Assignment:
The Surprising Findings on Two Year Degrees
TOPICS: Return on Investment
SUMMARY: As you pay your tuition bills, buy books and face the costs of higher education you may have wondered about the return on your investment. Data from Texas, Colorado and Indiana are beginning to provide insight into the value of higher education. The Federal Reserve also finished a study of returns. Some of the results are surprising. A college degree matters, but in some instances, a two-year degree may provide a competitive salary. The return on degrees has been stable for several decades and the difference in wages between the two degrees is also relatively constant. Part of the calculation is the opportunity cost; what you give up in terms of salary by forgoing work and going to college. Another important number is the wage you earn if all you have is a high school degree. Real wages for high school graduates dropped and helped maintain the earnings premium for college degrees.
CLASSROOM APPLICATION: It can be difficult at times to apply business concepts to your personal life. One important concept in personal finance is the return on investment for your education. It can be difficult to calculate on an individual basis, but studies incorporating state data suggest there is a positive return. The annualized rate of return the Federal Reserve found over a graduates career is 15% which is higher than the typical returns on financial investments. More specific data like starting salaries may be too narrow a measure, but it can help students look at schools and degrees.
QUESTIONS:
1.Give us your initial thoughts after reading this information on college degrees...
2. What aresome benefits of either a two- or four-year degree based on the research discussed in the article?
3. Do you think it is a good idea to focus on starting salaries to make career decisions?