The average college degree yields a better return on investment than the U.S. stock market—even if some don’t.
A typical four-year degree course — which covers tuition, housing, books and food — costs $108,800.
If invested in the stock market, based on typical returns, it would be worth $2.8 million after a 40-year working career.
But during the same period, a person would earn about $4 million more than if they had only attended high school.
And an engineering student would generate greater returns than humanities and arts. The graphic below shows the differences.
Researchers found that obtaining a degree provided a return on investment of 9.9 percent for women and 9.1 percent for men
Stocks and shares generate an average return of about 8.46 percent, according to a separate study cited by the study
The fascinating findings come in a new analysis of 5.8 million Americans, which compared the wages of those with college degrees to those with only high school diplomas.
Over a lifetime, university graduates typically earn significantly more.
That extra income was compared to what they spent on four-year bachelor’s degrees — $108,800 on average. Earnings missed by college graduates while in college were also considered, but accounted for separately.
On average, those with college degrees had an annual return on their investment of between 9 and 10 percent, according to the study, published in American Educational Research Journal.
That is greater than the average return on an investment in the stock market, which is about 8.5 percent annually, according to separate research cited by the researchers.
So if someone made an initial investment of $108,800 in the stock market, they would have just over $2.8 million 40 years later.
But if they used that money to finance a college education, over the next 40 years they would have earned a total of $4 million more than they would have if they only attended high school.
That’s an average of nearly $100,000 more each year thanks to the degree.
But the selection of college students had a significant effect, with some underperforming the markets.
“Our cost-benefit analysis shows that, on average, a college education yields better returns than the stock market,” said co-author Liang Zhang, a professor at the NYU Steinhardt School of Culture, Education, and Human Development.
“There are significant differences across university students, and the returns are higher for women than men,” he added.
Male and female engineering majors returned an average of 16.4 percent, but female engineers alone saw a much higher return of nearly 19 percent.
Engineering graduates can end up taking high-paying jobs at companies such as Boeing or Tesla.
The study, released this week, also found that the return on the average college degree for both sexes fell by more than half a percent between 2012 and 2020. That was due to the rising cost of college and wages not keeping up.
In the case of almost all major, women saw higher returns. That’s because women with only high school diplomas were particularly low-paid, meaning the benefit they experienced from going to college was higher.
This does not mean that women earn more than men, in fact the opposite is true. Women earned approximately 28 percent less than men among college graduates and about 33 percent less than men among high school graduates.
Computer science graduates, who might end up working at places like Google, were among those with the highest returns
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The second highest earning major was computer science, with returns between about 13 and 15 percent for both men and women. These graduates can go on to work as software engineers for tech giants like Apple or Google.
Business, health and mathematics and science subjects had a return of between 10 and 13 percent. Biology, agriculture and social science majors had returns of approximately 8 percent to 9 percent.
At the lower end of the spectrum, education, humanities and arts all had returns of less than 8 percent. These graduates may go into fields such as marketing or book publishing.
To assess what kind of returns can be expected from investing in the stock market, the study cited research that estimated returns on assets such as bonds, stocks and housing between 1870 and 2015.
It found that stocks and shares produced a long-term return of 8.46 percent, taking inflation into account.
The study was based on data between 2009 and 2021 from the US Census Bureau’s American Community Survey and also adjusted all earnings to compensate for inflation.
However, it only compared people who completed high school to those who earned bachelor’s degrees—it did not take into account those with more advanced degrees.
Liang said that may underestimate the overall return of a university education, as a bachelor’s degree is a necessary stepping stone for those embarking on postgraduate studies, which can also be lucrative.