Fed: College degree not paying off as well
Survey shows tepid income growth but big cost, debt-load hikes.
As more Americans graduate from college with huge amounts of student-loan debt, they’re taking jobs that haven’t been as rewarding.
The latest Federal Reserve Survey of Consumer Finances shows the median income for heads of households who have college degrees grew just 2.1 percent between 2013 and 2016. That compares with a 6.1 percent increase in tuition, fees and room and board on average at four-year public universities over a similar period, according to College Board data.
Inflation-adjusted median earnings for this group still haven’t reached their pre-recession high, and the increases in costs of attending college have outpaced gains in earnings for the better part of the past two decades.
“While college is generally a good investment, it has become increasingly expensive over the last several decades to attend a four-year program, as costs have risen considerably faster than wages, especially wages for all but the very top of the income distribution,” New York Fed President William Dudley said in a speech Friday. “This means that college has become increasingly unaffordable for those families who need it most, if we are to increase social and economic mobility.”
The Fed’s data also point to a lopsided distribution of income for families with college-degree holders. The average income for these households was almost $190,000, more than double the median.
A college degree has evolved from a luxury for wealthier Americans some four decades ago to a necessary prerequisite for a career in today’s knowledge-heavy economy. Economists say the benefits of attending college still outweigh the costs as graduates can realize much higher earnings and wealth over their lifetime. The data bear this out: Degree-holding households have a median net worth of $292,100 compared with $67,100 for those with a high school diploma.
“It has never been a fair fight,” said Anthony Carnevale, director of Georgetown University’s Center on Education and the Workforce. “You can charge an awful lot for college, and it’ll still have very high net value over a career.”
Still, Americans making the investment in education are having to pile up debt with the hope their incomes improve along with it. Earnings can vary significantly based on the program. Engineers often benefit the most from their degrees and teachers the least.
Data from the New York Fed show that student debt topped $1.3 trillion in the second quarter, up from $243 billion in the same period in 2003.
It also appears the benefit of higher education is only realized with a four-year degree. Families with a high school diploma have roughly the same net worth as those with just some college.