Is a college education worth a million dollars?

Summary:  One of the sad aspects of modern America is our gullibility.  We’ll believe the most preposterous statements if they feed our shiny prejudices.  Such as educators telling us that a college education is worth a million dollars.  This is the 4th in the FM site’s series about education (at the end are links to the other chapters).

A BA or BS is worth a million dollars of incremental lifetime earnings!  So say the educators of America.  This post links to the sources of this urban legend, and a few articles providing more sophisticated analysis.  But its obviously false, on several levels.

  • The million-dollar figure is an average, not a median.  See the following graph to see the range of returns.

It ignore the cost of college, and the income stream that money could yield by itself with no further work.

It ignores the role of race, gender, and class — big factors influencing lifetime income.


From a report by the American Enterprise Institute (see below)


The first three articles provide excellent analysis about the benefits of a college education.  The next two are a nice summaries.  The last is an interesting rebuttal.

  1. The Big Payoff: Educational Attainment and Synthetic Estimates of Work-Life Earnings ”, US Census Bureau, July 2002 — Source of the “million dollar” number.
  2. Education Pays“, Sandy Baum and Jennifer Ma, CollegeBoard, 2007 – “The Benefits of Higher Education for Individuals and Society”
  3. How Much Is That Bachelor’s Degree Really Worth?“, Mark Schneider, American Enterprise Institute, May 2009
  4. Is your degree worth $1 million — or worthless?“, Liz Pulliam Weston, MSN Money, 28 September 2007
  5. Afterword and other posts on this topic

Other valuable articles; no excerpt provided.  The first is a good summary analysis; the second summarizes the debate.


(1)  The Big Payoff: Educational Attainment and Synthetic Estimates of Work-Life Earnings ”, US Census Bureau, July 2002 — This is the primary source of the “million dollar” number.  This report considers the effect of our obsessions — race and gender — but ignores factors in our blindspot of class.  Excerpt:

Does going to school pay off? Most people think so. Currently, almost 90% of young adults graduate from high school and about 60% of high school seniors continue on to college the following year. People decide to go to college for many reasons. One of the most compelling is the expectation of future economic success based on educational attainment.

This report illustrates the economic value of an education, that is, the added value of a high school diploma or college degree. It explores the relationship between educational attainment and earnings and demonstrates how the relationship has changed over the last 25 years. Additionally, it provides, by level of education, synthetic estimates of the average total earnings adults are likely to accumulate over the course of their working lives.

… Over a work-life, individuals who have a bachelor’s degree would earn on average $2.1 million — about onethird more than workers who did not finish college, and nearly twice as much as workers with only a high school diploma. A master’s degree holder tops a bachelor’s degree holder at $2.5 million. Doctoral ($3.4 million) and professional degree holders ($4.4 million) do even better.

Footnote #6: Though medians provide a measure of central tendency less sensitive to outliers, and so are often used in describing earnings data, means present fewer computational difficulties, both in modeling the synthetic work-life estimates and in creating statistical procedures to test these estimates.

(2)  Education Pays“, Sandy Baum and Jennifer Ma, CollegeBoard, 2007 – “The Benefits of Higher Education for Individuals and Society” — Excerpt:

Among students with top test scores, virtually all students from the top quarter of families in terms of income and parental education enroll in postsecondary education, but about 25 percent of those in the lowest socioeconomic quartile do not continue their education after high school.

… Gaps in postsecondary enrollment rates by income and race/ethnicity are persistent. Moreover, black and Hispanic students, as well as low-income students, are less likely than others to complete degrees if they do enroll. Students from rural areas and male students also have relatively lower levels of participation in higher education.

Gaps between individuals who participate and succeed in higher education and those who don’t have a major impact on the next generation. The young children of college graduates display higher levels of school readiness indicators than children of parents who did not graduate from college. For high school graduates from families with similar incomes, students whose parents went to college are significantly more likely to go to college themselves than those whose parents did not go to college.

… During their working lives, typical college graduates earn over 60% more than typical high school graduates, and those with advanced degrees earn two to three times as much as high school graduates.

Table 1.1: Median Earnings and Tax Payments of Full-Time Year-Round Workers Ages 25 and Older, by Education Level, 2005

  • Professional degree.. $100,000 gross; $74,500 after-tax
  • Doctoral degree:……….$79,400 gross; $59,500 after-tax
  • Master’s degree:………..$61,300 gross; $46,600 after-tax
  • Bachelor’s degree:……..$50,900 gross; $39,000 after-tax
  • Associate Degree:………$40,600 gross; $31,500 after-tax
  • High School degree:……$31,500 gross; $24,900 after-tax
  • No degree:………………..$23,400 gross; $18,800 after-tax

All of the differences in earnings reported here may not be attributable to education level. Education credentials are correlated with a variety of other factors that affect earnings including, for example, parents’ socioeconomic status and some personal characteristics.

Taxes paid include federal income, Social Security, and Medicare taxes, and state and local income, sales, and property taxes.

(3)  How Much Is That Bachelor’s Degree Really Worth?“, Mark Schneider, American Enterprise Institute, May 2009 — Excerpt:

Many claim that a college degree is worth a million dollars, but like so many other “facts” about higher education in the United States, it is not quite right. Indeed, using a set of reasonable assumptions that factors in school selectivity, the cost of a college education, and foregone wages, I show that the million dollar figure is grossly inflated, and may be three times too high.

Key points in this Outlook:

  • Many claim that college graduates earn a million dollars more in a lifetime than high school graduates.
  • In fact, there is great variation in the lifetime earnings of students graduating from different types of colleges or universities.
  • Once we account for tuition payments and discount earnings streams, the payoff of a college degree falls dramatically, but the return is still substantial.

(4)  Is your degree worth $1 million — or worthless?“, Liz Pulliam Weston, MSN Money, 28 September 2007 — Opening:

With college tuitions heading toward the stratosphere this year, you might well be wondering whether a degree is still a good investment, especially if you’re facing the prospect of going into debt to pay the tab.

And if, as we all know, some bachelor’s and master’s degrees are much more lucrative than others, which are the best investments? To find out, I sat down with my handy-dandy financial calculator to play with some numbers.

It would be an impressive understatement, by the way, to call these figures a rough estimate. I had to make too many assumptions and leave out too many factors for these numbers to be anything other than a parlor game for those who might be interested.

But what they told me supported both common sense and what I’ve observed in the employment marketplace. For example:

  • Associate’s degrees are a slam dunk. These two-year degrees seem to result in a massive payback, compared to their relatively low cost, for a high school graduate.
  • Ditto, usually, a bachelor’s degree. Any bachelor’s degree you get at a public university is likely to pay off handsomely, as well. If you’re attending a private college, though, you might want to steer clear of education degrees.
  • Some degrees are a step back. Thinking of a master’s degree in a liberal arts or social sciences field? Let’s hope you’re in it for the love of learning, because on average there doesn’t seem to be any financial payoff.
  • Professional degrees rule. There’s a reason why people borrow tons of money to attend law and medical schools. The return for a professional degree is huge.


Please share your comments by posting below.  Per the FM site’s Comment Policy, please make them brief (250 words max), civil, and relevant to this post.  Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

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For more information

To read other articles about these things, see the FM reference page on the right side menu bar. Of esp relevance to this topic:

Posts about America’s education system:

  1. College education in America, another broken business model, 3 July 2009
  2. The secret about our universities (seldom even whispered among Professors), 5 July 2009
  3. Women dominating the ranks of college graduates – What’s the effect on America?, 7 July 200

    Originally published at Fabius Maximus and reproduced here with the author’s permission.

3 Responses to "Is a college education worth a million dollars?"

  1. Guest   July 11, 2009 at 8:06 pm

    Why are you still worried out irrelevant issues? US government is facing a 500-1500 billion shortfall as calculated by Hayman Capital. And now Japan is also joining the world with a tin cup in hand. Where are we really heading?

  2. MarkL   July 13, 2009 at 1:58 am

    Let me make this simple so even an American Government can understand it…You cannot keep buying products from overseas you can’t afford it – you have to make them in the US. You lost the global trade game and it’s time to become protectionist. China and India and other countries don’t respect intellectual property so anything clever you do manage to do will be stolen anyway. Forget it you can’t win, you lose, stop trying.And anyway even if you did start to win at something small look at what China did to Australia – RIO Tinto and BHP kicked China in the proverbial in business and Chinese government just arrested their employees and anyone who did business with them.

  3. James Yancy   August 6, 2009 at 6:33 pm

    Actual hard facts supporting the commonly stated fact that a degree is worth $1 million are always welcome. That figure is thrown around a lot but it’s pretty plain to see that a degree can help increase one’s income significantly. For example, those who earn a Master’s Degree in Nursing often earn near 6 figure salaries immediately afterward.