The Real Value of a College Degree: Is it Worth the Money?

Michael Lux Blog, Student Loans 16 Comments

Making sure you are getting a good bang for your buck when it comes to college seems simple in theory, but can be practically difficult to figure out.  With the high price of education, it is critical today to make sure you are getting a good return on investment (ROI) with your tuition dollars.  Many people subscribe to the view that all student loan debt is good debt because you are investing in yourself.  I think “good debt” is a myth, but the view of college as an investment in yourself is a good way to analyze the value of a degree.

How do you determine the value of a degree?  Their are two important variables: School and Major.  At its most basic level this makes sense.  We would expect a Harvard grad to make more money that someone who went to the local art school.  We would also expect a Pharmacist to make more than a basket weaving major.  Things start to get complicated when we try to put an exact value on education for purposes of deciding whether or not a school or major is worth the debt…

The Georgetown Study

A Georgetown University economist recently completed a major study of the income earning potential calculated by major (editor’s note: the linked file is a large PDF).  There were many very valuable findings.  One that stands out is that the area you study matters more than the school.  The example cited in the study pointed out that if you major in early childhood education, the salary you earn is going to be pretty consistent regardless of whether or not you got an Ivy League degree.

The study went into great detail breaking down salaries by a number of different measures, but the bottom line is that some majors earn far more money than others:


Note: Figures are median income for all full-time workers with bachelor’s degrees in each subject.
Workers with graduate degrees are not included in the data.
Source: Anthony Carnevale, Georgetown University
Credit: Matt Stiles/NPR

These numbers may be somewhat disturbing… it seems absurd that a social worker makes a third of what a petroleum engineer makes, but that is the reality of today’s economy.  People in these two different majors are going to have significantly different experiences on the job market.  NPR recently had an interesting interview with a petroleum engineering major and a psychology major.  One had a job making $110,000/yr lined up before she even went back to school her senior year, while the other applied to hundreds of jobs just to secure a position that paid less than half.

Why is this important?

The point of this article is not that everyone needs to major in engineering.  The point of the article is to have reasonable expectations about what you will be earning when you graduate.  This is critical, because you will have to decide if the price of the school is worth the debt that you will be incurring to attend.

Lets say that early childhood education is an area that you really want to study.  36k a year may not be petroleum engineer money, but money is not your first priority in life, and your passion is early childhood education.  There is absolutely nothing wrong with making that decision.  Now lets say that you get into the private school of your dreams, and you want to attend their amazing early childhood education program.  People start to make mistakes when they go into huge debts to fund an education that won’t pay the bills.

Doing the Math

For the sake of discussion, lets assume that you will spend 30k a year for 4 years, meaning your total student loans could be as high as 120k.  Now lets assume you have an average interest rate of 10.5% (some have higher, others lower, but this is a good number for our discussion).  If you run the math, you will have to pay approximately $1,100 for the next 30 years to pay off this loan.

Here is a calculator to help you do the math based upon your expected college expenses:

Simple Loan Calculator

Free loan calculator by

If we turn our attention back to the early childhood education major, we have someone who will be making 36k a year but will need to pay 13k a year in student loans alone.  Based upon these numbers, this program would not be a good investment for this individual.

How do I decide what is best for me?

If you are trying to pick a major or deciding on what loans you can afford, go to the Georgetown study and look at what each major is paying.  Then turn your attention to the calculator and and see how much you will need each month to pay off your student loans.  Does your plan add up?  Remember, the average salary values are for all graduates, not just the recent ones, so be sure to give yourself a very comfortable cushion in the numbers.  If you don’t like the numbers you are seeing, here are a few tricks to save thousands on your college education.

The last thing you want to do is finish school and then find out the hard way that the math doesn’t work.

Readers: Have you done the math on your education?  What lessons do you have to offer from your experience?

  • My wife got her master’s in early childhood education…but fortunately she went to a public college so it was not that expensive. At the time, the mindset was that teachers have a stable job…but those jobs were hard to come by and she taught at preschools/day cares which pay hourly and poorly with no benefits. It definitely makes sense to have an understanding of the average salaries before you decide on a school and major.

    • I think so too. These days people encourage following your passion, which is a good thing, but people need to have realistic expectations with their higher ed spending.

  • I have a double major in drama and psychology, two of the worst paid jobs and I went to NYU, one of the most expensive schools. This post makes some really great points that no one really mentions when you’re applying to school.

    • Thanks for sharing Stefanie. Hopefully people will adjust to the high price of college and start doing this research before it is too late.

  • Student Debt Survivor

    I find it hard to believe that social workers with a bachelors degree are making just until $40k. My MSWs-social workers with a masters degree and a license are making $42,5000 in NYC (where salaries are much higher than the rest of the country).

    Anyway, I think that students need to seriously consider the amount of debt they take on. I have friends with MSWs who have over $80,000 in student loan debt from grad school alone!

    • Is that 42k starting or for everyone? These numbers are for everyone so it could skew them a little higher. Also, people in the profession could have pursued more lucrative careers and that would also push the numbers up.

  • My husband just finished his Degree of Computer Science. Right now he has a good pay, with good benefits. But for me your salary depends on the country where you are working.

    • Computer science is definitely one of the best degrees to have, and you make a very good point. The value of the degree is in many ways dependent upon where you work.

  • The other factor is expanding your school search. If you want to go for a lower-paying field then you need to reduce your loans. Apply to any and all scholarships and explore schools with better financial aid packages instead of just eyeing name brand institutions. Plus, networking is a huge part of the ROI from your tuition dollars. You need to be involved and constantly networking all through college so you can get a job via your alumni network. I knew going into to college that I didn’t have a high salary prospects as a journalism and theater double major, so I made sure I graduated debt free to give myself an advantage starting out.

    • Good planning on your part! The point of this article is not that you shouldn’t pursue the major you want in college, it is that you should be aware of the potential financial limitations of your decision. You are living proof that if you plan ahead, any major can be the right individual decision. Thanks for sharing!

  • I should have been an engineer!

    I am happy with my finance degrees. I would not have my job today if I hadn’t gone to my undergrad and MBA programs when I did. There is no question of that.

    The real value of the MBA will come down the line when I am up for a promotion against someone else and I have the MBA and they don’t. It can be a great tie breaker.

    • I think the value of an MBA is an interesting issue. I don’t have one, but I have heard that the value of the MBA unlike many undergrad degrees really depends upon where you go. Do you think that is a fair assessment?

    • I think the value on the institution is the same for undergrad or grad school. Part of the value is name recognition (e.g. my University of Denver MBA is worth more in Colorado than the East Coast), but that doesn’t make it not valuable should I look for a job on the East Coast.

    • Great point! Geography is definitely a big issue when it comes to how your degree is viewed by a potential employer.

  • Suburban Finance

    I’m a business major and it’s definitely worth it for me. I don’t know about there, but here you can’t get a job in business without one. I’m making 3x that of my pre-graduation wage and I’m only 24.

    • That is awesome! Congrats on picking a major that worked out so well for you. Were you considering anything else while you were in school? What lead you to pick business?