David Lerner Associates News: Is a College Degree Still Worthwhile?

David Lerner Associates News: Is a College Degree Still Worthwhile?

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2014-04-15

Happy college graduates

 

It’s no secret that the cost of a college degree in the U.S. is on the rise, and that many young people and their families are assuming heavy debt loads in order to pay for these degrees. The average college graduate from the class of 2012 left school owing more than $29,000 in student loan debt according to the Institute for College Access and Success.

Against this backdrop, many Americans are starting to question the value of a college degree and voice ocmplaints about the student debt load.. In a poll conducted in 2011 by Pew Research, more than half (57 percent) of respondents said that college students received only a “fair” or “poor” return on their investment in a college education.

However, this pessimistic view was contrasted by those who actually have a college degree. Nearly nine out of 10 of the college-educated respondents said they believed they received value in return for the money and time they spent acquiring a college degree.

Crunching the Numbers

There’s a lot of subjectivity in asking anonymous responders to answer this question in a survey. Crunching the income numbers provides a more objective answer to the question of whether a college degree is worth the investment.

A new Pew Research report titled “The Rising Cost of Not Going to College” examined the current earnings gap between young Americans with and without college degrees, and it seems to indicate that a college degree is indeed worthwhile for most Americans. This earnings gap is now the widest it has been in 50 years, with 25- to 32-year-old college graduates working full-time now earning $17,500 more than non-graduates with just a high school degree.

In 1965, the earnings gap was less than half this amount — just $7,499 in today’s inflation-adjusted dollars. A college graduate in this age range today earns an average of $45,500, compared to $38,833 in 1965 in today’s inflation-adjusted dollars.

What’s more, the majority of college graduates in this age range (72 percent) said that their degrees had already paid off for them, and another 17 percent said they believed their degrees would pay off in the future. Put another way, nine out of 10 of these graduates are glad they went to college.

The value of a college degree becomes apparent not only when you look at the income data contained in the study, but also when you look at the employment data as well. The unemployment rate among young college graduates is just 3.8 percent, compared to 12.2 percent for those with just a high school degree. In addition, those without college degrees are far more likely to be living in poverty. Among those with just a high school degree, about one in five (22 percent) live in poverty.

Declining Prospects for Non-Graduates

According to the authors of the study, the results may point more to a decline in the income prospects of those without college degrees than an increase in the prospects of those with a degree. The median pay for a young person with just a high school diploma is $28,000 now, which is down from $31,384 in 1965 in today’s inflation-adjusted dollars. A high school graduate today makes just 62 percent as much money as a college graduate — this figure was 81 percent in 1965.

Of course, these are broad statistics: Not every person who doesn’t go to college is destined to struggle financially, and not every college graduate is going to enjoy financial success. However, it may also be helpful to note that by 2018, 63 percent of all jobs in the U.S. will require at least some college education, according to the Department of Labor.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC

 

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 1-800-367-3000 Visit our website: http://www.davidlerner.com

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Jake Mendlinger
Account Manager
Zimmerman/Edelson
516.829.8374 X 232
jmendlinger@zimmed.com

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