College Degrees in U.S. Are Still Worth the Investment, Fed Says

June 10 (Bloomberg) -- U.S. Senator Elizabeth Warren, a Democrat from Massachusetts, talks about her proposed legislation on student-loan debt refinancing. Warren also discusses Hillary Clinton's memoir "Hard Choices" with Peter Cook on Bloomberg Television's "Bottom Line." Bloomberg's Mark Crumpton also speaks. (Source: Bloomberg)

A U.S. college degree is still worth the investment, the Federal Reserve Bank of New York said.

The benefits of both bachelor’s and associate’s degrees still tend to outweigh the costs for the average person, according to a study of the economic returns since the 1970s released today.

“The return to a college degree has held steady for more than a decade at around 15 percent, easily surpassing the threshold for a sound investment,” economists Jaison R. Abel and Richard Deitz wrote in Current Issues in Economics and Finance. “While the past decade has been a challenging time for college graduates, those with less education have struggled even more.”

As the cost of higher education continues to outpace the rate of inflation and job prospects diminish, the wages of those without a college degree have also been falling, keeping the college wage premium near an all-time high, Abel and Deitz wrote.

Recent studies by the New York Fed and Pew Research Center show a growing economic divergence between those with student debt and those without it. With outstanding education debt at an all-time high of $1.2 trillion and wages declining, Fed economists decided to study the return on investment, which can climb past $200,000 for private schools.

Field of study plays an important role in the success of graduates. Engineering majors or math and computer science majors earn the highest returns -- 21 percent and 18 percent. Below-average returns come from degrees in liberal arts or leisure and hospitality.

“Nonetheless, every major earned a return of more than 9 percent, a figure that easily passes the threshold of a sound investment -- underscoring the value of earning a college degree,” the economists wrote.

To contact the reporter on this story: Janet Lorin in New York at jlorin@bloomberg.net

To contact the editors responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net Chris Staiti, James Callan

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