When people talk about the value of a college degree, they mean different things. A report last year by Georgetown University’s Center on Education and the Workforce pegs the median value of a four-year bachelor’s degree at $2.3 million, which is the average earnings for a degree holder employed full-time from ages 25 to 64. The value of a college investment calculated by PayScale, a Seattle-based compensation data company, for Bloomberg Businessweek is a small fraction of that amount, and to understand why, you need to know a little bit about our methodology.
The PayScale methodology differs from most others in several key respects. Instead of using lifetime earnings, it starts with earnings over a 30-year period. From that figure, we deduct the earnings of a typical high school graduate (since most people who don’t go to college would still have earnings, albeit at a much lower amount). In our return on investment (ROI) calculation, the “investment”—or total net cost—is the amount spent on college over the actual time it takes students to graduate, whether four, five, or six years. Finally, our ROI figures are adjusted using each school’s graduation rate. After all, if you don’t graduate, you’ve made an investment with very little financial return. The result is a return that reflects what incoming students can reasonably expect from their investment.
