• Beth & Tim Manners

What is the Cost:Benefit of a Gap Year?

CBS News: "Delaying college for a year now, during the coronavirus pandemic, could cost members of the class of 2024 about $90,000 in lifetime earnings, according to a new analysis from the Federal Reserve Bank of New York. About half of the longterm earnings losses comes from forgoing the $43,000 salary that new graduates typically earn in their first year of work after graduation ... Wage increases are steeper at the beginning of young professionals' careers — the graduate who earns their degree at age 22 can, by the time they are 25, expect to earn an average of $52,000 ... But the graduate who starts working a year later, would, by age 25, only be earning $49,000 with two, versus three years of professional experience under their belts. And so on and so forth in following years — all the way to retirement age."


"These disparities exist even during non-COVID-19 times. But the pandemic has made them more acute because the global spread of the novel coronavirus has lowered what economists call the 'opportunity cost' of going to college — or what you give up to be in school. That's in part because unemployment has soared since the pandemic hit, effectively eliminating the job opportunities that high school graduates could normally pursue as an alternative to college. Non-college degree holders in particular have faced some of the highest rates of unemployment: About one quarter of young workers without a college degree were unemployed in the months following the onset of the pandemic."


"For simplicity's sake, the Fed researchers assumed that students give up no opportunities by going to college right now. That drives up the rate of return for a bachelor's degree to 17%, from 14% in normal times.Another way of stating that: For every dollar you spend on a degree, you'd earn $1.17 on the investment. For those students who delay college by a year, the return on the investment drops to 13%, the economists found."

© 2020 by The Manners Group.

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