Value of a College Degree

How much is your college degree really worth?

You know your college degree is an investment in your future. But do you know how big of an ROI you can expect? And how important should any of that be, anyway? Find out in this podcast.

Podcast transcript


PETE: This is How Not to Move Back in With Your Parents. You’re on the IU MoneySmarts Radio Network. I’m your host Pete the Planner, and this is my cohost, Alexander.

ALEX: Howdy.

PETE: You like that?

ALEX: It’s all right.

PETE: Have you thought about when you go into professional world changing—

ALEX: Changing my name? [LAUGH]

PETE: Well, my brother-in-law, his name is Nate. But when he moved to LA, and he’s a professional, he’s Nathaniel. So we go visit him, and everyone’s like hey Nathaniel, and we’re like, who the hell’s that, it’s Nate. So you can go by Alexander. What do you think?

ALEX: I don’t know. I’ve never been... I’m not a very formal guy, so I don’t know how that would work. I could totally, like, I’m gonna write a book, and my name would simply be Alexander, as my pen name.

PETE: Yeah, you need a period somewhere, on either side of it. Speaking of names, Philip Shuman joins us on the program. Phil, Director of Financial Literacy at Indiana University. The Philip?

PHIL: It is Philip, but we tend to avoid that second, so.

PETE: All right, so we’re not talking names today. What are we talking about? Phil, I want to have you say this, because these are your words, not mine. What are we to be discussing today?

PHIL: We are talking about how to make your college degree worth it.

PETE: That is the slipperiest of slopes.

PHIL: Yes.

PETE: Okay. You’re leaning down, you lift the mic, your mouth, mouth, there you go. So here’s the deal, Alex. To make your college degree worth it, which just sounds like a buzzy buzzword...

ALEX: It’s such a hot topic right now though.

PETE: But it has to—this discussion has to mean something, right? We have to make sure that we’re giving actual advice, because it’s really abstract.

ALEX: It’s a very opinion-based topic right now.

PETE: So, first of all, let me say that when you have an education, the enlightenment that comes with education itself is very valuable, and the life experiences, and relationships...

ALEX: Yeah.

PETE: And just growth as an individual. But unfortunately, we live in a world of metrics and we have to put some value to that, and to some degree and economic value, and you’ve paid a certain dollar amount for it. Now the question is, was that worth it, and how do you make sure it was worth it? Phil, what do you see, because I know this is a topic when we discussed discussing it. We don’t really consider this. We don’t wanna go out there and say an expensive college degree’s not worth it. It is if you’ve leveraged it.

PHIL: Yeah and I think the thing to keep in mind is that, I’ve talked with you guys about my personal experience with this, that when I graduated I thought that college wasn’t necessarily worth it, just because I wasn’t seeing the results that I thought I would get. Coming from a four-year private school, where you get all this promise of, “you’re gonna have a high-paying degree because you’ve paid all this money for school,” and I come out of college, and my first job in Chicago is $28,400 a year.

PETE: Yeah, in Chicago.

PHIL: In Chicago.

PETE: Yes, so $28,400 in not-Chicago is a challenge.

PHIL: Yep.

PETE: $28,400 in Chicago is... where did you live? Home?

PHIL: No, I lived about a mile away from Wrigley Field.

PETE: Really, like by yourself?

PHIL: Initially by myself and then I got a roommate.

PETE: Okay.

PHIL: And I mean, that at least was nice because that shared some of the expenses or cut down the expenses.

PETE: I think the unfortunate need (and I don’t have the stats on this for today because I just didn’t feel right doing it, and I’m lazy) but I think the reality is some majors, some industries, fields of study, create more economic opportunity than others. That’s not science that I just—that’s truth.

PHIL: Yeah.

PETE: Right?

PHIL: Definitely. I mean, if you wanna be straight about it, like typically art, and those fine art type majors aren’t gonna create as much money especially in the beginning, right after school.

PETE: And I think the idea that it’s so uncomfortable to say, hey, maybe if you’re focusing on music or art or library science, whatever it is, it’s not that those aren’t important. Not the point.

PHIL: Right.

PETE: And it’s not the point that people shouldn’t go into that. It’s just you have to understand, there are financial ramifications of making those career choices, and fill the challenges. Let’s say someone’s getting a finance degree and someone over here’s getting a jazz dance degree. And I love some good jazz dance. Who doesn’t? If they’re getting the same degree or different degrees at the same price, one is gonna be able to leverage that same price degree as the other person can.

PHIL: Yeah.

PETE: So how does the person that isn’t in a position of leverage, how do they make sure that that education they got is worth it?

PHIL: I mean, honestly, since the demand in the market is gonna result in you having less pay or might be harder for you to get that job that you really want, it’s gonna be all about what you do during your time in school to really enhance your profile.

PETE: See, not only that, but the economic choices you make when you’re in college. So that you don’t have so much student loan debt when you get out. You know, on various episodes of this podcast, we talked about different ways to reduce your cost of living. Some of them being things like returning these student loan refund checks that could come to you. If you’re in a position or a degree program where there’s not big income on the back end, and you are wasting pennies and dollars and hundreds of dollars, that’s a problem, Alex.

ALEX: That’s the funny thing about this podcast, and this financial topic, in general, is it ties into everything.

PETE: It does.

ALEX: You know, you could be an art major and make $20,000 coming out of school, and then you can see the accounting, finance major, or pre-med, or whatever, coming out of school making $50,000, but they’re acting horribly with their debt, they have a ton of student debt. And five years down the line, you’re in a much higher net worth and better financial position than they are because you’ve handled yourself well. And maybe, also like, Phil, you just said you enhanced your profile during college, you did the right things to set you up for a better future. So it is about not screwing up during college.

PHIL: And that’s the thing, there’s nothing wrong with choosing either major.

PETE: Right.

PHIL: You’re going to college. You’re coming to college for a reason to take and to get the degree that you wanted to get. And there’s nothing wrong with that.

PETE: ’Cause it’s your life. What you’re gonna do. It’s like—I mean, it’s not about money.

PHIL: Yeah, and it could be about money if that’s your priority in life, but if your priority is happiness and happiness is by you getting that jazz dance degree...

PETE: True.

PHIL: ...then by all means, you should pursue that. Then you just need to understand that whether or not you’re a jazz dance major or you’re an accounting major, there are financial choices that you’re gonna have to make in college to put yourself in a great position once you do graduate, so you feel your degree is worth it.

PETE: Now Alex, I know you’ve run across stuff like this but I remember when I was in school, I had a friend who went to law school, and I asked him, before he went to law school, “what area are you going to, like what area of law?” And he said, flat out, “whatever area makes the most money.” And I don’t think that way. It kinda seems bad. I don’t know...

ALEX: Sounds miserable. [LAUGH]

PETE: Yeah, you run across people that—

ALEX: Be honest, yeah—

PETE: Say, I’m gonna study what makes me the most money, but that can’t be the way to go.

ALEX: No, and I went through the same thing, honestly.

PETE: Yeah?

ALEX: So personally, I’m not [LAUGH]... it’s funny to run a financial podcast. I don’t consider myself technically a numbers person. I’m not the best with technical numbers and math and all that stuff. I prefer the speaking, hence podcasting, and marketing. So I decided that coming into college, I was deciding whether to do a finance major or a marketing major. And I chose marketing, even though finance is generally gonna make more money ,because that’s what I felt was better. And it’s weird, there aren’t a lot of us actually—marketing majors—comparatively, to the finance and accounting. But it’s that general sense of, do what you want but at the same time make sure you’re doing the right thing. ’Cause I have a lot of people I know who are finance accounting majors, who have just been screwing off during college, not doing the right things. And they might not even be able to get a job with that degree. That’s supposed to be one of the easiest degrees to get a well, high-paying job in. So it’s non-financial decisions also that will affect your finances.

PETE: You know, when you’re picking your area of study, a lot of times you say, okay, post-graduation, if I choose this field, I’ll never make more than 40 grand, and I’m okay with that. A lot of people, social workers or whatever, it doesn’t matter. And then other people say, you know what, kind of, sky’s the limit. But it doesn’t actually work that way, especially with student loans, right, because in a vacuum, $40,000 every year for the rest of your life is somewhat—is manageable. I mean, there’s no reason to say it’s not manageable. It’s well above the poverty line. It’s manageable. You just gotta make right choices. But if you start off in the hole because you got 30 grand in student loan debt, and you’re trying to live on 40,000 bucks, I mean, the math starts to fall apart.

PHIL: Yeah, I mean, that’s exactly it. I suggest you have to figure out ways so you can manage your debt, or you keep yourself out of debt while you’re in school just so you avoid that situation once you do graduate.

PETE: One of you fellas, it may have been Al, Alexander, said, that’s why making the right connections with extracurricular—who said that? The extracurriculars and the things you have and networking while you’re in college is to get you the best job opportunities, so then you can leverage that education. Look, I was a slacker to some degree, and I’ve just gotten out of it, really. But if you’re slacking and you just get a degree you don’t care about, it is kind of impossible to leverage your education, to put you in a decent position (or, that is, not into debt).

ALEX: Yeah, and it’s about making the right grades to set yourself up for a good job. Or if you’re pre-med or whatever, making sure you can study enough to pass those correct tests that you’re gonna need to go into your field, And bringing connections, meeting people, and just getting involved, and making sure it’s the right thing for you too, Because if you are in something that makes a lot of money, and you’re gonna be absolutely miserable, you can figure that out during college and prevent that mistake. And vice versa—if you’re in something that you think you like, but its a risk, and you won’t be making a lot of money, and you find you don’t like it enough to spend your life doing it—those are decisions that you should try and figure out as early as possible, so those financial things don’t build up on you later.

PETE: I think Phil, too, just goes back to the idea of, what, an appreciating asset, a depreciating asset, and then an education. So an appreciating asset is something like a house where the longer you hold it, generally, the housing market will push the value of that house higher. So you even, if you had to borrow money to buy a house, of course you’re making payments on said house, but your equity is growing because it’s an appreciating asset. A car, you’re making payments on a car, but your car, the longer you drive, it gets worth less, less, less. So at the end of paying off your car, it’s worth less than you started. How about an education, right? What is that?

PHIL: Wow, an education—delayed gratification in a way.

PETE: It’s an asset. But if you use it as such...

ALEX: Right.

PHIL: It is, but I think, I would say it almost operates a little bit similar to the house in just that the value of it is going to increase over time. But it is very, very slow going. And don’t expect for you to graduate, and all of a sudden everything that you could possibly want just comes at your feet because you have this magical piece of paper that tells you, look what you’ve done over the past, hopefully four years.

PETE: It’s gotta be what you make it.

ALEX: Yeah, exactly.

PHIL: It’s what you make of it.

PETE: I also think this was not a problem 20 years ago, I have to admit. Sometimes these would yield 2014–2015 problems. This is one of those. 20 years ago, you graduate from school, you don’t know what you’ll do, you don’t leverage your education. It kinda didn’t matter as much because he didn’t owe $30,000 to student loan debt, right? Now it’s a big bet, I mean you’re asking someone at the beginning of their adult life to make a huge decision, there’s a lot of pressure. I don’t know how much the Director of the Department of Financial Literacy weighs in on majors versus income, and how much schools do, and how much parents have that conversation. Did that conversation matter a lot less when they were in school?

PHIL: Yeah, I mean we—

PETE: Do you weigh in on that?

PHIL: We—we kinda do, I mean—

PETE: You don’t throw anyone under the bus, right?

PHIL: I mean, that’s the thing. It’s what—yeah, we definitely don’t wanna throw anybody under the bus. We wanna encourage people to have that conversation. It’s about their finances and making sure they understand what’s going on. We encourage them, but we don’t have that conversation with them.

PETE: Al, anything else to add? Take-aways?

ALEX: The number one thing has gotta be, it’s what you make of it, during and after. That’s what it comes down to. You can make your college degree worth it or you can completely squander it.

PETE: Let me give a big disclaimer. Okay, here’s my disclaimer. I’m not belittling, we’re not saying any major’s better than any other major. The fact of the matter is, math is involved with this, okay. So before you get mad at someone, get mad at math. Don’t get mad at us. We want you to do whatever your heart desires, whatever your passion is. Do it. Just understand, financial reality is part of that equation, and you’re gonna be a lot better off if you understand that, and then work with it, opposed to ignore the realities of some of our career decisions. So all right, so we’ll leave it there. If you have any questions, go to You’ve been listening to How Not to Move Back in With Your Parents. You’re on the IU MoneySmarts Radio Network.