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How much is a college degree worth?
Business Tips by Burleson Consulting |
How much is a college degree
worth? Let's face it, college has become very expensive and the savvy
student will carefully weigh the net present value of the college costs with the
expected increase in lifetime earnings, not to mention the benefits of a
professional lifestyle.
I have several employees who
have asked me this question and it deserves a thoughtful answer. In my
research
Increased earning income from bachelors, masters and doctoral (PhD) degrees,
I discovered some interesting facts:
A Bachelors degree is worth a million
bucks!
High school graduates can expect, on average, to
earn about $1.2 million dollars in lifetime income, while those with a
bachelor's degree earn an average of $2.1 million over a 40 year working
lifetime. In sum, a college degree is worth a million dollars of extra
cash, but it's amortized over a 40 year period, and we must account for
inflation and the time value of money. At the same time, the cost of a
state college for four years is about $100k.
Net present value of a college
Bachelors degree
To compare apples-to-apples, we need to convert
these costs and rewards into today's dollars, figured on graduation day.
Note that the million dollars in increased earning power is the same as about
$400k today:
NPV college costs = $150k
NPV income gain = $400k
So, what's a Bachelors degree worth? It's
about a quarter of a million dollars, not too shabby.
Income and College Major
Lifetime income increase depends heavily on your
college major, with this hierarchy (expressed in net present value dollars).
It's interesting that college students fall down this hierarchy using the Peter
Principle, changing majors until they find one that they master:
|
Major |
NPV worth |
| Engineering |
$497,930
|
| Computer
science or Info. Tech |
$443,180
|
| Business |
$349,028
|
|
Science |
$283,286 |
|
Liberal arts |
$243,883 |
|
Social science |
$210,080 |
|
Education |
$108,461
|
Note that engineers earn 4x as much as Education
majors, followed closely by computer science and business administration.
What's a Masters or Law Degree worth?
When we look at the increased earnings for MBA's
and lawyers, we see a huge increase in lifetime earnings:
- Attorneys can expect to earn
$3.2 million dollars more than a High School graduate. (Today's NPV worth is
about 1.5 million dollars, about $500k payback per year)
- MBA's can expect to earn 1.3 million dollars more than a high school
graduate. (Today's NPV worth ~= $800k dollars, about $400k payback per year)
Of course, these are all averages and your mileage will vary. But it's
clear that a Law School diploma (J.D.) is worth about 1.5 million dollars, and
an MBA is worth about $800k.
College earnings references:
