Monday, June 27, 2011

The ROI of College is 2x the Stock Market


I posted a note last week discussing the (very) high cost of college education.

As it turns out, Dave Leonhardt had a column in yesterday's New York Times opinion section that made a very good case for colleges.

Mr. Leonhardt notes that only about 1/3 of high school graduates go on to college, while another 10% get a degree from a two-year program. And while it is true that higher education is expensive:

The evidence is overwhelming that college is a better investment for most graduates than in the past. A new study even shows that a bachelor’s degree pays off for jobs that don’t require one: secretaries, plumbers and cashiers. And, beyond money, education seems to make people happier and healthier.

“Sending more young Americans to college is not a panacea,” says David Autor, an M.I.T. economist who studies the labor market. “Not sending them to college would be a disaster.”

And for people like me, who work in the investment world, there is this:

...the returns from a degree have soared. Three decades ago, full-time workers with a bachelor’s degree made 40 percent more than those with only a high-school diploma. Last year, the gap reached 83 percent. College graduates, though hardly immune from the downturn, are also far less likely to be unemployed than non-graduates....

The Hamilton Project, a research group in Washington, has just finished a comparison of college with other investments. It found that college tuition in recent decades has delivered an inflation-adjusted annual return of more than 15 percent. For stocks, the historical return is 7 percent. For real estate, it’s less than 1 percent.

College Degrees Are Valuable Even for Careers That Don’t Require Them - NYTimes.com

Interesting counterpoint to my Friday post.