's author writes. However, "[a]cknowledging that not all postsecondary paths are productive for all students ... helps put the stories of unfortunate but atypical students into perspective," the author concludes, adding, "College pays off well for most people. And the payoff for those on the fence—the marginal students who might be induced to enroll by policy changes including the availability of better information and more generous funding—is likely to be high."(Published February 2014) 
  • Education Pays 2013: The Benefits of Higher Education for Individuals and Society” by the College Board: The most recent iteration of the report focuses on the outcomes associated with varying levels of educational attainment and examines increases and continuing disparities across demographic groups in college completion and participation. The report shows that the earnings of bachelor's degree holders working full time in 2011 were $56,500, $21,100 more than the median earnings of high school graduates. In addition, the 2012 unemployment rate for four-year college graduates between ages 25 and 34 was 7.1 percentage points below that for high school graduates. Similarly, the unemployment rates for individuals with associate's degree and those with some college but no degree were 4.0 and 1.6 percentage points below that for high school graduates. The report also found that the financial return associated with college degrees and the gaps in earnings by educational attainment have continued to increase over time. However, large gaps in enrollment and completion rates persist across demographic groups and U.S. higher education is relying more heavily on private funding than most other developed countries. (Published October 2013) 
  • "Smart Shoppers: The End of the ‘College for All’ Debate?" By College Summit: While higher education does not provide guaranteed economic security, it does remain the best insurance policy against under- and unemployment and shifting labor markets, such as those seen in the Great Recession, according to the report's authors. They argue that the U.S. faces two challenges in the future of higher education. The first is that schools must do a better job of identifying students not realizing their potential, including a large number of low-income students. The second is that schools, colleges, business, and not-for-profit organizations need to better educate students about options surrounding college, including where they should attend, which degrees to pursue, and how to pay for it. The authors conclude that those in higher education need to think differently about preparing students for college "rather than assuming that the college experience is inevitable or interchangeable." (Published November 2013) 
  • "The Economics of B.A. Ambivalence: The Case of California Higher Education" By Alan Benson, assistant professor in the Carlson School of Management at the University of Minnesota-Twin Cities; Frank S. Levy, emeritus professor of urban studies and planning at the Massachusetts Institute of Technology; and Raimundo Esteva, former research assistant at MIT: The paper uses data from California’s higher education systems to estimate individuals’ and society’s economic returns to a bachelor’s degree and evaluates the quality of beginning a BA program as an investment. The authors included various adjustments - including non-completion, time-to-degree, accelerating marginal income taxes, and risk - not typically found in similar studies. They found that the adjustments reduced the estimated return to a beginning BA program. However, they conclude that a BA degree that includes such factors "generally remains a good investment for individuals and society." They caution that rising tuition and a growing distribution of earnings among individuals who begin BA programs has increased the risk that they will not recoup their investments. (Published September 2013)
  • A Gateway To A Better Life” By The Neilson Global Survey of Education Aspirations: Receiving higher education is important but education costs can be a significant barrier to entry, according to a global online survey conducted by Neilson. The survey, which included more than 29,000 Internet respondents in 58 countries, found that 78 percent of respondents said that receiving a higher education is important and that better employment (75 percent of respondents) and higher income (72 percent) are attainable with educational opportunities. Latin Americans were the most supportive of higher education, with more than 90 percent of respondents in Brazil, Mexico, Chile, and Venezuela saying that higher education is vital. However, education costs remain a barrier for many around the world, comprising an average of 8 percent of monthly budget allocations and ranking among the top four household expenses, according to the survey. Developing countries in Latin America, Asia-Pacific, and the Middle East/Africa regions reported that monthly spending on education expenses exceeded the global average. Moreover, 50 percent of the global respondents said they could not afford an education where they lived. Notably, many European respondents said they allot the least amount of their monthly spending to education, due in large part to subsidized education programs. (Published September 2013) 
  • Higher Education Pays: But A Lot More For Some Graduates Than For Others” By College Measures: Several factors influence earnings and some associate’s degrees can lead to better earnings or positions than four-year degrees, according to the report. The report is based on earnings data gathered from five states – Arkansas, Colorado, Tennessee, Texas, and Virginia. While the data varied by state, people with associate’s degrees earned more than those with bachelor’s degrees in the first year of after college in many instances across the board. For example, individuals with Applied Sciences degrees from two-year institutions earned $7,000 more in Colorado and $2,000 more in Virginia than those with bachelor’s degrees in the same field. The factors that can influence such earnings disparities include what degree a graduate earns, what school they attended, and the field in which the degree is earned. In addition, the study found that science, technology, engineering and mathematics (STEM) degrees may not offer as high of earnings as many believe. (Published September 2013) 
  • Is Starting College and Not Finishing Really That Bad?” by The Hamilton Project: A paper from The Hamilton Project shows that students who start college but fail to complete earn on average over $100,000 more over their lifetimes - $8,000 more a year - than high school graduates without any college. The paper, authored by Michael Greenstone and Adam Looney, found that, on average, attending some college but not receiving a degree also has a higher return (9.1 percent) than all other conventional investments, such as stocks or bonds. A comparison of the average earnings of individuals with varying levels of education shows that over the course of their lifetime, individuals with a bachelor's degree tend to earn over $500,000 more than those with just a high school diploma. Despite the disparity between students who complete their degrees and those who start but do not finish, “what this analysis suggests is that the downside risk of trying for a college degree but not making it all the way to a degree is not that bad, and could still be worth the investment of time and tuition,” the authors write. (Published June 2013) 
  • A Matter of Degrees: The Effect of Educational Attainment on Regional Economic Prosperity” by the Milken Institute: According to the report’s key findings, education increases regional prosperity-and the better educated the worker, the greater the benefit of additional schooling, to both the worker and the region. In addition, in metropolitan areas with clusters of high-skilled occupations, the share of workers holding at least a master's degree is much higher than in areas without significant clusters. The report's key policy recommendations for governments, educational institutions, and businesses include: make higher education more affordable and accessible; increase higher education graduation rates; and strengthen coordination between industries and higher education institutions. (Published February 2013) 
  • How Much Protection Does a College Degree Afford? The Impact of the Recession on Recent College Graduates” by the Pew Economic Mobility Project: The report examines whether or not a degree still helps people find better jobs and earn more money. The study’s main finding suggests that the recession has not affected the impact of a college degree, despite some reports to the contrary. The study focused on recent graduates and compared the employment level and average wages of 21- to 24-year-olds with high school degrees, associate degrees, or bachelor’s degrees before, during, and after the recession. The study found that while well-paid, college-level jobs have been more difficult to attain since the recession, the effect has been significantly less severe for those with college degrees. (Published January 2013) 
  • Community College Contributions” by the American Association of Community Colleges: The report claims that while an associate’s degree is a cost-effective investment for students and state governments, community colleges continue to be shortchanged during budget season. The estimates in the report show that workers earn bigger paychecks and pay more in taxes for each level of education they have completed, from high school graduates to bachelor’s degree-holders. For example, a worker with a bachelor’s degree earned 65 percent more than a worker with a high school diploma in 2011, according to data from the Bureau of Labor Statistics. A wage premium for workers with a bachelor’s degree or higher rose from 37 percent to 80 percent from 1950 to 2005, respectively.  “In order to continue to provide these benefits and fill in where other opportunities for education and training once stood,” the report concludes, “public investments in the education and training community colleges provide need to equalize and stabilize, if not increase.” (Published January 2013) 
  • The Economics of Higher Education” by the Departments of Education and the Treasury: The report shows that investments in higher education expands job opportunities, increases the U.S.'s competitiveness, and supports income mobility that is needed to grow the national economy. The study’s key findings include that individuals with higher education typically earn more and have a lower likelihood of underemployment. Higher education also significantly boosts a child's chances of advancing economically, according to the study. (Published December 2012) 
  • "The College Advantage: Weathering the Economic Storm" by The Center on Education and the Workforce at Georgetown University and the Lumina Foundation: The report aims to reconcile reports on the difficulties facing recent college graduates and the notion that the hardships indicate a low economic value for their degrees. While the report acknowledges an underemployment problem, the rate of underemployment for new college graduates is 8.4 percent - less than half of the underemployment rate for recent high school graduates (17.3 percent). The report notes that college graduates hold an advantage in gaining jobs that have been created in recent years, with more than half of the recession-recovery jobs going to college graduates, who comprise only one-third of the workforce. (Published August 2012) 


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