Capital Budgeting For A College Degree

The decision to attend college is at least in part a capital budgeting decision. A recent report by economists at the Federal Reserve Bank of New York completed that analysis for us. The NPV of a college degree today is about $273,000, down from a high of $338,000 in 2001, but three times the 1980s NPV of $80,000. Additionally, the payback period today is about 10 years, much quicker than the 15 to 25 years during the 1970s. What about the IRR? The IRR overall for a college degree is about 15 percent. Engineers have the highest IRR at 21 percent, while education majors have the lowest IRR at about 9 percent.