The College Boost: Grads Still Outearn Nongrads | St. Louis Fed

This is Part I of a three-part series from the Fed. A little more cheery than Part II, which I posted yesterday. I can't wait for Part III to see their solutions.

On average, families headed by someone with a four-year college degree have 69 percent more income and 201 percent more wealth than families without a degree. The gaps between nongrads and those with a postgraduate degree are even larger.

I fear they are going to bang the drums for equal funding for all school districts nationwide. It's all these socialists and Marxists know. They fail to realize and refuse to accept that even if you do that -- and there will be unintended/unforeseen consequences to doing that -- the race will still go to the swiftest and the fight to the strongest. That's the way to bet. 

from the St. Louis Fed:

https://www.stlouisfed.org/on-the-economy/2018/july/college-boost-grads-outearn-nongrads

The College Boost: Grads Still Outearn Nongrads

Monday, July 16, 2018

By William Emmons, Lead Economist; Ana Hernández Kent, Policy Analyst; and Lowell Ricketts, Lead Analyst, Center for Household Financial Stability

This is the first post in a series on the financial returns of college degrees.

A college degree has long been associated with a laundry list of positive outcomes:

• Higher income and wealth
• Better health
• A higher likelihood of being a homeowner
• A higher likelihood of being partnered (married or cohabitating)
• A lower risk of falling behind on loan payments

In response, more and more Americans are pursuing—and earning—a bachelor’s degree. In 1989, about 23 percent of families were headed by someone with a four-year college degree or higher. By 2016, the share had reached 34 percent.

More individuals are continuing their schooling beyond the traditional four-year degree as well. Families headed by someone with a postgraduate degree (such as a master’s degree or Ph.D.) rose from almost 9 percent of all families in 1989 to about 13 percent in 2016.

This remarkable surge in highly educated individuals begs the question: How have the financial returns (expected earnings and wealth) of college degrees fared over time?

The Average Financial Returns to a College Degree

Previous work by our Center for Household Financial Stability has long corroborated the traditional wisdom that a college degree is associated with higher expected earnings and wealth.1 For this analysis, we typically used the Survey of Consumer Finances, often considered the gold standard of data on household balance sheets (asset, debt and income).

When evaluating the financial payoff to a college education, it is useful to ask: How much additional income and wealth does a college-educated family have beyond that of a family that doesn’t hold a college degree?

Income Differences

Pooling all available data (47,776 families), we found that the average family with a four-year degree (grads) earned approximately 69 percent more than the average family without a degree (nongrads). The average family with a postgraduate degree (postgrads) earned twice as much as their nongrad counterpart. Importantly, these estimates controlled for the age of the family, so we were comparing outcomes at similar stages of life.

Wealth Differences

What about wealth? College graduates—both grads and postgrads—accumulated much higher amounts of wealth over their lifetime than nongrads. On average, grad families accumulated 201 percent more, while postgrad families accumulated 242 percent more than their nongrad peers.

These boosts are remarkable, and it’s clear why going to college is such an imperative for individuals and families across the U.S. However, these average returns mask a considerably wide range of outcomes. How do these outcomes vary when considering the race and ethnicity as well as birth decade of these families? That will be the focus of the next post in this series.

Notes and References

1 For example, see Emmons, William R.; and Noeth, Bryan J. “Education and Wealth.” The Demographics of Wealth, Essay No. 2, May 2015.

Additional Resources

• Center for Household Financial Stability
• The Demographics of Wealth: Education and Wealth
• On the Economy: Income and Wealth Gaps: College Grads vs. Nongrads