It’s not news to anybody that the cost of college these days is through the roof. Nor would anybody be surprised to learn that to cover those increasingly astronomical costs, more students than ever are taking out student loans: seven in 10 students who graduated college last year did so with at least some student loan debt, according to the Project on Student Debt, an initiative of the Institute for College Access and Success.
Faced with the prospect of $30,000 in student loan debt – the average loan burden per borrower, according to the Project on Student Debt – many students might ask themselves whether college is really worth it. According to a new study from the Federal Reserve Bank of Cleveland, it absolutely is.
The study found that the “skill premium” – the difference in wages between college educated workers and workers without a college degree – was 61.5 percent for young households earning the median wage: $42,693 for college-educated households compared to $26,429 for those households without a college degree.
However, the real pay-off in the college degree doesn’t come until later in a person’s career: “In many professions, a college degree combined with work experience opens the door to senior-level administrative positions and higher salaries,” the authors wrote.
Indeed: the premium for older households (30-65 years of age) was 88 percent for median income earners.
Yes, there’s a tradeoff, the authors conclude: to get access to that skill premium, students are taking on a considerable amount of debt early on. But over the course of a lifetime of working, it is still a smart tradeoff.
There is a cautionary note: the skill premium does not hold true for students who have some college, but did not persist to earn a degree, according to study. Those students get the worst of both worlds: college debt, but no wage benefit. This finding serves to underscore our belief at Mass Insight that it’s critical our K-12 systems are preparing students for success in college or other post-secondary education.