Module 7: Is a College Education Worthwhile

Jared Miller

Monika Dutka

Mike Wheeler

Teresa DePuy

Mark Groza

Module 7: Is a College Education Worthwhile?

From the calculations that were used in this present value exercise to determine whether or not a college education is worthwhile we had to start off with a discount rate that could be applied to the equations so that as time went by there would be noticeable difference in the salaries of high school graduate versus the college graduate. The rate that was used in this scenario was the current interest rate of 1.56%. This rate was chosen because it is the rate at which money is loaned out at and it is the current rate at which the U.S. dollar is inflating.

The present value of net income if one decides to attend college would be $2,617,730.97 versus $1,343,885.00 if one were not to attend college. Based on these calculations alone it is worth attending college, because the college graduate over a lifetime makes double of what the high school graduate will make.

Using a twelve year indicator to tell whether a college education is worthwhile is biased, because after only twelve years, in terms of net present values of the college education income of $275,540.22 versus high school income of $270,346.93, there is only about a $5,000 difference there. If you were comparing it for only twelve years it would have to be biased, because some people would think that for $5,000 more in income, your college education really was not worth it.

Considerations taken into account when deciding on going to college or not going to college generally at first comes down to one factor. Can the individual afford it, either through paying it on their own, through scholarships, or by having support from their family. After that the considerations come down to what the individual wants, the experience of college, learning a trade in school, all of these factors come into account when deciding if a person is right for college.

When pursuing a master’s degree though, what most people are going to be doing is seeing if the master’s degree they receive is worth the extra money that graduate school is going to cost them. It is just like deciding to go to college if the individual knows that a MA will get them more money then a BA or BS and over time the individual knows that the MA will pay for itself then that is the kind of decision making process that an individual goes through when deciding if they will pursue an MA.