A cost-benefit analysis of pursuing a post-secondary degree 

There is a common belief that the cost of getting a college degree has risen relative to the income of a typical college graduate, leading many to question the economic benefit of earning a post-secondary degree. The answer to the question “Is getting a college degree worth it?” remains a personal one, but the economic and intellectual benefits of earning a college degree remain compelling for many people. There are tricky and seemingly conflicting claims made about post-secondary education. For example, there is an oft-cited view that the cost of attending college has skyrocketed, while more recent data reveal that the inflation adjusted cost of tuition at many schools has declined. While the cost-benefit analysis of attending college depends on an individual’s circumstances, for students who do earn post-graduate degrees, the returns generally remain compelling.

The direct cost of attending college, which measures the hard dollar expense of a college education, has been falling over the past few years. On average, this direct cost is about $30,000 over the typical four years required to complete a bachelor’s degree. The indirect cost of attending college, also known as an opportunity cost, often represents the greater expense of obtaining an undergraduate degree. One proxy for this indirect cost is to consider the wages foregone by a full-time college student who might otherwise pursue full-time employment with only a high school degree. As of 2024, the median high school graduate would earn $150,000 over four years that it would typically take to earn a bachelor’s degree. These indirect and direct costs combine for a total expense of $180,000 for attending college. This may seem like a lot of money, but individuals who elect not to complete a college education usually forego even larger gains. For women, the median college graduate earns over $600,000 more than the median female high school graduate during her lifetime, and for men the median college graduate earns approximately $900,000 more during his career.

For the majority of past three decades, the median rate of return for attending college has been between 12 and 13%, an attractive financial return on investment. In fact, the college wage premium is at an all-time high right now as the real earnings of college graduates has increased at a faster and more consistent rate than that of high school graduates. However, this premium is not applicable to all students. A prime cause of decreased returns on completing college is the time required to earn a degree; for many students, earning a bachelor’s degree can take 5–7 years. For each extra year a person spends in college, the financial return decreases by 2–3%.

Another helpful fact illustrated by research is that college does not pay off, financially, for roughly 25% of graduates. For some students, the low return on a college degree might reflect personal work/life decisions. For other students, it may be due to a factor that can be explained by data, like what major they select. For example, the median rate of return for people majoring in engineering is over 18%, while for people majoring in education it is around 5%.

Many people fear attending college due to the accumulation of debt they will incur. Data confirm that the more post-secondary schooling a person attains, the more debt they are likely to have. In 2023, it was reported that three years after earning their degrees, 17% of people graduating with a bachelor’s degree were paying out a debt-to-earnings ratio of 8% or higher, while 60% of graduates with professional degrees were paying out a debt-to-earnings ratio of over 20%. Indicators for whether a program is “worth it” or not often conclude that a debt-to-earnings ratio higher than 12% is dangerous, and a ratio in the 8–12% range is in the warning zone. By this measurement, completing a professional degree to become a doctor or a lawyer is not financially “worth it.” However, this guideline does not fully account for high wage earners (like doctors and lawyers), but rather for people earning more average incomes. For people earning more average incomes, spending 20% of their monthly earnings on debt service is prohibitive because they have less surplus income available than a high wage earner after paying for life’s necessities. A typical doctor, on the other hand, could relatively easily cover life’s basic costs and still spend 20% of their income to pay off their debt.

Another beneficial aspect of college graduation that is frequently overlooked is the strong alumni networks that colleges have to offer. Currently, 70–80% of jobs are secured through employee referrals, social media recruiting, and hiring manager’s networks, meaning the majority of jobs are not coming from a traditional application process. Alumni networks can also be helpful for students during their time at college, as many alumni associations help students get internships while they are still in school. Having access to a network of a large group of people spread across the world can prove to be useful in countless ways to students who choose to tap into this resource.

One often overlooked consideration when analyzing the benefits and drawbacks of going into college is the happiness aspect of it. Earning a degree takes many years, and the experience of being a student presents a mixture of joy or dread that depends on an individual’s preferences. Attending college involves a litany of lifestyle changes, which may be liberating or threatening depending on personal circumstances. No evaluation about the merits of enrolling in college is complete without an honest effort to answer a difficult question: would you be happy to be a college student?

As the discussion in the preceding paragraphs attempts to reveal, there is no universal answer to the desirability of enrolling in college. Given the disparate outcomes of a cost-benefit analysis of attending college due to a variety of factors (intended area of study, likelihood of completing studies, years required to earn a degree, etc.), individuals will have to consider the merits of enrolling in college or graduate school based on their own circumstances. Among the issues a person ought to consider are these:

• Your alternatives. If you don’t pursue college, what is your career plan?
• Your career goals. Many fulfilling or high-wage careers do not require post-secondary education, including trade careers.
• The all-in cost of earning the degree you desire. How many years of schooling would you anticipate, and what income would you forego while in school?
• Defraying the cost of earning a degree. In addition to grants or scholarships, community college and online courses can often be cheaper than full-time residential college experiences or better fit into a lifestyle where a student maintains employment while pursuing a degree.
• Your commitment to and the likelihood of completing your course of study. Many students who enroll in college never earn a degree and are left burdened by debt and lost wages from the pursuit of incomplete studies.

Choosing to attend college is not a choice that should be taken lightly and, while it is a suitable pathway for many, it is not universally advisable.

For most people, the answer is yes, attending college is a worthwhile decision. College can be an exciting time, presenting a mix of learning, relationships and networks that can deliver a lifetime of economic and social dividends. For prospective students, it may be helpful to consider whether they are likely to fall in the significant but sizeable minority of students who do not obviously benefit from college, either due to their high opportunity cost, low expected return upon graduation, or low likelihood of timely graduation. Otherwise, the financial and social gains from attaining a college degree have been steady and attractive for many decades, arguing in favor of post-secondary education for students prepared for the challenges and opportunities it presents.