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What’s a Degree Really Worth? The Million-Dollar Misunderstanding

The Wall Street Journal reports that the earnings gap between college graduates and non-college high school graduates is actually much narrower than most of us previously thought. As Anya Kamenetz points out in DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education, a degree isn’t necessarily the golden ticket to a prosperous future the conventional wisdom would have you believe. Fuzzy math and wishful thinking based on a 2002 Census Bureau report ballooned the actual figure to the point that choosing college—and the often-crushing debt that goes with it—seemed like a no-brainer. With the rise of online courses and self-directed learning, college doesn’t seem to be the rock-solid investment we once thought it was.

From the Wall Street Journal:

A college education may not be worth as much as you think.

For years, higher education was touted as a safe path to professional and financial success. Easy money, in the form of student loans, flowed to help parents and students finance degrees, with the implication that in the long run, a bachelor’s degree was a good bet. Graduates, it has long been argued, would be able to build solid careers that would earn them far more than their high-school educated counterparts.

The numbers appeared to back it up. In recent years, the nonprofit College Board touted the difference in lifetime earnings of college grads over high-school graduates at $800,000, a widely circulated figure. Other estimates topped $1 million.

But now, as tuition continues to skyrocket and many seeking to change careers are heading back to school, some researchers are questioning the methodology behind the high projections.

Most researchers agree that college graduates, even in rough economies, generally fare better than individuals with only high-school diplomas. But just how much better is where the math gets fuzzy.

The problem stems from the common source of the estimates, a 2002 Census Bureau report titled “The Big Payoff.” The report said the average high-school graduate earns $25,900 a year, and the average college graduate earns $45,400, based on 1999 data. The difference between the two figures is $19,500; multiply it by 40 years, as the Census Bureau did, and the result is $780,000.

“The idea was not to produce a definitive ‘This is what you’ll earn’ number, but to try and give some measure of the relative value of education attainments,” says Eric Newburger, a lead researcher at the Census and the paper’s co-author. “It’s not a statement about the future, it’s a statement about today.”

Mark Schneider, a vice president of the American Institutes for Research, a nonprofit research organization based in Washington, calls it “a million-dollar misunderstanding.”

Read the whole article here.


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