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The lifetime ROI of college is only 13%? https://libertystreeteconomics.newyorkfed.org/2025/04/is-college-still-worth-it/ https://libertystreeteconomics.newyor

The lifetime ROI of college is only 13%? https://libertystreeteconomics.newyorkfed.org/2025/04/is-college-still-worth-it/ https://libertystreeteconomics.newyorkfed.org/2025/04/is-col... Doesn't that mean over the working life of the person (40 years), they spend (1-0.13) * 40 = 34.8yrs paying for the cost of college from their additional earnings? I think my college was paid for with additional earnings inside of 5 years.

bena 1y ago
I think it’s the difference between going and not going. So if you make 100 without college, you’d have made 113 with it. And I don’t know if loan repayments are factored in. It could be that college educated individuals wind up with 13% more wealth than similarly situated non-degreed individuals
CGMthrowaway 1y ago
ROI (as a %) at 5 years out is going to be much higher than Lifetime ROI. A non-graduate will be able to make up most of the gap they start with.
paxys 1y ago
It's your annual ROI. The total investment is 4 years of tuition + 4 years of opportunity cost. The total return is your salary till age 65 - salary of someone without a degree. Subtract 1 from 2, annualize it.
- deleted 1y ago
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alterom 1y ago
>The lifetime ROI of college is only 13%? Yeah, that's BS. Right off the bat, I'm seeing different numbers[1] for median earnings elsewhere: $60K for college graduates vs. $36K for high-school diploma holders. I have no idea where they got the $47K wage for high-school graduates from, and it's a substantial difference. Because the difference between being able to make ends meet, and not being able to make ends meet isn't quantifiable in terms of ROI. Not having to worry about your card bouncing at the grocery store is a step-function-like quality of life increase alone. What's the ROI of decreased risk of depression and suicide? [2] Or living 7 years longer, as the article we're discussing acknowledges. Then, the devil is in the details. Wages of someone with only a high school diploma and 20 years of experience today might be acceptable, but that's because they were able to get into the field with only a high school diploma 20 years back. The job landscape right now is different, and will be different still 20 years into the future. We all know that a factory worker in the 1950s could get by just fine with only a HS diploma, but lumping their end-of-career earnings with those of a fresh high-school grad entering a dead-end job makes for bad analysis. Yet this study attempts no such distinction. Then, there's looking at the toll jobs available to HS diploma folks take on them. With social security and retirement potentially not being an option anymore, that's probably the most important factor to look at today. I can go on and on; the point is, ROI calculation could make sense, but it is awfully incomplete in studies like this. And that's ignoring the elephant in the room, which is that colleges are not merely trade schools. College education develops the mind, introduces people to different perspectives and backgrounds - and, on average, creates more informed voters with better critical thinking skills and more ability to resist Russian-style firehose-of-falsehood propaganda.[3] There is no cure to that, aside from teaching critical thinking (according to the same RAND study) - which Finland has started doing a decade ago, starting from elementary school[4]. That kind of thing is one of a million reasons of why college education (beyond being a trade school with an ROI) is important for the society as a whole. That, and probably the fact that even if a plumber makes the same as a college-level mathematics instructor, we shouldn't be pushing potential mathematicians to become plumbers for a better ROI. Just a thought. [1] https://www.aplu.org/our-work/4-policy-and-advocacy/publicuvalues/employment-earnings https://www.aplu.org/our-work/4-policy-and-advocacy/publicuv... [2] https://pmc.ncbi.nlm.nih.gov/articles/PMC6739140/ https://pmc.ncbi.nlm.nih.gov/articles/PMC6739140/ [3] https://www.rand.org/pubs/perspectives/PE198.html https://www.rand.org/pubs/perspectives/PE198.html
dgacmu 1y ago
But are you factoring in the opportunity cost, i.e., the lost earnings of not working for four years during college? That's actually the bigger factor for many colleges. And then compute the interest / investment gains on those earnings.
freddie_mercury 1y ago
That's not lifetime ROI. It's pretty obvious they mean annual, since they compare it to stocks returning 8% and we know that isn't a "lifetime" return. "Indeed, by comparison, the stock market has provided a long-term return of about 8 percent and bonds have returned around 4 percent."

bena 1y ago

I think it’s the difference between going and not going. So if you make 100 without college, you’d have made 113 with it. And I don’t know if loan repayments are factored in. It could be that college educated individuals wind up with 13% more wealth than similarly situated non-degreed individuals

CGMthrowaway 1y ago

ROI (as a %) at 5 years out is going to be much higher than Lifetime ROI. A non-graduate will be able to make up most of the gap they start with.

paxys 1y ago

It's your annual ROI. The total investment is 4 years of tuition + 4 years of opportunity cost. The total return is your salary till age 65 - salary of someone without a degree. Subtract 1 from 2, annualize it.

deleted 1y ago
[deleted]

alterom 1y ago

>The lifetime ROI of college is only 13%? Yeah, that's BS. Right off the bat, I'm seeing different numbers[1] for median earnings elsewhere: $60K for college graduates vs. $36K for high-school diploma holders. I have no idea where they got the $47K wage for high-school graduates from, and it's a substantial difference. Because the difference between being able to make ends meet, and not being able to make ends meet isn't quantifiable in terms of ROI. Not having to worry about your card bouncing at the grocery store is a step-function-like quality of life increase alone. What's the ROI of decreased risk of depression and suicide? [2] Or living 7 years longer, as the article we're discussing acknowledges. Then, the devil is in the details. Wages of someone with only a high school diploma and 20 years of experience today might be acceptable, but that's because they were able to get into the field with only a high school diploma 20 years back. The job landscape right now is different, and will be different still 20 years into the future. We all know that a factory worker in the 1950s could get by just fine with only a HS diploma, but lumping their end-of-career earnings with those of a fresh high-school grad entering a dead-end job makes for bad analysis. Yet this study attempts no such distinction. Then, there's looking at the toll jobs available to HS diploma folks take on them. With social security and retirement potentially not being an option anymore, that's probably the most important factor to look at today. I can go on and on; the point is, ROI calculation could make sense, but it is awfully incomplete in studies like this. And that's ignoring the elephant in the room, which is that colleges are not merely trade schools. College education develops the mind, introduces people to different perspectives and backgrounds - and, on average, creates more informed voters with better critical thinking skills and more ability to resist Russian-style firehose-of-falsehood propaganda.[3] There is no cure to that, aside from teaching critical thinking (according to the same RAND study) - which Finland has started doing a decade ago, starting from elementary school[4]. That kind of thing is one of a million reasons of why college education (beyond being a trade school with an ROI) is important for the society as a whole. That, and probably the fact that even if a plumber makes the same as a college-level mathematics instructor, we shouldn't be pushing potential mathematicians to become plumbers for a better ROI. Just a thought. [1] https://www.aplu.org/our-work/4-policy-and-advocacy/publicuvalues/employment-earnings https://www.aplu.org/our-work/4-policy-and-advocacy/publicuv... [2] https://pmc.ncbi.nlm.nih.gov/articles/PMC6739140/ https://pmc.ncbi.nlm.nih.gov/articles/PMC6739140/ [3] https://www.rand.org/pubs/perspectives/PE198.html https://www.rand.org/pubs/perspectives/PE198.html

dgacmu 1y ago

But are you factoring in the opportunity cost, i.e., the lost earnings of not working for four years during college? That's actually the bigger factor for many colleges. And then compute the interest / investment gains on those earnings.

freddie_mercury 1y ago

That's not lifetime ROI. It's pretty obvious they mean annual, since they compare it to stocks returning 8% and we know that isn't a "lifetime" return. "Indeed, by comparison, the stock market has provided a long-term return of about 8 percent and bonds have returned around 4 percent."