Is College Worth It?

As the federal government continues to wrestle with loan forgiveness and income-driven options for student loan borrowers, many high school students are continuing to debate the merits of going to college. And now Gen Z seems to be the first generation seriously looking at alternatives to a bachelor’s degree.

However, if you’re thinking about how to maximize your lifetime earnings, the decision of whether you should go to college - and what you should study - is more complicated than you might think.

If you’re debating between going to school and skipping higher education because of the cost, the right answer depends on many factors. Read below to learn about the return on investment (ROI) for higher education and surprising factors that determine ROI.

What is the ROI of higher education?

Calculating the return on investment of higher education illustrates if potential higher earnings make up for the average cost of a degree. Some degrees are more expensive than others, but they also generally provide a higher average annual salary. Many students assume that paying for school - even if it means taking out costly student loans - will always pay off in the long run.

In fact, going to college used to be a surefire way to settle into a comfortable middle-class life. But that’s no longer true. If you enter the trades instead of getting into a traditional four-year school, you may be able to graduate with low or no debt, good job prospects and an even higher ROI than many college degrees.

In fact, data from the Foundation for Research on Equal Opportunity found that the highest ROI is for graduates of technical trade schools, not four-year schools. The median ROI for a technical certificate is $313,022, while a nursing associate’s degree has an ROI of $223,679. The ROI for all bachelor’s degrees is $159,571, almost half the ROI for a technical certificate.

If you compare those with bachelor’s degrees to those with just a high school diploma, getting a degree makes more sense overall. Data from the American Educational Research Journal discovered that the typical college graduate with a bachelor’s degree can expect to earn between 9% and 10% more each year compared to someone with just a high school degree. This is about the same for both men and women.

But the ROI isn’t the same across all degrees. In fact, the difference can be drastic, even depending on gender. For example, men majoring in the arts and humanities will see less than a 5% return, whereas those who study engineering and computer science will have a 13% average ROI.

However, there’s a big discrepancy between having a high school degree and having a bachelor’s degree. But not all degrees are created equal. In fact, getting a two-year degree may pay off more than a regular four-year degree.

The best ROI for a two-year degree or certificate usually comes from a vocational program where you can start working as soon as you graduate. For example, getting an associate’s degree in business has only a $31,000 ROI. That’s because that degree isn’t usually enough to land a gig in the business world. In fact, many business-related jobs require an MBA, not just a bachelor’s degree.

However, nurses with an associate's degree can start working almost immediately. And the average salary of a nurse with just an associate’s degree is around $86,000. Not bad for only going to school for two years. Plus, nurses have some of the best job security and growth compared to many other professions.

How to Improve Your ROI

It’s important to remember that the ROI listed above is just an average. It’s perfectly fine to choose a degree or industry that doesn’t have the best ROI.

If you’re still interested in a field that has a low ROI, you can boost your odds by choosing a school with a low annual cost of attendance. This will usually entail going to a local public school because it will often have the lowest tuition rate. Staying near home will enable you to qualify for more state grants and awards than if you’re an out-of-state student.

You can also minimize your expenses by applying for as many scholarships as possible. Using scholarships can reduce the cost of attendance. Fortunately, there are scholarships available for any kind of degree or field. Many students don’t realize that even students attending a two-year school are eligible for scholarships.

Also, it’s possible to hurt the median ROI by taking on more debt than normal. For example, the ROI for a medical degree is around $1 million. But if you take out tens of thousands in loans for an undergraduate degree, hundreds of thousands for a medical degree and choose a low-paying specialty, like pediatrics or family medicine, then your lifestyle may be much different than your fellow physicians.

The same is true for lawyers. If you graduate with hundreds of thousands in student loans and work as a public defender or in a legal aid clinic, your ROI may fall short.

The Bottom Line

In general, it’s not just about what kind of degree you get. It’s more about what you study. For example, a cosmetology certificate has a negative median ROI of $114,036. This means that the cost of getting that kind of degree doesn’t result in higher annual earnings. Unless you’re willing to put in the work to be at the top of your field, you may struggle financially in this profession.

A good general practice would be to study something you’re interested in, that the world needs and that will support you financially. If you can satisfy all three requirements, then you’ll be OK no matter what you study.