Rate of Return of College Compared to Alternative Investments
June 25, 2011
When the various costs of college are totaled, the total investment for a four-year college degree is about $102,000. When you compare the rates of return of a $102,000 investment in bonds, stocks, gold, treasury bills, and housing to the investment in a bachelor’s degree, higher education is the clear winner. The investment in a four-year college yields a rate of return of 15.2 percent per year — more than double the average return over the last 60 years experienced in the stock market (6.8 percent), and more than five times the return to investments in corporate bonds (2.9 percent), gold (2.3 percent), long-term government bonds (2.2 percent), or housing (0.4 percent). Also, at first glance the associate’s degree stands out with returns over 20 percent, but this simply reflects the much lower cost of an associate’s degree relative to a four-year degree. When compared to the lifetime earnings of four-year college graduates, workers with an associate’s degree still earn significantly less.