Is College Still Worth it? The New Calculus of Falling Returns

34 Pages Posted: 27 Nov 2019 Last revised: 6 Mar 2020

See all articles by William R. Emmons

William R. Emmons

Federal Reserve Bank of St. Louis - Banking Supervision and Regulation; Washington University in St. Louis

Ana Hernández Kent

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Lowell Ricketts

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: 2019

Abstract

The college income premium is the extra income earned by a family whose head has a college degree over the income earned by an otherwise similar family whose head does not have a college degree. This premium remains positive but has declined for recent graduates. The college wealth premium (extra net worth) has declined more noticeably among all cohorts born after 1940. Among families whose head is White and born in the 1980s, the college wealth premium of a terminal four-year bachelor’s degree is at a historic low; among families whose head is any other race and ethnicity born in that decade, the premium is statistically indistinguishable from zero. Among families whose head is of any race or ethnicity born in the 1980s and holding a postgraduate degree, the wealth premium is also indistinguishable from zero. Our results suggest that college and postgraduate education may be failing some recent graduates as a financial investment.

JEL Classification: I26, J15

Suggested Citation

Emmons, William R. and Kent, Ana Hernández and Ricketts, Lowell, Is College Still Worth it? The New Calculus of Falling Returns (2019). Review, Vol. 101, Issue 4, pp. 297-329, 2019, Available at SSRN: https://ssrn.com/abstract=3494169 or http://dx.doi.org/10.20955/r.101.297-329

William R. Emmons (Contact Author)

Federal Reserve Bank of St. Louis - Banking Supervision and Regulation ( email )

411 Locust St
Saint Louis, MO 63011
United States

Washington University in St. Louis ( email )

One Brookings Drive
Campus Box 1208
Saint Louis, MO MO 63130-4899
United States

Ana Hernández Kent

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

Lowell Ricketts

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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