Rashida Grant Rashida Grant Zachary Easterling Zachary Easterling David Nowlin David Nowlin

Sylvia TeleszSylvia Telesz

““Of course there's a lot of knowledge in universities: the Of course there's a lot of knowledge in universities: the freshmen bring a little in; the seniors don't take much away, freshmen bring a little in; the seniors don't take much away, so knowledge sort of accumulates....” -Dr. A so knowledge sort of accumulates....” -Dr. A Lawrence Lowell Lawrence Lowell

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Determining Factors of College Determining Factors of College PursuitPursuit

PrestigePrestige Expectations of othersExpectations of others Personal value placed on educationPersonal value placed on education Parent educational attainmentParent educational attainment

Returns of College EducationReturns of College Education Higher wagesHigher wages Increased efficiency and production in marketIncreased efficiency and production in market Ability to make better consumption decisionsAbility to make better consumption decisions Better health and access to healthcare Better health and access to healthcare Annual increase of lifetime earningsAnnual increase of lifetime earnings

∑Ct

(1+r)t- C0

T

t=1NPV=

Net Present Value: the accumulated value of all net income discounted by the average inflation rate

C0 = L1*(1+r)5 + L2*(1+r)4 + L3*(1+r)3 + L4*(1+r)2 + L5*(1+r)Cash flow- initial outflow for a student, Lx is

annual amount borrowed

NLA = {GLA -[(GI * 0.08) – (GLA * 0.0421)]}

New Net Loan Amount: equal to the residual monies left over from a payment derived from 8% of total Gross Income after

paying 4.21% interest on a federal student loan subtracted from the previous gross loan amount.

Topel: The Private and Social Values of Education (2004)

Intangible Benefits of College Education

• More efficient parenting (better develops child’s human capital)

• Effect of one’s person education is internalized by others (family members, peers, increased workplace efficiency)

Trostel: The Fiscal Impacts of College Attainment (2007)

• College students tend to pay much more in taxes

• Total government spending per college degree is negative

• College education pays for itself: increased productivity and standard of living

College still remains a good investment…

Discount Rate = 2.94%

BLS: Consumer Price Index, using average inflation from 1980-2008

Average Salary Increase = 3.9%

Ken Abosch, head of Hewitt Associate's compensation practice

Entry Level Workers Starting Salary

Clerical Workers: $9.83 Fast Food: $7.62

Data Processing: $10.40 Non-Commission Sales: $19.94

Factory Labor: $14.18 Retail: $9.70

College Expense

(expected to rise 8% until graduation, model adds 20% to base expenses for a Master’s degree)

Per Semester: $5,000 (included $500 for supplies)

Bachelor’s Degree - initial salary: $34,000 Retirement age: 67

Present Value= $2,108,935.14

Future Value= $8,286,555.96

Master’s Degree- initial salary: $47,900 Retirement Age: 67

Present Value= $2,574,689.75

Future Value= $10,598,558.20

Loan Amount- Principle= $61,135.85 Interest= $45,468.74

Total= $106,604.59 paid back in 24 yrs

Loan Amount- Principle= $96,523.28 Interest= $84,391.62

Total= $180,914.90 paid back in 27 yrs

Salaries for Non-College Graduate Occupations

OccupationOccupation Hours Hours Worked per Worked per WeekWeek

Average Average Annual Annual SalarySalary

Max Hourly Max Hourly RateRate

Max Annual Max Annual SalarySalary

ClericalClerical 4040 $12,046.00$12,046.00 $20.00$20.00 $41,600.00$41,600.00

Data Data ProcessingProcessing

4040 $20,446.40$20,446.40 $20.00$20.00 $41,600.00$41,600.00

Factory Factory WorkerWorker

4040 $29,494.40$29,494.40 $35.00$35.00 $72,800.00$72,800.00

Fast Food/ Fast Food/ Counter Counter SalesSales

4040 $15,849.60$15,849.60 $12.00$12.00 $24,960.00$24,960.00

Retail SalesRetail Sales 3636 $18,158.40$18,158.40 $15.00$15.00 $28,080.00$28,080.00

SalesSales 3636 $37,327.68$37,327.68 $28.00$28.00 $52,416.00$52,416.00

OccupationOccupation BA/BSTotal

Earnings

BA/BS Discounted

Earnings

Master’s Total

Earnings

Master’s Discounted

Earnings

Clerical 30 Years 35 Years 30 Years 35 Years

Data Processing

30 Years 35 Years 30 Years 35 Years

Factory 45 Years 55 Years 40 Years 45 Years

Fast Food/ Counter Sales

20 Years 25 Years 25 Years 30 Years

Retail Sales 25 Years 30 Years 25 Years 30 Years

Non-Commission Sales

40 Years 50 Years 35 Years 45 Years

Table 1: Total and Discounted Equal Earnings of College Graduates and Non-Graduates

Annual Employment Lifetime Earnings

($150,000.00)

($100,000.00)

($50,000.00)

$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

Age

Bachelor Degree Economics Masters Degree Economics Clerical

Data Processing Factory Work Fast Food / Counter Sales

Retail Non-Comm Sales

Barrow, L., and C. E. Rouse. 2005. Does college still pay? The Economists’ Voice 2, (4): 1-8. Levin, H., C. Belfield, P. Muennig, and C. Rouse. 2007. The costs and benefits of an excellent education for all of America’s children. Retrieved March 17, : 2007.

Bureau of Labor Statistics. Consumer Price Index - All Urban Consumers. US Department of Labor. http://data.bls.gov/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUSR0000SA0&output_view=pct_1mth (10 November 2008).

Bureau of Labor Statistics. National Compensation Survey 2006. http://www.bls.gov/ncs/ocs/sp/ncbl0848.pdf (1 December 2008).

Bureau of Labor Statistics. Occupational Employment Statistics . http://www.bls.gov/oes/current/oes_oh.htm#b13-0000 (6 December 2008).

Dr. Al, Lee. Finding Percentages in Salary Increase for 2008. Payscale: Ask Dr. Salary. http://blogs.payscale.com/ask_dr_salary/2007/10/finding-percent.html (6 December 2008).

Sangrillo, Karen. “All About ‘Free Money,’ and How to Earn It.” Bucks County Courier times, 5 November 2006.

Topel, R. 2004. The private and social values of education. Education and

Economic Development: 18-9.

Trostel, P. A. The fiscal impacts of college attainment.US Department of Education. Federal Student Aid. http://studentaid.ed.gov/PORTALSWebApp/students/english/FFEL_DLInterestRates2008-09.jsp (3 December 2008).