The Financial Value of a Higher Education

Five years have passed since the U.S. Census Bureau published synthetic estimates of work-life earnings by educational attainment. This paper updates those figures with the most recent data from the U.S. Census Bureau\u27s annual Current Population Surveys, and adds net present value analysis of the financial benefit of a college degree to the individual and to the federal government. The added value of a bachelor\u27s degree over a high school diploma or GED has increased to $1.2 million in 2005 from $910,000 in 1997-1999. Compared with the average out-of-pocket costs of a college education, this represents a return on investment in excess of 27%. The added value also corresponds to an additional $133,000 in cumulative federal income tax revenue. Accordingly, it would be financially worthwhile for the federal government to replace loans with grants in the financial aid packages of low income students if this yielded at least a 32% increase in the number of low income students graduating with bachelor\u27s degrees