How Much is My Bachelor’s Really Worth?

, Bethany Stotts, Leave a comment

Mary Pilon writes for the Wall Street Journal on February 2 that researchers are questioning whether college graduates actually gain $800,000 or $1 million in additional lifetime earnings over those with only a high school degree.

“In recent years, the nonprofit College Board touted the difference in lifetime earnings of college grads over high-school graduates at $800,000, a widely circulated figure,” Pilon reports. “Other estimates topped $1 million.”

“But now, as tuition continues to skyrocket and many seeking to change careers are heading back to school, some researchers are questioning the methodology behind the high projections.”

In her article Pilon incorrectly attributes a $280,000 lifetime-earning advantage estimate to Mark Schneider, a Vice President at the American Institutes for Research (AIR) and an AEI visiting fellow.  “Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in a report he wrote last year,” she writes.

Actually, the $279,893 number comes from Spellings Commission Chair Charles Miller in his April 2008 letter to College Board President Gaston Caperton, as excerpted by Higher Ed in 2008.

In the May 2009 AEI Outlook, “How Much Is That Bachelor’s Degree Really Worth? The Million Dollar Misunderstanding”—to which Pilon said she was referring—Schneider writes that

“There have been arguments over this million dollar number. Perhaps the most pointed came from Charles Miller, who headed former U.S. secretary of education Margaret Spellings’s Commission on the Future of Higher Education. In April 2008, Miller released a public letter to College Board president Gaston Caperton accusing him of misleading the public by repeating the million dollar number in the College Board’s Education Pays reports.  In his letter, Miller argues that by replacing some assumptions used by the College Board with other, perhaps more reasonable, ones (for example, including those who took six years to graduate instead of four and deducting tuition costs from lifetime earnings), the present value of the lifetime earnings differential is only $279,893 for a bachelor’s degree versus a high school degree.”

Schneider does not calculate the $280,000 estimate, as Pilon reports, but conveys another man’s research. Pilon writes, in full:

Mark Schneider, a vice president of the American Institutes for Research, a nonprofit research organization based in Washington, calls it “a million-dollar misunderstanding.”

One problem he sees with the estimates: They don’t take into account deductions from income taxes or breaks in employment. Nor do they factor in debt, particularly student debt loads, which have ballooned for both public and private colleges in recent years. In addition, the income data used for the Census estimates is from 1999, when total expenses for tuition and fees at the average four-year private college were $15,518 per year. For the 2009-10 school year, that number has risen to $26,273, and it continues to increase at a rate higher than inflation.

Dr. Schneider estimated the actual lifetime-earnings advantage for college graduates is a mere $279,893 in a report he wrote last year. He included tuition payments and discounted earning streams, putting them into present value. He also used actual salary data for graduates 10 years after they completed their degrees to measure incomes. Even among graduates of top-tier institutions, the earnings came in well below the million-dollar mark, he says.

In the AEI paper, Schneider initially calculated the lifetime difference in earnings between bachelor’s graduates and high school graduates before without accounting for tuition costs and differentiated by institution type (public vs. nonprofit) and selectivity levels. According to Figure 1 in the paper, the differential between the two degrees ranged from an increase of over $2 million at “nonprofit most selective” institutions and under $1 million at several less selective institutions.

Schneider then calculated, in Figure 2, the lifetime earning differences between these two groups, “adjusting for tuition, by institution type.” The lifetime benefit of a Bachelor’s degree, when accounting for tuition costs and college selectivity, ranged from just under $500,000 to less than $200,000, according to his calculations.

At no point did Schneider say that his study definitively concluded that a bachelor degree provides “a mere $279,893” in additional lifetime earnings.

Bethany Stotts is a staff writer at Accuracy in Academia.

 

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