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Rashida Grant Zachary Easterling David Nowlin Sylvia Telesz

Is College Education Worthwhile?. Rashida Grant Zachary Easterling David Nowlin Sylvia Telesz

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Rashida Grant Zachary Easterling David Nowlin Sylvia Telesz

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  1. Is College Education Worthwhile? Rashida Grant Zachary Easterling David Nowlin Sylvia Telesz “Of course there's a lot of knowledge in universities: the freshmen bring a little in; the seniors don't take much away, so knowledge sort of accumulates....” -Dr. A Lawrence Lowell www.basicjokes.com

  2. Determining Factors of College Pursuit • Prestige • Expectations of others • Personal value placed on education • Parent educational attainment Returns of College Education • Higher wages • Increased efficiency and production in market • Ability to make better consumption decisions • Better health and access to healthcare • Annual increase of lifetime earnings INTRODUCTION

  3. Net Present Value: the accumulated value of all net income discounted by the average inflation rate Ct T ∑ NPV= - C0 (1+r)t t=1 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 Theoretical Overview 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. NLA = {GLA -[(GI * 0.08) – (GLA * 0.0421)]}

  4. College still remains a good investment… • 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) Literature Review • 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

  5. 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 Method 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)

  6. Bachelor’s Degree - initial salary: $34,000 Retirement age: 67 Present Value= $2,108,935.14 Future Value= $8,286,555.96 Loan Amount- Principle= $61,135.85 Interest= $45,468.74 Total= $106,604.59 paid back in 24 yrs DATA 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= $96,523.28 Interest= $84,391.62 Total= $180,914.90paid back in 27 yrs

  7. Data Salaries for Non-College Graduate Occupations

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

  9. Results

  10. 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). References

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