College Degrees a Better Investment Than Stocks, Bonds

NEW YORK (MainStreet) — College degrees have earned a bad reputation in recent years as new graduates struggle to find work, but parents and students who forked over six figures for education expenses can take heart: one new study shows that college is still the best investment.

Money spent on a four-year college degree has yielded an average return on investment of 15.2% annually during the previous 60 years, beating out the average returns from the stock market, bonds and housing, among others, according to a new analysis from the Brookings Institution. Stocks, for example, offered an average annual return of 6.8% during the previous 60 years, and housing had an annual return of just 0.4%.

Brookings crunched some numbers and found that the average student today spends $48,000 on tuition and fees for a four-year degree, and forfeits another $54,000 in earnings during the four years they are enrolled, based on the average amount earned by those 18-22 with just a high school degree. That brings the total initial investment for a four-year degree to $102,000.

With that in mind, Brookings reviewed historical trends in average salaries by degree, along with traditional investments, to find out if students really would be better off by skipping college and just having a parent write them a check for $102,000. As much as some students might dream of this scenario, it turns out to be worse for their bank accounts in the long run.

As the researchers explain, the salary of a 22-year-old with a college degree is 70% higher on average than the salary of a 22-year-old with a high school degree, and this difference persists to varying degrees throughout one’s career, so that over the course of his or her life, the college graduate will earn $570,000 more than the average high school graduate.