Calculating the Financial Returns to College
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Key Assumptions - College Duration & CostValuesDefault
Source/Comment on Default Value
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(Total) College Cost$106,960$106,960
2017 Average Net Tuition, Fees, Room & Board for Four Year Non-Profit Private; https://trends.collegeboard.org/sites/default/files/2017-trends-in-college-pricing_0.pdf
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# of Years in College4
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Key Assumptions - Wages & Time to Retirement
Except for retirement age, all data here comes from 2017 Census Current Population Survey
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Wage Growth (YoY %) for non-College Grad - until age 35
5.82%5.82%
median nominal salary CAGR comparing 25-34 yr old High School (only) in 2017 and 2007 with 18-24 yr olds in 2007 and 1997
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Wage Growth (YoY %) for non-College Grad - age 35-55
3.26%3.26%
median of 10-yr and 20-yr nominal wage CAGRs comparing cohorts of workers from 2007 and 1997 with 2017 and 2007 with only high school
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Wage Growth (YoY %) for College Grad - until age 356.72%6.72%
median nominal salary CAGR comparing 25-34 yr old Bachelor's (only) in 2017 and 2007 with 18-24 yr olds in 2007 and 1997
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Wage Growth (YoY %) for College Grad - age 35-554.01%4.01%
median of 10-yr and 20-yr nominal wage (in 2017 dollars) CAGRs comparing cohorts of workers from 2007 and 1997 with 2017 and 2007 with Bachelor's only
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Starting Wage for High School Diploma-only$30,696$30,696
2017 mean wage (both sexes), high school only (includes equivalency), 18-24 years
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Starting Wage for College Grad$47,551$47,551
2017 mean wage, bachelor's degree (only), 18-24 years
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Retirement Age6565
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Tax Brackets$ cutoff
% bracket
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Bracket 1$9,52510.0%$952.50
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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Bracket 2$38,70012.0%$4,453.50
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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Bracket 3$82,50022.0%$14,089.50
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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Bracket 4$157,50024.0%$32,089.50
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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Bracket 5$200,00032.0%$45,689.50
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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Bracket 6$500,00035.0%$150,689.50
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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Bracket 737.0%
2018 Tax Brackets; https://www.cnbc.com/2019/02/07/how-to-find-out-what-tax-bracket-youre-in-under-the-new-tax-law.html
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IRR8.06%
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Age when investment pays off37
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Cash Flows
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Age (assuming Year 1 = 18)18192021222324252627282930313233343536373839404142434445464748495051525354555657585960616263646566676869707172737475767778798081828384858687
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Year12345678910111213141516171819202122232425262728293031323334353637383940414243444546474849505152535455565758596061626364656667686970
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Financial Impact-$53,943-$55,514-$57,177-$58,936$7,093$7,819$8,633$9,519$10,481$11,527$12,664$13,898$15,237$16,631$18,091$19,676$21,395$23,259$24,601$26,059$27,590$29,198$30,887$32,661$34,523$36,478$38,507$40,155$41,889$43,712$45,630$47,646$49,766$51,762$53,854$56,054$58,368$60,801$60,801$60,801$60,801$60,801$60,801$60,801$60,801$60,801$60,801$60,801$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0
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Tuition$26,740$26,740$26,740$26,740$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0
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After-tax - High School Diploma (only)$27,203$28,774$30,437$32,196$34,057$35,824$37,672$39,626$41,695$43,884$46,200$48,650$51,244$53,988$56,891$59,964$63,215$66,655$68,687$70,738$72,857$75,044$77,303$79,635$82,043$84,530$87,097$89,748$92,486$95,313$98,232$101,246$104,358$107,571$110,889$114,316$117,854$121,507$121,507$121,507$121,507$121,507$121,507$121,507$121,507$121,507$121,507$121,507$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0
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After-tax - College Grad$0$0$0$0$41,150$43,644$46,305$49,145$52,176$55,411$58,863$62,548$66,480$70,618$74,982$79,640$84,610$89,914$93,288$96,797$100,447$104,242$108,190$112,296$116,566$121,008$125,605$129,903$134,375$139,025$143,861$148,892$154,124$159,333$164,743$170,370$176,222$182,308$182,308$182,308$182,308$182,308$182,308$182,308$182,308$182,308$182,308$182,308$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0$0
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Cumulative Financial Impact-$53,943-$109,458-$166,634-$225,570-$218,477-$210,658-$202,024-$192,506-$182,025-$170,497-$157,833-$143,936-$128,699-$112,068-$93,977-$74,301-$52,906-$29,647-$5,046$21,013$48,603$77,801$108,688$141,349$175,872$212,351$250,858$291,013$332,902$376,614$422,244$469,890$519,656$571,418$625,271$681,325$739,694$800,495$861,296$922,098$982,899$1,043,701$1,104,502$1,165,304$1,226,105$1,286,907$1,347,708$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510$1,408,510
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