saving money collegeWith student loan debt topping $1 trillion and the cost of college rising at four times the rate of inflation, many parents and high school seniors are asking themselves a fairly obvious question: Is college still worth it?

According to data released by the U.S. Bureau of Labor Statistics (BLS), the answer is still yes.

“That’s not to say you want to go borrow $100K to be a teacher,” says Greg McBride, senior financial analyst at Bankrate.com. “But the right degree at the right price is not only the path toward higher earning, it’s also great insulation against unemployment.”

Employment and earning power

Even during the recession, with high unemployment and limited earning power, the numbers still bear out the simple truth we’ve always preached about college—a degree will help you get a job and earn more. For college graduates—that’s anybody with a four-year degree or more—the unemployment rate is only 4.1 percent, half of the 8.4 percent unemployment rate for high school graduates that have no college experience, according to the BLS.
“When you look at the difference in the unemployment rate, it really goes to show the investment of a college degree is still the best investment you can make,” McBride says.

College graduates will also earn more over their lifetimes than those with only a high school diploma. In 2011, the last year these figures were available, the median annual earnings for someone with only a high school diploma was $33,000, but for college graduates it was almost $55,000.

But as the price of a college degree gets steeper, graduates who aren’t in fields with plump salaries will find it takes a lot longer to pay off that degree.

In a Georgetown University Center on Education and the Workforce study, researchers concluded that “high school students who can go on to college should do so—with one caveat. They should do their homework before picking a major because, when it comes to employment prospects and compensation, not all college degrees are created equal.”

McBride considers this basic common sense. Whether you’re buying a car, home, or college degree, make sure you can afford your investment and consider the potential return on that investment.
Research potential future salaries

Although industries and salaries change, you can research how much a potential job would earn on sites like Salary.com or Payscale.com. Compare that to the cost of universities your future college student is looking at attending. If you’re looking at taking out student loans, make sure to also factor in the interest rate.

“One rule of thumb that is used in calibrating cost of education with earning power is don’t borrow more than one year’s salary in your degree area or field of choice,” McBride says.

That can be a challenge, but it’s something to think about. Students taking out loans should consider how much they could reasonably put toward such loans each year and how long it will take them to pay the loans off if they earn that median salary. Do you really want to be paying for college when you turn 35 and work for meager wages as, for example, a social worker? No matter how fulfilling your career may be, that’s a hard number to crunch.

In the end, the cost-versus-earning-power calculation may not decide which college one may choose, but it’s a calculation that prepares young students for the life decisions they will encounter when they finally have that expensive degree.

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.