A college degree may be worth the investment, but not for everyone

The short answer to the question, “Is college still worth it?” is, “It depends.”

Attending higher education institutions may impart an array of societal and personal development benefits. Still, one factor of increasing import that raises the question of the worthiness of attaining a college education in a market-driven economy is the personal cost involved. The question becomes even more pertinent based on three trends: rising costs, decreasing employment opportunities for college graduates and a fair share of Americans having little or no confidence in higher education. 

Consider these three trends: 

• College tuition has doubled in the last 20 years, as shown in SSTI's September 2024 analysis.
• An April 2025 study from the Federal Reserve Bank of New York found a 5.8% unemployment rate among recent college graduates aged 22-27 in March 2025—rising from a low 3.9% in April and May 2022.
• A 2024 Gallup survey found that Americans are “nearly equally divided among those who have a great deal or quite a lot of confidence (36%), some confidence (32%), or little or no confidence (32%) in higher education.” 

Adding complexity to the economic question of pursuing a college education is the growing phenomenon of good employment opportunities that do not require a four-year college degree to be considered. SSTI reported in this August 2024 article that numerous state governments and major corporations had dropped college degree requirements for many jobs in 2023. This trend can be good for non-college-graduate workers' paychecks. As noted in a Burning Glass Institute report, “When workers without a (bachelor’s) step into a role that previously required a degree, they experience on average an approximately 25% increase in salary, amounting to over $12,400 in incremental earnings per year.”

So, it may be of little surprise, as the Pew Research Center has found, that many Americans are skeptical of the value of a college education. According to Pew’s May 2024 survey, “Only one in four U.S. adults say it's extremely or very important to have a four-year college degree in order to get a well-paying job in today's economy. About a third (35%) say a college degree is somewhat important, while 40% say it's not too or not at all important."

Using return on investment analysis (ROI) instead of personal sentiment or gut feelings puts the degree’s value into dollars. For example, analysis from New York Fed economists Jaison R. Abel and Richard Deitz, published on April 16, 2025, found that a college degree’s ROI is 12.5%, a rate that beats the New York Stock Exchange’s long-term return of about 8% and bonds’ return of around 4%. Abel and Deitz calculated a degree’s ROI using the rate of return (wages) for the median graduate rather than the average graduate to eliminate very low and very high wages from the equation. 

The Federal Reserve economists, however, present some strong caveats about their findings. They note that their estimates are for the typical graduate paying the average costs over four years of school and earning the median college wage upon completion. “But with half of college graduates earning a return below the median, and some paying higher costs,” they ask, “is college worth it for everyone?”

They point out in the Federal Reserve piece that, in many cases, graduates do not attain a consistent return of 12.5%, noting,

(s)ome colleges are much more expensive than average, and financial aid is not guaranteed no matter which college a student attends. In addition, the potentially high cost of living on campus was not factored into our estimates. Some students also may take five or six years to finish their degrees, which can significantly increase costs. Further, our calculations were based on median wages over a working life, but half of college graduates earn less than the median.

They concluded that the abovementioned factors prevent about 25% of college graduates from benefiting as much as others might from their investment. These lower-on-return students include those who must pay above-average living expenses. For example, a student who pays $207,000 for room and board over four years instead of $180,000 has a return on investment of only 11%. 

Another scenario that lowers the ROI is not receiving any financial aid and thus paying the average sticker price for college. This adjustment in actual costs lowers the return on investment to roughly 10%. A final scenario would be a combination of several factors: not receiving aid and paying higher living expenses or attending a more expensive school. In each variation of this scenario, the total cost increases to $262,000 and the return falls to about 9%. 

 Yet, there is still a positive return in the scenarios mentioned above. 

Other possibilities could diminish the net gain further, however: taking extra time to finish a degree can be especially problematic. These students are paying for an additional year or two for living expenses and entering the workforce later, thus losing out on lifetime earnings. Abel and Deitz note, “The total cost of college increases from $180,000 to $272,000 when students graduate in five years and to $364,000 if it takes six years to graduate.” They estimate that taking five years to complete college lowers the return on investment to about 9% (25% lower than the average), and taking six years lowers the return to 7% (40% lower than the average). 

Since the analysis uses the median post-graduate return, as noted earlier, half of college graduates fall into these lower return categories. About 25% of graduates fall at the lower end of this continuum and derive minimal benefit from their investment in a college education.