Question

brenda has an associates degree earning the median salary. she wants to quit working and go to college to get just a bachelors degree. if she completes her degree in 2 years and it costs $15,000, how long will it take her to recover her investment assuming that she earns the median salary?
median annual household income by educational attainment of householder, 1997
professional degree $82,220
doctorate degree $97,222
masters degree $68,115
bachelors degree or more $83,202
bachelors degree $50,048
associate degree $45,258
some college, no degree $40,015
high school graduate $33,770
9th to 12th grade $18,851
than 9th grade $15,541
source: u.s. census bureau, march current population survey, income statistics branch/hhes division, u.s. department of commerce: washington, dc. table f - 18.
a. almost 6 years
b. almost 7 years

Explanation:

Step1: Calculate the additional annual income

The median salary with an associate - degree is $45,258$, and with a bachelor's degree is $59,048$. The additional annual income $I$ is $I = 59048 - 45258=\$13790$.

Step2: Calculate the time to recover investment

The cost of getting a bachelor's degree is $C = 15000$. Let the time to recover the investment be $t$. We use the formula $t=\frac{C}{I}$. Substituting the values, we get $t=\frac{15000}{13790}\approx1.09$ years. But we also need to consider the 2 - year study period. The total cost considering the 2 - year non - earning period (assuming no part - time work while studying) is the cost of education plus the income forgone. The income forgone in 2 years with an associate - degree salary is $45258\times2 = 90516$. The total cost $T=15000 + 90516=\$105516$. Then $t=\frac{105516}{13790}\approx7.65$ years.

Answer:

b. almost 7 years