Which Education Level Has the Highest Return on Investment (ROI)

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How much more can you earn over your lifetime if you have a college or advanced degree? Is pursuing a two-year, four-year or graduate degree worth it? Will you achieve an adequate return on your investment (ROI) in tuition, fees, loan interest payments, and room/board costs? 

On one level– that of average and lifetime earnings–the answer is quite simple. The more education you acquire, the higher your income will be. The picture becomes more complicated when you factor in the often exorbitant cost of higher education and the years of income that must be forfeited to pursue it. Non-monetary returns on investment–for example job satisfaction and job security–must also be considered.

The Cost of Higher Education

In order to complete a valid cost/benefit analysis of higher levels of education, it’s important to factor in the cost of education and the income lost while pursuing an advanced degree. The College Board estimates that the published annual cost of tuition plus room and board for various types of two and four-year colleges is as follows:

  • Public two-year: $12,320
  • Public four-year in-state: $21,370
  • Public four-year out-of-state: $37,430
  • Private nonprofit four-year: $48,510

These figures are gross costs without factoring in your eligibility for financial aid or whether your state has any special programs like New York’s free tuition at public four-year colleges (with income restrictions). A more common option is free tuition at two-year colleges, with 17 states having such programs.

Since most college students work only part-time jobs while in school, the 'opportunity cost' of lost wages should also be considered. For example, if we assume that the average high school graduate would earn about $35,000 per year if they weren’t pursuing a college degree, but only $7,000 while at a four-year college, then the opportunity cost of lost wages would be about $112,000 (4 x $28,000 per year).

Academic Major Matters

Lifetime earnings vary significantly based on your selection of college major. A study by the Hamilton Project indicates that the highest income majors such as engineering, computer science, operations and logistics, physics, economics, and finance can generate two-and-a-half times as much lifetime income as the lowest earnings majors. These include early childhood education, family sciences (home economics), theology, fine arts, social work, and elementary education.

However, you need to be well suited for the major and successful in its pursuit, since there is a dramatic difference in how top earners within a major are compensated versus lower-earning graduates with that same major. Cumulative earnings double—or even triple—when moving from the bottom quartile to the top quartile of earners in a given major. 

Average Income by Degree Level

The Bureau of Labor Statistics publishes figures for average weekly earnings based on the level of educational attainment. For the third quarter of 2018, the data indicated median weekly earnings as follows:

  • Less than a high school degree: $556
  • High school diploma: $736
  • College or associate’s degree: $826
  • Bachelor’s degree: $1232
  • Advanced degree: $1487

Lifetime Earnings and Educational Achievement

Another way to look at the return on investment of higher education is to examine the average lifetime earnings of workers with different levels of educational attainment. The Social Security Administration (SSA) data reveals very substantial increases in lifetime earnings with each additional level of educational attainment.

Men with bachelor's degrees have median lifetime earnings approximately $900,000 greater than high school graduates. For women with bachelor's degrees, median earnings are $630,000 more. Men with graduate degrees having median lifetime earnings $1.5 million above that of high school graduates. The median advantage in lifetime earnings for women with graduate degrees is $1.1 million.

The following accumulations of lifetime earnings were indicated in the SSA data:

  • Less than a high school degree: men $1,130,000; women $510,000
  • High school degree: men $1,540,000; Women $800,000
  • College or associate’s degree: men $1,760,000; women $1,100,000
  • Bachelor’s degree: men $2,430,000; women $1,430,000
  • Graduate degree: men $3,050,000; women $1,860,000

Job Security and Educational Advancement

Enhanced job security is another element of educational advancement that appeals to many workers. Periods of unemployment cause a great deal of stress to workers and their families. The following data on unemployment rates from the BLS indicate that individuals with more education are less likely to be unemployed:

  • Less than a high school degree - 6.5%
  • High school diploma - 4.6%
  • College or associate’s degree - 3.4%
  • Bachelor’s degree - 2.5%
  • Master’s degree - 2.2%
  • Professional or doctoral degree – 1.5%

Higher Levels of Job Satisfaction

Common sense tells us that the types of professional jobs available to college graduates are more likely to offer variety and stimulation, and therefore higher levels of job satisfaction. Survey data from PEW Research Center confirm this theory: 75% of respondents with a bachelor’s degree or higher describe themselves as very satisfied with their jobs, versus only 64% of those with less than a high school education.

Adults with less than a high school education are more than twice as likely as those with a bachelor’s degree or more education to say they are not too happy with their lives (23 percent vs. 9 percent). In addition, those with higher incomes (that correlate with educational level, as we have seen) report greater satisfaction with their jobs. About six in ten (59 percent) of those with an annual family income of $75,000 or more say they’re very satisfied with their current job, compared with 45 percent of respondents making $30,000 to $74,999, and only 39 percent of those making less than $30,000 agreeing.

Consider More Than the Math

Even though calculating how much you can potentially earn is valuable when you're planning your career trajectory, work-life balance, job satisfaction, career growth, and your career values are all important considerations too. 

This applies when deciding to go to college, choosing a major, picking a career option if you’re just starting out in the job market, or thinking about a career change to switch up your career path. Considering all the viable options that will give you personal satisfaction as well as professional success, will help you make the right career choices.