How valuable is a college degree? The payoff is big, but the public is skeptical

People who have a college degree continue to enjoy several large economic benefits, including substantially larger earnings compared to those who haven’t completed college. That’s a major finding from a new report from the Pew Research Center entitled “Is College Worth it?”.

But despite these advantages, the study also found that a large percentage of the public doesn’t believe a college degree is worth the investment.

The report is based on 2 sources of data. First, the researchers analyzed data from the U.S. Census Bureau and a Federal Reserve survey to assess how workers between the age of 25 to 34 have fared in the labor market in the past decade.

Second, they conducted an online national survey of about 5,200 adults in 2023 to gauge their views on the value of a college education.

Economic Outcomes

Because of numerous labor market differences between men and women, the researchers looked at the economic payoffs of a college degree for the sexes separately.

Economic outcomes for men

Annual earnings for young men without a college degree trended downward from 1973 until about 10 years ago. But since then, the median earnings of young men with a high school education who are working full time have increased from $39,300 in 2014 to roughly $45,000 today. Median earnings of full-time workers with some college education are about $50,000 today, similar to their median earnings in 2014 ($49,100). All figures are in 2022 dollars. Even with those gains, the median annual earnings for both groups of non-college men remain below their 1973 levels.

By contrast, median earnings for young men with a 4-year college degree have increased over the past 10 years, from $67,500 in 2014 to $77,000 today. And unlike those without a college degree, the earnings of college-educated young men now exceed their levels in the early 1970s.

In 1973, the typical young man with a degree earned 23% more than his high school-educated counterpart. By 2023, that gap stood at 71%.

A similar pattern was found for household income, which counts the earnings of everyone in the household. In 1980, the median household income for young men with at least a bachelor’s degree was about 38% larger than that of high school graduates. By 2014, that gap had widened to 86%. By 2023, the typical college graduate’s household income was 93% greater than that of the typical high school graduate.

Economic outcomes for women

Unlike young men, young women without a college education did not see their earnings fall between 1970 and 2000. And during the last decade, young women with a high school diploma saw their median earnings increase from $30,900 in 2014 to $36,000 in 2023. For women who had completed some college but not earned a degree, median earnings rose to $40,000 in 2023 from $37,700 in 2014.

By contrast, median earnings for young women with a college degree increased steadily from the mid-1980s until the early 2000s, reaching $62,100 in 2003. This amount declined to $55,200 by 2014, but in the past 10 years, their earnings have rebounded, reaching $65,000 in 2023.

In the mid-1980s, the typical young woman with a college degree earned about 48% more than her counterpart with a high school diploma. By 2014, the typical college graduate earned 79% more than the typical high school graduate, a gap that’s remained about the same in the past 10 years.

If we consider median household income, non-college young women have enjoyed large gains over the past 10 years, but women with a college degree have outpaced those gains. As a result, the income gap between young women with and without a college degree has widened. In 1980, the median household income of young women with a college degree was 50% higher than that of high school-educated women. By 2014, the gap had grown to 139%. Today, it stands at 121% ($136,000 vs. $61,600).

The bottom line

Earnings for people without a college degree have increased over the past decade. However, the earnings increase for people with college degrees has been even greater, so the economic gap between the 2 groups hasn’t narrowed. If anything, it has grown. That conclusion is supported by the data we’ve analyzed here at Degreechoices. For most people, college is worth it, as long as you pick a school with a proven track record of good outcomes for its students. For example, we’ve found that within 3 years of graduating from one of America’s top 100 public universities, the average student:

• Earns at least double the average wage of a high school graduate, and in many cases, well above the national wage average of $45,760.
• Has earned back what they invested in college with the extra money they made compared to a high school graduate.

Those 2 factors determine what we call a college’s return on investment (ROI). A college degree’s ROI varies greatly depending on the school you choose, and what major you declare, but for most students an investment in a college education eventually pays dividends in the form of a large lifetime earnings premium.

A skeptical public

Despite that reality, the Pew researchers discovered that a substantial percentage of the public believe that college isn’t worth the investment.

Only 22% said the cost of getting a 4-year college degree would be worth it if it required taking out student loans. Another 49% thought earning a degree would be worth it only if it didn’t require taking on debt, and 29% said the cost of college is not worth it.

Only 1-in-4 U.S. adults believe it’s extremely or very important to have a 4-year college degree to land a good-paying job in today’s economy. About a third (35%) said a college degree is somewhat important, but 40% say it’s not too important or not at all important.

Almost half (49%) of the respondents said it’s less important to have a 4-year college degree today in order to get a well-paying job than it was 20 years ago. Only a third (32%) said it’s more important, and about 17% said it’s about as important as it was 20 years ago.

Consistent with similar surveys in the past, the public’s view about whether college is a good investment was associated with political identification, level of education and age.

• Half of Republicans and Republican-leaning independents – compared to 30% of Democrats and Democratic leaners – say it’s not too important or not at all important to have a 4-year college degree to get a well-paying job.
• College graduates were more inclined than those with less education to believe that a college degree was extremely or very important (30% vs. 22%). However, 51% of 4-year college graduates and 48% of those with less education believed it was less important today for someone to have a college degree than it was in the past.
• Among respondents aged 18 to 29, 44% said having a degree is more important today to get a good-paying job than it was 20 years ago. Only 29% of those 30 to 49 and 30% of those 50 and older said the same.

Why, despite repeated findings that a college degree is strongly associated with better economic outcomes including lower unemployment and higher wages, do so many people continue to question its value? What accounts for such widespread, even increasing, skepticism?

4 factors are probably in play.

First, as our own ROI analyses show, some skepticism is in order. Not all post-secondary credentials pay off. Many short-term certificate programs, particularly those offered by for-profit schools, leave students in debt and without earning any extra income beyond that of the average high school graduate.

Students are well advised to be smart consumers when choosing where they will attend college and what they will study there.

Second, the public is bombarded with almost daily coverage about rising tuition costs and runaway college expenses. No surprise then that many people overestimate the real costs of higher education and conclude that it’s unaffordable. Much of the problem is driven by the inordinate attention the press gives to sticker tuition prices when describing the costs of college.

The problem, of course, is that most students don’t pay the sticker price for tuition. According to the recent national 2023 NACUBO Tuition Discounting Study of 325 private, nonprofit colleges and universities, published tuition prices were discounted by an average of 56.1% for full-time, first-year students in academic year academic year 2023-24 and 51.9% for all undergraduates.

In other words, by providing grants, fellowships, and scholarships, these institutions charge the average student less than half of their official tuition and fee sticker price. College is still expensive, but it is much more affordable than the media’s focus on published tuition would suggest.

Third, public perceptions are often influenced disproportionately by powerful anecdotes. We are quick to draw conclusions from small samples, often reaching generalizations that are not justified by the data. How many times have you heard a story about an individual who skipped college and became a millionaire cited as a reason that college is unnecessary?

It takes just 1 or 2 examples of the high school graduate or the college drop-out making a fortune from their business startup to challenge the well-established fact that on average college graduates earn much more across their lifetimes than do people without a degree.

Finally, it’s become politically fashionable in some circles to attack almost every aspect of higher education. Critics are quick to trumpet the claim that colleges are turning out graduates who are unprepared to succeed in the workplace and that plenty of good jobs await those who skip college altogether.

These claims, which may be true in some cases, but are misleading in the aggregate, often resonate with people who are eager to hear that the time and expense of a college education are not necessary for economic success.

Final thoughts

Although the perception that college isn’t important or worth it is contradicted by the data, the survey highlights the importance of providing students and their families with good information about college costs and outcomes. The more transparency the better. That’s why the Biden Administration’s introduction of a new Financial Value Transparency framework should be welcomed. It will provide students in all programs detailed information about what they are likely to pay out-of-pocket for programs, how much debt they can expect to take on, and how much money they are likely to earn after graduation.