Which Education Level Has the Highest ROI for You

Diploma next to a graduation cap with money inside
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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-and-board costs? 

On one level—that of average salary and lifetime earnings—the answer is quite simple. The more education you acquire, the higher your income will be. However, the picture gets cloudier when you factor in the significant cost of higher education and the years of income that you must forfeit to pursue it. Non-monetary returns on investment, such as job satisfaction and job security, are also an aspect to consider.

The Cost of Higher Education

In order to complete a valid cost-benefit analysis of varying 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 the published annual cost of tuition plus room and board for various types of two- and four-year colleges in 2018-19 as follows:

These figures represent gross costs without factoring in your eligibility for financial aid or any special state 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 is also a consideration. If we assume that the average high school graduate would earn about $35,000 per year without 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 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-earning majors. These include early childhood education, family sciences (home economics), theology, fine arts, social work, and elementary education.

However, success within a career field varies a great deal. There is a dramatic difference in how top earners within a major are compensated vs. lower-earning graduates with that same major. Cumulative earnings can double or even triple when moving from the bottom quartile to the top quartile of earners in a given major. The moral? Choose a career path that suits you, not just a major that might make you a lot of money.

Average Income by Degree Level

The Bureau of Labor Statistics (BLS) publishes figures for average weekly earnings based on the level of educational attainment. For the second quarter of 2019, the data indicated median weekly earnings as follows:

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 substantial increases in lifetime earnings with each additional level of educational attainment.

As of 2015, men with bachelor's degrees had median lifetime earnings of approximately $900,000 greater than high school graduates. For women with bachelor's degrees, median earnings were $630,000 more. Men with graduate degrees had median lifetime earnings of $1.5 million above the level of high school graduates. The median advantage in lifetime earnings for women with graduate degrees was $1.1 million.

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

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 for workers and their families. The following 2018 data on unemployment rates from the BLS indicates that individuals with more education are less likely to be unemployed:

  • Less than a high school degree - 5.6%
  • High school diploma - 4.1%
  • Associate’s degree - 2.8%
  • Bachelor’s degree - 2.2%
  • Master’s degree - 2.1%
  • 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. 2016 survey data from PEW Research Center confirms this theory: 75% of respondents with at least a bachelor’s degree describe themselves as very satisfied with their jobs, vs. only 64% of those with less than a high school diploma.

Adults with less than a high school education are more than twice as likely as those with a bachelor’s degree or higher to say they are not too happy with their lives (23% vs. 9%). Additionally, those with higher incomes (which correlate with educational level, as we have seen) report greater satisfaction with their jobs. About six in 10 (59%) of those with an annual family income of $75,000 or more say they’re very satisfied with their current job, compared with 45% of respondents making $30,000 to $74,999, and only 39% of those making less than $30,000.

Consider More Than the Math

Calculating how much you can potentially earn when you're working in a job that pays well is valuable when you're planning your career trajectory. But 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 when you graduate, or thinking about a career change to switch up your career path. Considering all the viable options that will give you personal satisfaction, professional success, and a satisfying income will help you make the right career choices. Weigh all of this against the cost of any degree you're considering before you make your decision.