A Research Agenda for the Entrepreneurial University

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A growing number of Americans are questioning the value of four-year college degrees as the prices of higher education rise. Many argue that students are left with deep debts and no clear path to jobs.

The Gallup research company questioned American families about the issue in November and December 2020. It reported that 46 percent of the families said they would prefer their child do something else than go to college—even if there were no financial barriers.

But studies show that people with full college degrees make more money over their lifetimes than people with less education. Those with only high school diplomas, professional certifications or two-year college degrees earn less on average.

Investing in a college degree will usually earn a good return, according to the New York Federal Reserve, the state’s central bank. Its data shows that people with college degrees will earn on average 14 percent more money than they spent on college.

The average earnings for four-year degree holders is about $78,000 per year compared to $45,000 for those with only high school diplomas, the bank reported.

“On average” does not mean that the return on college education will always be a gain. Where a student attends school, how much debt they collect and the field of study they choose help determine their investment return. And the race, ethnicity and sex of the student can influence all of that.

Here are some of the ways college can turn out to be a good financial decision—or not:

Student loans can impact the degree’s value

Student loan debt is hard to avoid and harder to repay. College costs in the United States rose 117 percent from 1985 to 2019, federal data shows. Wages, however, have only risen 19 percent over that same time.

Loans are still the main way for most students to pay for college. In order to make the degree worthwhile, a student will have to earn enough money to pay back lenders. A manageable student loan payment is about 10 percent of after-tax income.

That is why it is so important to graduate. A lot of debt and no degree is the worst outcome for a college student.

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