How much a college degree is actually worth, in dollars
blogs.edweek.org
blogs.edweek.org
1) Many realistic outcomes are obscured by the averages. The average college doesn't lead to very good opportunities, and the average student doesn't work very hard. Working hard at a good school (top 50) or even not working that hard at a mediocre school (top 10) can lead to dramatically different results than what might be expected from looking at the results of all students from all ~5,000 or so universities in the country.
2) While the use of net present value is technically correct (the best kind of correct!) it's also somewhat misleading. Say a college graduate earns $100,000 more than a high school graduate in the final year of his career. The net present value of that (using the historic S&P 500 return of 7%) is $6,700. Yes, if you're comparing a choice between earning $100k more in the final year of your career with $7,000 right now, the latter is the better choice. However, that is never the choice! A high school graduate cannot get $7,000 in loans to invest in the market at 7% return. So from a practical perspective, using net present value compares against a choice that the graduate doesn't have.
It all makes sense when you look at things another way. The student is not making an investment. He is the investment, one the bank is making in him. The investment directly creates real value (as opposed to an investment in the market, which does so only indirectly), so both the bank and the student might come out ahead even if the net present value of the education is less than the amount borrowed to finance it.
Even for lawyers I was reading an article the other day that said more than half of all law students in the US won't ever make a high enough salary from law to justify their tuition costs.