By John Wasik
CHICAGO Nov 5 Despite the sourness of the
recent job market, a college degree is still a good investment.
But picking your major is akin to assembling the right portfolio
-- you have to be selective to maximize your returns.
Recent studies back this up: the Hamilton Project of the
Brookings Institution shows that a college degree can yield a
more than 15-percent return. That's better than double the
average annual return of stocks over the last 60 years (6.8
percent), and five times the return of corporate bonds through
2010 (2.9 percent).
Even a hot investment like gold has only managed a 2 percent
average return over that period.
What you study matters because the difference in lifetime
earning potential from one degree to another can vary as much as
300 percent, according to a Georgetown University study. It all
adds up to the conclusion that being selective about the type of
degree you choose is more important than ever.
"On average, the rate of return on a college degree is about
as high as it's ever been," said Michael Greenstone, director of
the Hamilton Project of the Brookings Institution, the
nonpartisan think tank, which conducted one of the studies.
"We're now in a global labor market and we don't see these
The other study was called "The College Payoff," and was
conducted by the Georgetown University Center on Education and
the Workforce earlier this year. It examined the relationship
between lifetime earnings and degree choice.
If you're in the market for a college education -- either
for yourself or your children -- think of it in terms of
What can your investment yield? Going through the exercise
carefully won't give you a clear answer on whether a degree is
worth pursuing, but it will give you some idea on whether your
future earnings will justify the investment. The important thing
is to acquire a suite of critical thinking skills and not to
think short term when it comes to a degree. It should be a
stepping stone, not a stumbling block.
Here are a few tips to figure it out:
1. Do the math.
Look at the total costs of the degree, which includes
tuition, room and board, books, transportation and miscellaneous
fees. One of the best online sources is the U.S. Department of
Education's College Affordability and Transparency Center ().
What's most relevant isn't a college's "list" price, but
what it will charge you after it offers an average financial aid
package. There's another feature that will show you how much
college costs are going up for individual universities.
Once you apply a cost-increase factor to a range of
colleges, you can get a better idea of how much you'll pay after
four years. This is a good starting point for a baseline
estimate of a degree's cost. For example, on tuition alone, the
University of Arizona raised its prices 49 percent between the
2008-2009 and 2010-2011 academic years.
2. Make strategic choices.
If you're unsure on what colleges you'll be attending,
that's OK, because you can do a cost projection for fields of
study you're considering in the DOE website. Thinking long-term,
you can also do some projections on what lifetime earnings might
Don't just think of future demand, either, when choosing a
degree. There's a huge disparity between occupations due to a
job's relative global importance within a growing industry.
For example, Computer/Information Systems Managers with
bachelor's degrees can earn nearly $4 million over a career,
compared with $1.5 million for social workers, according to the
Georgetown University study.
In an information-based economy, "knowledge-intensive" jobs
that require a great deal of technical expertise and experience
tend to win out over public service professions -- at least in
terms of salaries.
3. Think sub-sectors within industries.
Within healthcare, consider positions such as biomedical
engineering, pharmaceutical research or alternative
energy/transportation. The top two fastest-growing sub-sectors,
according to IBIS World, are generic pharmaceuticals and
solar-panel manufacturing. Both play into long-term trends
For example, pharmacists are projected to make $4.4 million
in lifetime earnings, compared with $1 million for
nursing/psychiatric or healthcare aides. Both professions will
be in demand as the population ages, but the higher level of
skills for those in the professions or research -- demanding
graduate level education -- make a significant difference in
4. Figure in the worth of even more schooling.
Graduate degrees can boost earnings even more. The median
salary of someone with a master's degree was 26 percent more
than a bachelor's degree, Georgetown found.
Again, the kind of degree matters. Workers in healthcare or
life sciences saw salaries double in many cases when they earned
a master's degree. Employees in journalism and the arts saw
raises only up to 25 percent.
5. Consider the passion and purpose quotient.
Of course, finding something you're good at, feel passionate
about and will sustain you through a career is never to be
discounted. I've known successful lawyers who wished they were
writers. My B.A. degree (psychology) had little to nothing to do
with the profession I eventually found a passion for: journalism
Your passion/purpose quotient should focus on life goals.
Setting a financial goal in tandem with a lifetime earnings
target is important in this regard. "The importance that people
attached to income at age 18 also anticipated their satisfaction
with their income as adults," writes psychologist and Nobel
Prize winner Daniel Kahneman in his best-seller "Thinking Fast
Do you want to create a new drug, building or discover a new
species? Then your college and professional path is simpler. If
your path is less defined, look at the relationship between
earnings and choice of degree. It will provide some guidance
that will be helpful as you make one of the most important
investments of your life.