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Mellody Hobson is president of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts.  Additionally, she is a regular financial contributor and analyst for CBS news.

Mellody: We are talking college again, tom, but that is because it is so important! Specifically, I want to discuss the question of whether college is worth it. This is something that has been on the minds of many as we have seen college tuition prices rise and student loans burdens rising along with them. But while it is understandable that parents and students might ask this question, I am here to tell you that college is not only worth it, it is a critical step towards increasing lifetime earnings and securing a sound financial future.

Tom: Can you spell this out for us? How much is a degree worth?

Mellody: I have some eye-popping numbers for you, tom. Try this first one on for size: adjusting for the costs of tuition, books, inflation’s impact on wages, the average value of a college degree is $500,000 dollars over a lifetime – and that’s a conservative average! That number has doubled over the past 3 decades. If that doesn’t grab your attention, there’s more! According to the department of labor, Americans with four-year college degrees made 98% more an hour on average in 2013 than people without a degree. That’s up from 89% five years earlier, 85% a decade earlier and 64% in the early 1980s.

It is important to note though that these differences persist even if you have some college but did not graduate. The wages for people who have some college but have not obtained a four year degree — a group that includes community-college graduates — have not been rising. The big economic returns go to people who have obtained a bachelors degree.

Tom: But what if you have student loans or you can’t get a job?

Mellody: You certainly cannot dispute the fact that the economic downturn has been tough on everyone in terms of employment, including college grads. And there are certainly concerns out there about student loan debt – I have spoken about that numerous times on this show. However, among four-year college graduates who took out loans, the average debt is about $25,000. This is a very small fraction of the economic benefits of college. And the unemployment rate in April for people between 25 and 34 years old with a bachelor’s degree was just 3%.

Tom: Does this hold true for minority graduates?

Mellody: Well Tom, the answer to this is multifaceted. In terms of employment rates, a college degree is always a positive factor in your favor. The story here is really about recent graduates, and the difference we see between minorities versus the general population. The unemployment rate for recent black degree holders is almost 10% lower than the black population as a whole, but black graduates are facing an unemployment rate nearly 7% higher than college graduates as a whole. Before the recession, the difference hovered around 3%. Clearly, there is still a lot that needs to be done to ensure that recent minority graduates and recent black graduates in particular, are getting the same advantages from their education as the general populace. However, the data does show that that gap narrows over time, and these differences do not negate the value of a college degree over a lifetime.

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College — Is It Worth It?  was originally published on