Many Americans underestimate the economic benefit of holding a college degree and overestimate the cost of earning one, according to a new survey from the Federal Reserve Bank of New York.
Almost 75% of respondents undervalued the earnings premium of a higher education degree, and about 60% overvalued the price of attending college. Additionally, low-income households and those headed by parents who did not attend college were more likely to be off in their estimations.
Incorrect information may be making families think college is not worth the cost, says Basit Zafar, one of the report authors and New York Fed research officer.
Since 1979, the gap in earnings between college-educated workers and those with no post-secondary education ballooned—rising from 35% to nearly 80% higher in 2013, according to an Economic Letter from the Federal Reserve Bank of San Francisco. Additionally, researchers from the Brookings Institution found that while wages are growing for college graduates, they are actually falling for those without a degree.
However, once respondents were given accurate information about higher education degrees and wages, parents were 5.1% more likely to say they would send their children to college.
In a "somewhat puzzling" finding, providing correct information about the cost of college did not significantly affect people's likelihood of saying their kids would go to college. This is possibly explained by behavioral research indicating that people weigh benefits more than costs when making big decisions, Zafar says (Berman, MarketWatch, 9/22).
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