What’s the price and payoff of a diploma? (image from iStock)

In recent years much debate has arisen about the value of a college degree. Many argue that learning is intrinsically worthwhile for its own sake. But a great number of students and parents want to know the financial bottom line before they commit to enrolling in a college that could cost tens or hundreds of thousands of dollars for a four-year degree. What is the payoff?

The federal government took a stab at answering this question through a new website called College Scorecard. Unveiled last year, it shows the average net price of a school for students who receive financial aid and the average earnings of former students who were aid recipients, measured 10 years after they started school.

Several states are also publishing information about the labor market for college graduates that they have gathered through analysis of student and wage data. Websites such as Payscale also compile wage data through surveys of graduates.

Mark Schneider, a former senior education official in the George W. Bush administration, argues that what matters is not just the school that a student attends but the program of study. Schneider, now at the American Institutes for Research, has come up with some surprising findings through his work with states. Here is his analysis.

By Mark Schneider

As rising college costs and student debt get debated around kitchen tables and in the presidential campaign, price tags and loan totals may be blinding us to a basic economic fact. Whether college costs and debt are too high depends on what graduates earn after completing their degrees. If, as many calculate, the bachelor’s degree is really worth an additional million dollars in lifetime earnings, then the average debt of $30,000 that comes with it ranks among the best investments a young adult could make. Trouble is, while education pays, it pays a lot more for some graduates than for others — and not all will reach or even come near the million dollar mark.

Luckily, predicting who will is no longer a crapshoot.

Mark Schneider (Photo courtesy American Institutes for Research) Mark Schneider (American Institutes for Research)

Measures of the labor market value of college degrees have improved dramatically over the last few years. Many states and the federal government now report the earnings of graduates at different career stages. But the federal government’s College Scorecard wage data are limited to a single number for an entire college or university.

In contrast, many states are reporting what graduates with different majors at different schools earn. Now a student in Virginia, for example, can see how much graduates from different sociology programs throughout the state are making after graduation. Or they could see how much a sociology grad from Virginia Tech pulls down compared to a Virginia Tech business grad. Or they could see whether getting a master’s degree from University of Virginia would pay significantly better than stopping with a bachelor’s degree in the same major from the same school. States are able to report these detailed wage outcomes by matching unemployment insurance wage data with information about where students studied and where they graduated from.

I have worked with seven states (Arkansas, Colorado, Florida, Minnesota, Tennessee, Texas and Virginia) to make these data more understandable. This work has been done in a partnership between each state and College Measures, a division of the American Institutes for Research, which is a non-partisan, not-for-profit research company. The data, which can be found at www.collegemeasures.org/esm, has yielded important insights and some real surprises. Here are a few:

  • What a student studies matters. Overall, the median wages of college graduates increase with each step up the educational ladder. Bachelor’s graduates out-earn associate’s graduates, and master’s graduates bring home more than bachelor’s graduates. But associate’s degrees in some fields lead to wages that rival or surpass those of bachelor’s graduates. That helps explain why many community colleges now report that 10 percent or more of their students already have bachelor’s degrees and are looking for degrees that pay better. Given this trend, community colleges may become an alternative to graduate school!
  • Yes, master’s graduates on average earn more than bachelor’s graduates, but not always. In Texas, for example, graduates with master’s degrees in music, fine and studio arts, English language and literature, and social work earned less than the median wage of graduates from associate’s degree programs.
  • Despite national emphasis on high-quality early childhood education, the training programs that prepare students to work in this field consistently produce some of the country’s lowest paid graduates. In some states, students with credentials in early childhood education earn less than high school graduates.
  • Many of the largest programs of study, especially in the arts, produce graduates that earn low wages throughout at least the first decade in the workforce. And that “start low, end low” pattern usually lasts (and lasts).
  • The often discussed shortage of graduates in STEM (science, technology, engineering and math) does not translate uniformly into higher wages for graduates in these fields. Job seekers with degrees in biology, the nation’s largest science field, don’t fare especially well in the labor market, earning about the median wage of graduates from all bachelor’s degree programs. In contrast, graduates of TEM (just technology, engineering, and math) fields consistently earn higher wages than most of their peers.
  • Graduates in many health-related programs earn high wages, as do technicians at every level of postsecondary education. The rule of thumb is that students who know how to fix things or know how to help people stay healthy earn higher wages.

Given rising costs, high debt and an uncertain job market, questions about the value of a college degree have proliferated. As the debate heats up, remember that, overall, college is a good investment. Even if it isn’t uniformly worth a million dollars, college graduates earn more than high school graduates and they are far less likely to be unemployed.

But students need to know that not all college degrees are created equal and that some majors will launch them into the middle class relatively quickly while others might lead to years upon years of camping out in Mom’s basement, driving a beater and struggling to pay off student loans. Fortunately, as wage data become more available, it will become easier for students to make better decisions about what to study, how much to pay, and how much to borrow for that education.

Mark Schneider is vice president and institute fellow at the American Institutes for Research. He is also the president of College Measures. He served as the U.S. commissioner of education statistics from 2005 to 2008 and is a distinguished professor emeritus of political science at the State University of New York, Stony Brook.