The Worth of a College Degree

The Worth of a College Degree

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With admissions rates dropping and college tuition rising, making decisions about which college to attend or what to study can present students with a difficult set of challenges. Often, labels of prestige and other societal preconceptions can overwhelm the decision-making process. Fortunately, there are a number of tools that students can employ to help facilitate these choices, especially with regard to personal finance. In this lesson, we will analyze the different postsecondary steps for students and the economic impact they might have on one’s future. For many students, college (or other post-secondary paths) is the first time they develop significant financial responsibility for their future. It is therefore important that students recognize this responsibility and make well-informed decisions.

College: Is it Worth It?

Reliance on one’s conventional wisdom might make the answer to this question seem obvious: of course, college is worth it. For decades, a four-year university education has been the unquestioned next step to financial security and personal success. Those who attend college will have better opportunities, greater employment prospects, and earn more money, right? Well, kind of. A college education is undoubtedly beneficial, and it is true that college graduates face much lower rates of poverty and unemployment than their peers that lack four-year degrees. Yet in recent years, this same conventional wisdom that a college education guarantees success has also come under fire. Some argue that the economic benefits of college are often overstated and fail to account for delayed graduation, drop out rates, and much more.

Opportunity Cost of College

In economics, we often study opportunity cost, which is the forgone benefit of the next best alternative. This concept can be directly applied to the question of whether or not it makes sense to attend college. Students should ask if the benefits of a college degree, when coupled with astronomical tuition prices and burdensome student loans, outweigh all the alternative paths a student could pursue with the same money and time. The answer to this question is by no means uniform.

For many students, a four-year university education is the safest and best choice. Between scholarships and financial aid to combat the price tag, the security of college guarantees the future that many aspire for. For others, an associate’s degree can be the perfect way of combating the economic and time constraints of college. And in the very rare cases of those such as Bill Gates and Mark Zuckerberg, luck, a revolutionary idea, and hard work can outweigh the cost of college. Regardless of the decision you make, analyzing the opportunity cost of your choice will help ensure that you have made the best decision.

Deciding Which College to Attend

Let’s say you fit in with the majority of current high school students that make the decision to attend a four-year college. Whether you are deciding which schools to apply to, or have already applied and are trying to figure out what school to attend, such decisions can seem incredibly daunting. Unfortunately, in the hypercompetitive world of college admissions that we live in, a student’s preference for an educational institution is often clouded by prestige. Recently, however, more and more people have been questioning whether it matters what school a student goes to.  And while what a student does in college is much more significant than the specific institution they attend, the school itself certainly remains important.

So how can one best evaluate their options for college and decide which school to attend? Although conventional measures of choosing a college, such as location, size, or general atmosphere, remain a necessary means of analysis, it’s also important to evaluate an institution from a financial perspective. This analysis is different for all students and depends on both a student’s motives for pursuing secondary education and their plans after college.

For those that are interested in obtaining a four-year degree with the intention of immediately entering the labor force upon graduation, gauges such as starting salary level or job earning potential can provide important insight. Many schools publish statistics showing the employment statistics of their alumni. These statistics are a valuable source of information for a potential student. Specific indicators to focus on include the average salaries of graduates upon entrance to the labor force, the average maximum income or earning potential of alumni, and the relative employment rates of graduates in comparison to the rest of the population.

Choosing What to Study

Not only is it valuable for students to evaluate how a specific institution may impact their financial prospects, but it is also helpful for students to think about the area they plan to study. Of course, the highest priority for a student choosing a major or area of study should be to pick an area of interest and genuine passion. Yet while it is important for students to study areas that interest them, it is also critical that students understand the ever-changing nature of the job market.

With the continuous technological advances in areas such as automation and artificial intelligence, the job market even ten years from now, will be greatly different from how it is today. In fact, a recent report from McKinsey found that roughly half of current jobs could theoretically be automated. The increasing automation of many modern jobs means that future employment opportunities will require creativity, complex problem solving, critical thinking, and emotional intelligence in greater demand than they do today, while jobs in areas that are easy to automate will continue to become increasingly obsolete. It is therefore important that students are cognizant of how the areas they study and the careers they desire will be affected by automation.

Continuing Education After College

Many students choose to continue their education after college, whether that is by enrolling in a program to obtain a Master’s degree or by going to Law, Medical, or Business school. Although this may seem far away for students making decisions about their undergraduate studies, the intention of continuing education beyond a four-year college degree should influence a student’s undergraduate choice. For example, students interested in either continuing on to graduate programs or following a more academic path may want accessible research opportunities during their undergraduate studies.

Students can analyze the schools with the best opportunities for research by looking at the amount of research funding that schools receive from the federal government, as well as by analyzing an institution’s budget and spending. Schools that prioritize spending on aspects such as new athletic amenities and housing might not have as strong of research opportunities as those universities that allocate a greater amount of money to funding research projects and initiatives.

Another way of analyzing the quality of an undergraduate program with regard to plans of future graduate studies is by looking at an undergraduate institution’s acceptance rates to graduate programs and the subsequent success of the students that enroll in those programs. This helps illustrate the degree to which an institution prepares its students for further studies. Finally, students interested in continuing formal education should understand the additional costs that they might incur.

Paying for College

Another important thing for many students to consider is financial aid and scholarship options. The price tags of American universities are astronomically high and can present a significant financial burden for many students. So far, we have talked about ways to maximize benefits by choosing an institution that provides the best value for students, but we can also look at how to minimize cost and most effectively finance secondary education.

The world of financial aid is complex and deserving of its own article, but fortunately, there are many resources available for students. The Federal Student Aid Office of the U.S. Department of Education offers a substantial amount of information for students about paying for college, as well as pointers to other pages that might serve as interest. Additionally, many online databases provide a large set of scholarship opportunities. Income share agreements have also popped up recently as an alternative to loans.  


In this day and age, students pick institutions based on prestige. While the prestige an institution is associated with is not unwarranted, an analysis of the aforementioned factors can help students determine the best path to pursue their post-secondary plans.

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