What's the Best Investment: Stocks, Bonds, Homes ... or College?

If you're feeling behind in the national debate over whether college is still "worth it," here's a quick refresher:

college barchart.png

Opening arguments

FOR: The more education you have attained, the more likely you are to be employed and earn a higher salary.

AGAINST: College is too expensive, the pay-off is too risky, and the learning experience is woefully inadequate.


FOR: If college is so worthless, how come 86% of grads say that college has been a good investment for them personally?

AGAINST: The college payoff has hit a wall. Graduates are seeing slowing wage gains even as the cost of college is increasing four times faster than wage growth.


It's an important debate, but count me in with college's proponents. The rising cost of a degree is a huge challenge that's waiting to be disrupted by a combination of Web innovation and automation. And college might not be the right investment for literally every American. (After all, half the students who matriculate in associate or bachelor's programs fail to graduate.) But the aggregate evidence is hard to dispute: College pays off.

The typical college graduate earns $570,000 more than the average person with only a high school diploma over her lifetime. That makes college the best big investment on the market, Michael Greenstone and Adam Looney find in this remarkable report on the value of a higher education.

Let's say you're deciding where to invest $100,000 at age 18. Maybe you think to put it in gold, corporate bonds, U.S. government debt, or hot company stocks. It turns out the best investment -- by far -- is college. "The $102,000 investment in a four-year college yields a rate of return of 15.2 percent per year," the authors report, "more than double the average return over the last 60 years experienced in the stock market" and more than five times the return in corporate bonds, gold, long-term government bonds, or housing.

Critics will ask, if half the country is going to work in jobs that don't require college anyway (retail workers, food preparers, janitors), why force them to pay thousands of dollars on a degree? One answer is that the United States will never suffer for scarcity of retail workers, food preparers, and janitors. And if we do, good for them: Short supply might push up their wages. Another answer is that college degrees push up earnings in non-college occupations, too, including construction workers, day-care workers, plumber and secretaries, David Leonhardt writes. Still another answer is that college exists not only to train for the jobs we expect to fill, but also to built the next batch of innovative thinkers and smart employees who will create new industries with new jobs.

I could go on, but I think pictures make the case more congently. So here are five more charts in defense of college.

1. If you don't feel like college is paying off ... maybe just wait a little. School is an appreciating asset whose value accelerates in growth until you reach middle age (source: Hamilton Project)

2. Each additional level of education correlates with lower unemployment rates and higher earnings (source: BLS)


3. No matter their background, Americans make more per-hour, per-week with every level of college attainment (source: Hamilton Project)


4. It was true for the past: For 30 years, employment among white-collar workers has grown much faster than among middle-skill workers (source: Hamilton)
job growth across industries high low education.png

5. And it's true for the future: Employment for workers with Masters, professional, or associate degrees are expected to grow twice as fast as the overall job market (source: BLS)
job growth decade education college.png