Is College a Good Investment?

There has a been a lot of talk the last few years about whether a college education provides a good return on investment (ROI). High tuition, absurd annual increases, and stagnant employee wages (not to mention the rise of the Gig economy) over the past few decades have further emboldened those that say the return isn’t there and the system needs a massive overhaul.

I will admit to being a skeptic. When my son, Jack, was born one of the first things Emily and I did was open a 529 College Savings Plan for him. Our monthly contributions were small and after running the numbers and seeing that a public college education might cost $200,000 by the time he turned 18, they felt even smaller.

Of course, feelings don’t determine the merits of an investment. The numbers do. So, let’s look at some numbers to see if college offers a good ROI. Special thanks to JP Morgan’s 2020 College Planning Essentials for the data.

Arguments Against

The chief argument against college as a good investment is the cost. A common saying among real estate investors is “You make your money when you buy.” The higher the price, the less opportunity for return. As you can see from the chart below, prices are high.

A college-bound 18-year-old will pay $94,607 to attend the average public institution and $214,946 to attend the average private institution. A six-year-old can expect to pay roughly $170,000 or $386,000, depending on whether they go public or private, respectively.

What’s even more startling is how fast prices are rising: an average of 6.3%! Thankfully, it has slowed over the past few years but look at the cumulative increase going back to 1983:

As grateful as I am that coffee prices have only increased 96%, the relative savings won’t come close to offsetting college tuition’s nearly 800% increase! It gets even worse when you consider that the average wage paid today is about the same as it was back in the 1970’s.

To the critics, I say loud and clear: I hear you! Costs are out of control, inflation is ridiculous. As I type this, I’m breaking out in sweats thinking about telling Jack and Gwen that high school is the end of the line.

Arguments For

Now, let’s turn our attention to the arguments for.

First, a college degree provides a much greater level of job security. Looking at the chart below, you’ll see unemployment by education level over the past 23 years. While the trend is obvious, of particular interest is how each group was impacted during the Great Recession of 2007-2009. For those with a college degree, unemployment peaked at less than 5% compared to nearly 11% for those with only a high school degree.

Second, the average college graduate earns exponentially more than someone without a degree: average annual earnings are $71,155 versus $38,936, respectively. That’s translates to an extra $1.8M in earnings over a 40-year career.

The Final Verdict

My answer is an unequivocal yes, college is a good investment. I do wonder how tuition-fatigue and the current pandemic will impact how college looks in the future (Greater consolidation? Less liberal arts and more specialization? More students choosing two years at a community college before finishing at a public or private institution?) but the benefits are hard to argue against.

What I believe we as parents need to focus on is finding the school that is the best fit for our kids: best fit academically, socially, and financially. We all want our kids to have an edge and that means guiding them somewhere they will thrive.

So, with the firm belief that college is a tremendous investment I am excited to announce an upcoming webinar with Brooke Daly and Lindsey Ringenbach of Advantage College Planning on Friday, May 22nd at 11 AM. Brooke and Lindsey will discuss “10 Keys to College Funding and Affordability,” dig into the scholarship process, how to research different forms of aid, how your child can maximize aid, and what we as parents can do to maximize aid, among other things. I will then present on how you can pay the tuition bill, the pros and cons of various types of accounts, how the timing of distributions matters, why you should never purchase a 529 through an advisor, and why 529 accounts set up by the student’s grandparents can foul up their eligibility for financial aid.

An invitation with more details is forthcoming and I hope you are able to tune in!

Have a great weekend!



Ryan Smith
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Born and raised on the North Shore of Massachusetts, I moved to Raleigh in 2011 to marry my wife, Emily. We have two kids, Jack and Gwen, a golden retriever named Olly, and are members of Church of the Apostles. I have been a Financial Advisor since 2005 and earned a Master’s of Science in Financial Planning from Bentley University in 2007. I became a CFP® professional in 2009, a Retirement Income Certified Professional® in 2015, and a Certified Tax Specialist™ in 2023.