One of the biggest financial stories of the past decade has been the absolute explosion of student debt in America. As late as 1994, America’s total student loan burden was “just” $36 billion—in constant 2014 dollars. By 2011, that burden had grown by 240%—to $1.24 Trillion.
Source: College Board
Though that debt has been reduced over the past four years, it is nonetheless large. In fact, it is so large that some—including myself—have outwardly wondered if college is worth the price of admission at all. In the end, can’t you get the same experience and knowledge that college offers through internships, mentoring arrangements, and an archaic piece of plastic called a library card?
Well, it turns out that there’s at least some evidence pointing to the wisdom behind higher education. Using data collected by the Bureau of Labor Statistic’s Q3 Wage Survey , it’s clear that—on average—those who earn higher degrees also earn higher salaries.
On the surface, the trend is clear: more standard education translates into higher earning power. And if the numbers look a little off, there are a few important factors to consider. First and foremost, this data represents the earning power of all workers over the age of 25. Thus, the 25-year-old just out of college is likely earning far less than the 65-year old executive who got her bachelor’s degree—but they are both lumped into the same category.
Further, this isn’t to say it’s impossible for someone with an advanced degree to earn a low wage—or for someone with only a GED to be considered wealthy. Indeed, many with advanced degrees take on low paying jobs that they consider to be meaningful (i.e. international aide workers), while some of the world’s most successful business people didn’t need a college degree (Steve Jobs, Dave Thomas, etc.) to make their way in the world.
Does this tell the whole story?
As you might have guessed, based on links above to my earlier writings, I don’t necessarily think there’s a perfect cause-and-effect relationship between education level and income—or, as it is assumed by many, a direct link between education level, income, and subjective well-being (happiness).
While I will submit that there are some fields in which an advanced degree is absolutely necessary—medicine being a prime example—there are many others in which financial success goes to those who are the most innovative, driven, and persistent. In fact, this is even more prevalent in the age of the Internet.
An unknown, lurking variable could easily explain away (some) of the trend in earnings and education. Perhaps those with requisite characteristics for financial success—like drive, persistence, extrinsic motivation, and ambition—are also most likely to seek ever-higher educational attainment; it’s a badge of honor, of sorts.
Or maybe it’s simply that those whose parents went to college also go to college. And they earn more money because of the connections they form through both their family, and college experiences.
It’s also worth noting that college need not be the backbreaking financial investment that it is made out to be. Fellow Fool Morgan Housel has posited a simple solution for non-rich people to graduate college without debt:
- Take time off after high school to experience the work world while living at home and saving money.
- Go to a community college to take care of all general education requirements for two years, while living at home and possibly working part-time.
- Transfer to your in-state four-year institution. Earn your bachelor’s for a fraction of what your peers paid.
That might seem overly simplistic, but more and more college students are taking advantage of this route.
And all of this ignores the fact that earning more money means very little for your overall life satisfaction, once your basic needs are met. What is important? Again, from Morgan :
- Control over what you’re doing.
- Progress in what you’re pursuing.
- Connections to other people.
- Having purpose and meaning.
It really is that simple. Figuring out where education fits in is up to you.
