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A College Degree Is Still Worthwhile, But Do Your Homework First

A college degree still pays off, but you need to do your homework before you enroll to ensure you're not bankrupting your future. Here's some advice:
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Even with rising tuition rates and larger student debt burdens, data still show a college degree pays off. A 2015 executive summary from Georgetown University found that the difference in lifetime wages between a college graduate and a high school graduate is $1 million.

“Even the most conservative estimates of the lifetime income differential between college graduates and high school graduates put the net present value well into the hundreds of thousands of dollars,” said Mark Kantrowitz, student aid expert and founder of

Your earnings return will depend on a number of different factors, including your major, how advanced your degree is and what kind of debt you accrue. That's why it pays to do your homework before you enroll, says Kantrowitz.

One of the trickiest calculations is your choice of a school.

The general assumption is that the better the college, the more you’ll earn after graduating. And that’s what economists concluded in a 1999 study published in the Journal of Human Resources.

“Strong evidence emerges of a significant economic return to attending an elite private institution, and some evidence suggests this premium has increased over time,” researchers said.

However, since that study was published, other research from economists Stacy Dale and Alan Krueger has found that it’s less about the college itself and more about individual students’ academic performance, no matter which school they attend.

And, since attending an elite college will likely result in a lot more student debt, that's a big consideration, says Kantrowitz.

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“The choice of college has some impact, but not as much as you might expect,” he said. “For example, has a nice tool for comparing estimates of lifetime earnings. The lifetime earnings of graduates of in-state public colleges are only slightly lower than the lifetime earnings of the most selective institutions for the same degree.”

That could mean your rate of return for attending a public college could be higher, because “they cost about half as much,” he said. Of course, this depends on the individual scenario: financial aid offers from various schools would affect those numbers, for example.

Another tactic to cut tuition costs is to you education at a community college and then transfer to a four-year school. According to a white paper from education organization Breakthrough collaborative, this strategy makes no difference in earning potential. And since attending a community college is so much cheaper, that could mean you realize a higher return on your investment over a lifetime of earning.

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However, the paper does note a couple of concerns with starting at a community college.

“The likelihood of earning a bachelor’s degree is significantly reduced if a student starts her post‐secondary education at a community college, and the amount of time it takes to complete a bachelor’s degree (and potentially, the amount of loans a student accrues) is greatly increased,” the paper said.

But for a student looking for the most cost-effective route to graduation, that shouldn’t obscure the key finding: Simply starting at a community college doesn’t make a difference in the return of that four-year degree.

Proprietary or for-profit college may be another story.

“For-profit colleges are a mixed bag,” Kantrowitz says. “Some graduates of for-profit colleges do well financially. But others do not. The key problems with for-profit colleges are high cost and high dropout rates.”

A 2012 paper from the Center for Analysis of Postsecondary Education and Employment concluded that while for-profit schools had “greater success at retaining students in their first year and getting them to complete short programs at the certificate and AA levels,” that benefit didn’t last.

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“For-profit students end up with higher unemployment and ‘idleness’ rates and lower earnings six years after entering programs” compared with students from other schools, the report said.

Kantrowitz points out that for-profit grads often have higher student debt burdens to pay off. They’re also more likely to default on student loans, a recent paper published by Harvard economists concluded.

“Six years after initial enrollment, 23 percent of students who had graduated or otherwise left for-profit colleges were unemployed and seeking work compared with about 15 percent in the other institutions,” it said.

The key consideration in deciding which route is right for you is to keep your educational spending in line with the income you expect to earn after completing your degree, Kantrowitz said.

“If you're getting a bachelor's degree in nursing, which has a starting salary of $60,000 to $70,000, you can afford to borrow more than someone who is getting a degree in underwater basket-weaving, which presumably doesn't pay as well,” he said.