For decades, college graduates enjoyed higher earnings and greater wealth than individuals who did not graduate from college. This circumstance came to be known as the “college premiums.”  

The college income premium is the extra income earned by a family whose head has a college degree over the income earned by an otherwise similar family whose head does not have a college degree. This premium remains positive but has declined for recent graduates.  

The college wealth premium, extra net worth, has declined even more noticeably, trending downward faster than the income premium due in part to the high cost of college and the increasing need for student loans. The college wealth premium of a terminal four-year bachelor’s degree is at a historic low. 

Though these premiums still exist, according to economic research published by the Federal Reserve Bank of St. Louis, the data suggests that college is failing many recent graduates as a financial investment. 

Here’s the short version of Forbes’s thoughts on what you should consider if you are thinking about going to college. 

• What are your career goals? 

• Does the school you’re eyeing offer a strong program in your area of interest? 

• How much would you need to pay for tuition and other expenses? 

• How much student loan debt will you incur? 

• What starting salary are you likely to earn? 

Do you notice anything missing? I’ll give you a hint. The latest data on “college outcomes” was reported in the WSJ last April. The study was done by the Burning Glass Institute and the Strada Education Foundation.  

When ten high school graduates matriculate: 

• Four drop out, most by the end of the first year. 

• Three graduate but find themselves underemployed, e.g. making lattes. 

• Three graduate and score a well-paying, professional job.  

What we can conclude from this study is (1) College is a competition for the relatively limited number of “college” jobs available each year. (2) Supply far exceeds Demand. (3) Academic ability, your major, and your resume matters.

W-A-Y too many high school graduates opt for college. Forbes, and many others, overlook one important question, “Am I college material?” If you aren’t college material, college is unlikely to be worth it. 

Have you been told, “You can be whatever you want to be?” That’s a lie. The abilities of high school graduates vary widely. Your high school GPA is highly predictive. For example, if your GPA is 3.5 or better, you would have, at a minimum, a 72% chance of graduating college. Those a reasonable odds.

Note 

The Federal Reserve Bank of New York has recently done a study of the wages of college graduates who only hold a bachelor’s degree. There were fourteen majors that had a mid-career (ages 35 to 45) median wage of at least $100,000 a year. Ten of those fourteen majors were STEM, Computer Science or some type of engineering. with Chemical Engineering topping the list at $133,000. The four non-STEM majors that came with the highest mid-career median wages were finance, economics, construction services, and business analytics. Many typical graduates with degrees such as Biology, Education, Communications, Theology, Criminal Justice, Hospitality, Psychology, Philosophy, Anthropology, Fine Arts, and History barely made enough money to justify the investment in time and money.