University Degrees Pay Off Over the Long Term

Source: Financial Post via Academica

The Financial Post has crunched the numbers to determine whether students would earn more by paying tuition for 4 years or by investing the same amount of money in a retirement fund. The study assumes that the average cost of a degree is $68,933; assuming a 5% return annually over 45 years, that amount would be worth $619,364 as an investment, and would offer students the chance to put in 4 years more time in the labour force. Based on an average income of $30,817 for a high school graduate, the hypothetical individual could, were they able to bank 100% of their after-tax earnings, make another $800,000 by investing their money at a 5% return, for a total of $1.4 M in 45 years’ time. That’s the same amount that the Council of Ontario Universities suggests a university graduate will make in excess of an individual with a high school diploma. However, this figure does not take into account increases in earnings due to inflation, which could lead to the university graduate earning an excess of closer to $2.1 M; wisely invested, that could make the value of a degree as much as $3.8 M greater than that of a high school diploma. A university graduate, the article says, is “more likely to be more financially independent during their working and retirement years,” and would have more options available to them.