5% is a pretty standard rate used in these type of calculations. It might be on the high side currently, but it is also low for other periods of time, hence being a decent average to work with.

> and assumes that the money is saved an invested as opposed to spent on luxury goods.

Naturally, but the potential remains.

> It also assumed that earnings potential throughout career will always be as good as that of an average college grad.

It makes no such assumptions. Earnings beyond the first four years after high school are completely irrelevant to my calculations. You will still have $1.6M in hand if you never made another cent, assuming you do not touch the investment until retirement.

In other words by going to college you are still "investing" some amount of money in yourself for a future payoff that is presumably better, though of course may not necessarily be.

With all that said, education is still worth it for education's sake. You don't really need to justify it with future incomes and better jobs. I find it disconcerting that so many do.