Americans are losing faith in the value of a four-year college degree. A Wall Street Journal poll last year showed that just 42 percent of respondents believed that it was worth the cost, down from 53 percent a decade ago. Prospective students have taken this to heart: undergraduate enrollment is down relative to 2019.
Are young people right to shun college? The answer is complex. College can be a path to a better life—but not always.
High college tuition costs deter many prospective students. Waning student demand and increased financial aid have pushed down tuition in recent years, though even adjusted for inflation it’s still higher than 30 years ago. Additionally, students face the opportunity cost of spending four or more years out of the labor force. Along with lost wages, that’s time that students don’t spend gaining work experience and developing their human capital.
College is also a risky investment. Only 62 percent of students finish a degree within six years, with fewer completing in the customary four. Dropouts see little benefit from whatever coursework they might have completed. The high risk of noncompletion makes college much less of a surefire investment than one might think. Whether college is worth it depends on whether the financial benefits outweigh these costs and risks.
While the median college graduate earns 68 percent more than the typical high school diploma holder, it’s misguided to interpret this differential as the financial “return” on a college degree. College students are different from those who quit education after high school. They might be more motivated, have stronger academic credentials, or hail from different family backgrounds. Some of the 68 percent “college earnings premium” is attributable to these differences, not to the degree itself.
In a recent report for the Foundation for Research on Equal Opportunity (FREOPP), I estimate the financial value of college, adjusting the college earnings premium for these preexisting differences, and then subtracting tuition costs and opportunity costs. Finally, I adjust for the risk that some students take longer than four years to finish their degrees or don’t finish at all.
The results show that college is still worth it—sometimes. The median four-year degree program increases students’ lifetime earnings by $160,000, after accounting for college costs and dropout risk. But not every degree performs so well. Nearly a quarter of four-year programs show no return on investment (ROI), meaning that students typically wind up no better off than if they never went to college. But plenty of degrees deliver returns significantly above the median—and some boost students’ net lifetime earnings by more than $1 million.
Field of study greatly affects ROI. Engineering programs yield a median lifetime return of $949,000, making it the highest-ROI major. Computer science, nursing, and economics are also good financial bets. The median fine-arts program, by contrast, leaves students in the red. The limited earnings gain from these programs isn’t sufficient to compensate students for the costs and risks of college. Other majors with low to negative returns include education, psychology, and English literature.
This isn’t to say that low-ROI majors have no value. But low-to-negative returns for some majors do signal a misalignment of supply and demand. Lots of engineering jobs with fewer qualified candidates mean high wages for engineering majors; fewer jobs in the arts with a surplus of college-trained artists lead to lower salaries for them.
Field of study is not the only factor behind variance in college returns. At New York University, one of the nation’s most expensive schools, the film-studies degree leaves students worse off by about $22,000. But at nearby SUNY–New Paltz, with its much lower tuition, the film program raises net lifetime earnings by roughly $148,000. All else being equal, lower tuition improves the ROI of a degree, even for traditionally low-paying fields.
College students can use FREOPP’s new data to become savvier consumers. Some evidence suggests that students are shifting into higher-ROI fields. In 2022, 123,000 students graduated with a bachelor’s degree in engineering, the highest-ROI major, up from 86,000 such graduates a decade prior. That 43 percent jump dwarfs the overall 9 percent increase in college graduates over the same period.
Students have started to understand that not all college degrees are equal and have adjusted their behavior accordingly. But the onus shouldn’t be entirely on them.
Governments, too, can help ensure that the schools they fund don’t leave students in the red. The federal government is a particular offender in this regard. Uncle Sam gives out over $100 billion in Pell Grant and student loan funding to colleges yearly. About one-third of that money funds programs that fail to make students better off financially. To the extent that a student loan “crisis” exists, it’s concentrated among borrowers who attended one of the nonperforming programs.
For decades, students have been told that college is a surefire ticket to a better life. While college can be a path to upward mobility, that message should come with caveats. Plenty of four-year college pathways aren’t worth the cost, and some even leave students worse off. We should be honest about this reality—and empower students to make more informed decisions.
Illustration by Fernando Cobelo
