Is higher education worth it?

[Alex Franke]

I suppose I am an exception.

Yes, I'd say you probably are. You caught "the bug" early (like I did, actually).

In general, I think people get out of a college education what they put into it. Those that want to learn probably will. Those that don't will either flunk out, or (less likely if it's a good school) will glide through -- maybe because they already know the material, or maybe they're good test takers... doesn't matter.

I paid for my own education, so I was motivated to get something out of it -- more than just the textbooks and the words in them. I gots me sum good learnin's for dem dollas!

[ragswl4]

I don't believe that a college DEGREE proves that one is not stupid. It might prove that one isn't ignorant in a certain field. There is a difference.

Not everyone has the opportunity to obtain a degree and I've met some pretty smart (read non-stupid) folks without degrees.

[Ed62]

Someone once said to me "If you think education is expensive, try without it". I never forgot those words.

I've always told my own kids that whatever they've learned, no matter what it was or where it was learned, they had something that nobody could take away from them. People can steal your wife, your car, your home, or your money. But they can't steal what you've learned.

Ed

[Kristofor]

As both a job seeker and a hiring supervisor, I have found from most of the salary surveys I read that a graduate masters degree is worth about $5K per year more than a bachelors degree.

If you can afford to stay on for a year or two then its well worth the time and money.

Depends on the job... If you're making $80K/yr that's not a very good payback. Heck even at $40K/yr those 2 years of work give you 16 years of that $5K difference plus 2 extra (and early) years to contribute to 401K/other retirement or gain experience/seniority/promotion. I know I've never gone 2 years without at least a $5K bump in salary. My guess is, on an average career if it really does take 2 years for the masters and only pays $5K/yr it's a losing bet.



Of course, I'm not a good one to talk. I finally finished my degree after ~10 years of working and going to school at night. There were a handful of useful classes, and another handful that would have been useful if I was straight out of high school. The other third/quarter were of dubious value.

Before/while I finished my degree over the course of 10 years I had worked my way up from contract techie to managing the IT department for a nearly billion dollar business. There is NO WAY I would have been hired from the outside for that position with only a high school diploma, some technical certificates and experience.

So in this case a degree may not have given me any better job directly, but it offers portability. If tomorrow some giant company gobbles us up and fires everyone I feel much better looking for a similar job rather than looking to work the way up the ladder again somewhere else.

[bradley_osu]

Lots of numbers flying around. I've always heard that a college graduate earns on average $1 million more than a non graduate, which is conveniently the same as the money spent on the education would be worth if it were invested, therefore is there really an advantage. Of course this argument is flawed as the surplus income would be available to the grad during his working life as opposed to afterwards and could thus be invested yielding even more.

So quantifying a masters using the conservative value of an extra 5k/yr and an example salary of 80/yr. So missing two years you'd have to make up $160k which would take 32 years. But if that 5k were invested earning a conservative apy of 9% it would only take a little under 16 years to pay that off leaving another 25 years of extra income (assuming an average 40 year work life).

That's all with conservative estimates, if your income pre masters was less, increased income were more, or investments were better it would take even less time to pay it off. Looking at it that way even 5k more/year on an already lucrative job earning 80k/year is arguably a "no-brainer".

[cgallery]

So quantifying a masters using the conservative value of an extra 5k/yr and an example salary of 80/yr. So missing two years you'd have to make up $160k which would take 32 years. But if that 5k were invested earning a conservative apy of 9% it would only take a little under 16 years to pay that off leaving another 25 years of extra income (assuming an average 40 year work life).

That's all with conservative estimates, if your income pre masters was less, increased income were more, or investments were better it would take even less time to pay it off. Looking at it that way even 5k more/year on an already lucrative job earning 80k/year is arguably a "no-brainer".

Your argument only works if the guy that skips the masters is unable to invest any of his $80k base, and if you take the cost of the masters degree itself out of the equation.

Here is a more realistic model. First, the guy w/ the undergraduate degree: He makes $80k/year for 45 years, invests 10% of his income at 9% APR, and invests the $40k he would have spent on the masters, too. After 45 years, he has $6,139,961.32 in his investment account.

Now the guy w/ the masters: He makes $85k/year for 43 years, invests 10% of his income at 9% APR, but doesn't have the initial $40k to invest because he spent it on the degree. After 43 years, he has $3,747,188.15 in his investment account, but has also enjoyed a higher (by $193,500) disposable income over the 43 years.

But get this. Even if the guy w/ the masters invested his entire additional income (the $5k/year) at the 9% (so he is investing $13k year), he still wouldn't catch up with that initial $40k investment the undergrad makes, and would only end with $5,730,993.64 in his investment account.

So with these 85/80 #'s, it IS a no-brainer. Just not the one you thought it was.

[LCHIEN]

Your argument only works if the guy that skips the masters is unable to invest any of his $80k base, and if you take the cost of the masters degree itself out of the equation.

Here is a more realistic model. First, the guy w/ the undergraduate degree: He makes $80k/year for 45 years, invests 10% of his income at 9% APR, and invests the $40k he would have spent on the masters, too. After 45 years, he has $6,139,961.32 in his investment account.

Now the guy w/ the masters: He makes $85k/year for 43 years, invests 10% of his income at 9% APR, but doesn't have the initial $40k to invest because he spent it on the degree. After 43 years, he has $3,747,188.15 in his investment account, but has also enjoyed a higher (by $193,500) disposable income over the 43 years.

But get this. Even if the guy w/ the masters invested his entire additional income (the $5k/year) at the 9% (so he is investing $13k year), he still wouldn't catch up with that initial $40k investment the undergrad makes, and would only end with $5,730,993.64 in his investment account.

So with these 85/80 #'s, it IS a no-brainer. Just not the one you thought it was.

The fallacy with this scenario is that both guys don't make straigh line salaries for 43 years. In fact, you have to start 5K apart and compound 5-6 % raises for 43 years.

[cgallery]

The fallacy with this scenario is that both guys don't make straigh line salaries for 43 years. In fact, you have to start 5K apart and compound 5-6 % raises for 43 years.

The guy that goes for his masters joins the workforce two years later, earning 6.25% more than the guy w/ the undergraduate degree. (Again, kinda sorta, because the guy starting at $80k would have had two COLA's and we'd have to adjust-up the $85k to compensate).

Assuming a historically more typical 4.5% annual COLA (most non-superstars are expected to get 3.9% this year), the masters guy ends 43 years at a wage of $579,859, while the undergrad puts in 45 years and ends with $564,182. So in your new scenario, the guy w/ a masters is earning something like 2.8% more than the guy w/ the undergrad.

http://www.usatoday.com/money/workpl...s_N.htm?csp=34

http://www.certmag.com/articles/temp...=374&zoneid=66

Now, supposing we take into account the first two years of COLA's earned while the other guy is getting his masters. By the time the guy that earns his masters enters the workforce, the undergrad is getting $87,362. So the masters guy starts at $92,362. After 43 years more each, the undergrad is getting $579.859 and the masters is getting $613,047, a 5.7% difference.

In the real world most people don't have $40k in cash. They aren't confronted with having to decide whether to continue their schooling or invest in something that guarantees a 9% return.

OTOH (and complicating matters further), some people borrow heavily to pay for school. And even at subsidized rates, their effort to pay off those student loans could delay further their long-term investments to the point where the guy that goes for his masters doesn't even do as well as I've laid-out above.

[mpc]

And that $40K? I didn't have that laying around if I didn't go to school... most folks have to work while going to school, take out education/student loans, etc. So few would have that $40K to invest on Day 1 instead of going to school while they start their new job. How much does that affect the final $6million nest egg?

Where I work (Aerospace engineering) we have all sorts of types but most do have college degrees. And a few actually know something about what they're doing... it's amazing how many folks really don't know the broad strokes of aerospace in general... they have a little niche they know and that's it. A college degree certainly isn't a guarantee of knowing anything useful in the field by my observation. But a degree is a requirement just to get your foot in the door. Once employed, your own skills, knowledge, ability to learn on the job, etc. are far more important.

Most of my friends have college degrees and I'd say maybe 1 in 5 are currently employed in a field related to their degree. But all are reasonably successful. So the college degree got them a job as proof of "being able to think/work" from the employer's point of view, not as job-training. That's where I think college education makes its benefits: passing college tells a potential employer that you a) can think somewhat and b) must have some organizational skills, study habits, discipline, etc. since colleges don't typically give many free rides. At least in the old days...

mpc

[cgallery]

And that $40K? I didn't have that laying around if I didn't go to school... most folks have to work while going to school, take out education/student loans, etc. So few would have that $40K to invest on Day 1 instead of going to school while they start their new job. How much does that affect the final $6million nest egg?

If you're going to borrow a substantial portion of the $40k for a masters, then your investments will be further delayed.

My point is that there is little you can do to beat compounding interest. If I don't get to invest the $40k, then you have to borrow it (fair is fair) to pay for your masters, so in the final analysis (with these #'s), the undergrad probably still wins.

Just questioning conventional wisdom and having a little fun. Do I think the value of a degree has been somewhat diluted by the ability of most anyone with a pulse to achieve one? Yes. Do I still think most people need one? I guess so. Becoming more reluctant on this last point, though.

[DaveS]

Regarding the extra money you get with a master's degree...

I can only speak from my experience in the high-tech engineering corporate environments - that extra kicker for the MS degree decreases over time.

Salary compression will put two people (one with a BS, and one with an MS) at about the same salary after about 10 years (ceteras paribus).

Having said that, the MS is much more powerful for opening doors than just a BS.

I actually got a job right after my BS, and made sure my company paid for, and supported me in an effort to get my MS while working.

It took a lot longer, but I think I came out ahead in the long run.

[LCHIEN]

Regarding the extra money you get with a master's degree...

...
Salary compression will put two people (one with a BS, and one with an MS) at about the same salary after about 10 years (ceteras paribus).
....

Its not automatic either way. There are people that can do a lot more with a BS than other can with any postgraduate degree. And, I agree that the value of an education decreases more after time. OTOH, the extra education should have put the holder ahead and he will be more successful and or have a more impressive resume for the extra head start.

As far as starting salaries, someone stated the postgrad recipient would be a couple of years behind raise/COLA-wise; we always considered that years spent in post grad work were like working experience,
so a guy with a BS and 2 years and a guy with a fresh masters degree both started at the same point experience wise, but the masters degree commanded the extra salary benefit as well.

[cgallery]

As far as starting salaries, someone stated the postgrad recipient would be a couple of years behind raise/COLA-wise; we always considered that years spent in post grad work were like working experience, so a guy with a BS and 2 years and a guy with a fresh masters degree both started at the same point experience wise, but the masters degree commanded the extra salary benefit as well.

I think I took that into account later in my last message.

But, I'm turning into a broken record and risk becoming (too late?) a PITA. So I'm going to drop this.