The Value of Education

Higher education remains one of the best investments of a lifetime for most college graduates. Despite continued increases in college charges for tuition, fees, and room and board, college cost increases have not outpaced the additional earnings students realize by attending and graduating from college.

However, for students saddled with large debts, the return on investment is not as great. These students are forced to begin life well behind the starting line. They may have to think twice about public service careers or postpone buying their first home.

Education and Pay - Average 1998 Earnings - Based On Education Level

Census Bureau: Current Population Reports, 1998

Jerry S. Davis, Vice President, Research for the USA Group FoundationTM, recently reported that college cost increases have not outpaced the additional earnings students realize by attending and graduating from college. The data showed that it took about the same number of months to recover college costs in 1997 as it did in 1970.

Davis reports that, among full-time workers ages 25 to 34 years, the earnings advantage enjoyed by male college graduates over male high school graduates widened to 57 percent in 1997, up from 33 percent in 1970. The difference in earnings for female college graduates over earnings for female high school graduates widened even more, from 41 percent in 1970 to 66 percent in 1997. This growing earnings advantage is keeping pace with rising college costs.

Davis cautioned, however, that college costs have risen faster than the additional earnings derived from a college education for students who fail to complete their undergraduate studies. Davis reports that the penalty for failure to complete college is especially high for students who borrow for college and do not finish their higher education.

In regards to raising education indebtedness, Davis said that education loan repayment burdens appear to be manageable for most borrowers, although average debt levels continue to rise. Based on a national survey of starting salaries for recent college graduates, average monthly student loan payments represent between 4.4 percent and 8 percent of the graduates' average monthly salaries. These debt payment-to-income figures fall within the range considered manageable for most student loan borrowers.

Davis noted, "These data should not be construed to mean that individual students and families are not feeling the pinch of educational expenses. Anecdotal evidence on campuses across America suggests otherwise. In general, however, student loan borrowers are managing their debts, and the payoff for their investment is not delayed significantly for those who complete their degrees." Davis also noted significant differences among the states in the affordability of four-year public colleges. He reported that federal student financial aid policy, by providing more aid to students in states with higher tuition, may unintentionally reinforce inequities in the distribution of aid among students throughout the nation.

Jerry S. Davis, joined the USA Group Foundation in November 1999, has more than 33 years of experience in higher education research. He has authored numerous articles, monographs, and research reports on college affordability and student financial aid.

The USA Group Foundation is the research and philanthropic arm of USA Group(r), a nonprofit company based in Indianapolis and the nation's largest guarantor and administrator of student loans. The USA Group Foundation supports higher education through research, programs, and grants.