There’s been much debate over whether the cost of college is worth it. Find out more in our analysis of college’s pros and cons.
Financial Impulse’s “Is It Worth It?” series takes a close look at high-cost items and experiences with the mission to break down their costs and benefits.
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The higher education landscape is changing rapidly in the U.S. as well as worldwide. For instance, as an alternative to traditional four-year degree programs, online courses and shorter training programs like coding boot camps are becoming more prevalent.
Moreover, social stigma against non-degree holders appears to be abating. In fact, popular culture often celebrates those who’ve succeeded without a college degree—Mark Zuckerberg, Steve Jobs, and Ellen Degeneres, to name a few.
But for many, going to college is perceived as the natural and expected next step after finishing high school and before pursuing a full-time career. Of course, with the growing student debt crisis, more and more people are beginning to question whether a college education is worth it.
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College Facts & Figures
Curious about the latest data on college graduates and current students in the U.S.? Here’s a snapshot of enrollment and other relevant facts and figures:
- According to the U.S. Census Bureau, 33.4% of adults in the U.S. held a bachelor’s degree or higher in 2016—the highest percentage ever since 1940.
- With that said, college and university enrollment has seen a slight decline in recent years—by nearly 90,000 students, or roughly half a percentage point, from fall 2016 to fall 2017.
- According to College Board, the total average cost of attending college in the 2018-2019 school year was as follows:
- Public four-year schools (out of state): $37,430
- Private nonprofit four-year schools: $48,510
- Public two-year schools (tuition and fees only); $3,660
- For-profit schools (tuition and fees only): $14,000
- Data comparing student loan debt over a 10-year span from 2007 to 2017 shows that debt increased across all of the U.S., with the exception of Alaska. The following states saw the greatest increase in debt:
- New Mexico (+102.49%)
- Delaware (+98.51%)
- Hawaii (+76.19%)
- Kentucky (+69.87%)
- Maryland (+61.80%)
- In the 2017-2018 academic year, the average full-time undergraduate student received $14,790 in financial aid. This broke down into:
- Grants: $8,970
- Federal loans: $4,510
- Education tax credits and deductions: $1,240
- Federal Work-Study: $70
The Benefits of Getting a College Degree
There’s a good reason why many parents push their kids to go to college—doing so has a clear ripple effect with numerous benefits for graduates.
Employment opportunities widen from having a college degree.
Those who hold a bachelor’s degree or higher consistently report higher rates of employment than those without one.
What’s more, studies suggest that the need for college-educated workers isn’t slowing. In fact, research by McKinsey Global Institute predicts that by 2020, there will be 1.5 million fewer college-educated workers than the economy needs in the U.S.
In addition, research by Georgetown’s Center on Education and the Workforce estimates 55 million job openings in the economy through 2020. Of these 55 million jobs, 65% will require some form of post-secondary education, like an associate’s, a bachelor’s degree, or higher.
But what about those big names like Oprah and Bill Gates who succeeded in spite of not finishing college?
We may be able to think of many famous names who quit school and cite their success as supporting evidence for why a college education isn’t worth it—but these cases only describe a portion of all those who do not obtain a college degree, not necessarily the norm or majority.
Life outcomes generally improve by virtue of having a college education.
The impact of having a college degree is far-reaching. As mentioned earlier, it improves employment opportunities—and with that comes greater perks like better health and well-being.
Why is this?
By virtue of having more employment opportunities, those with higher education have more job options, including those that offer benefits like health insurance, paid leave, and retirement.
They also tend to earn a higher income and are thus less likely to rely on public assistance. And compared to low-income earners, those who earn more have greater access to resources like housing and healthcare.
College promotes personal and social development.
Immersion in a diverse college environment enriches students’ perspectives by exposing them to new people and ideas. That can mean:
- Greater self-awareness
- Enhanced collaboration skills
- More creative thinking
- A wider knowledge base and social network
Meeting more people in college can go a long way and help you build what’s known as “social capital”—the resources made possible by having a wider network of contacts, whether it’s friends, colleagues, professors, and so on.
Of course, the extent of personal and social development you get depends in part on how much you put in. For instance, a student who joins a variety of student clubs and activities will likely interact with more people and gain newer perspectives than a student that only goes to campus for class.
The Drawbacks of Investing in Higher Education
In spite of the benefits, there are also downsides to going to college—some of which reflect larger economic circumstances rather than issues inherent to college itself.
Student debt can be a major financial setback.
By and large, the biggest drawback of going to college is the possibility of incurring debt, which 70% of students graduate with.
It’s a far from pleasant reality.
Thanks to spiraling college costs, the current student loan crisis affects more than 44 million borrowers. Collectively, their debt amounts to $1.56 trillion—making student debt the second highest form of consumer debt after mortgage debt.
And with the weight of student loans hanging over them, many borrowers face hardships in their financial freedom, career plans, and personal lives. For instance, student debt:
- Slows down saving for retirement
- Prevents buying a home, car, and other large purchases
- Prevents entrepreneurship and achieving other career goals
- Delays marriage and starting a family
Taking on the responsibility of student loans often happens at a time when you’re not prepared for it.
Unfortunately, student debt often begins at a time when you may not be in the right mindset to handle it.
Ashleigh Allman, writer at Smart Cents Mom, graduated with a bachelor’s in political science and admits to having “no idea” what jobs she qualified for after graduating. However, after visiting a few law schools as a senior, she decided against pursuing law and instead got a master’s degree in elementary education.
In total, Allman’s undergraduate and master’s programs resulted in about $20,000 in student loans.
Looking back, she says, “I wish I had a better understanding of the kind of loans I had during undergrad. I didn’t know that my student loans were Perkins Loans and that I could have chosen to minor in education and still earn a teaching certificate. Then I could have avoided my master’s program and saved even more money.”
Allman’s case isn’t an exception; on the contrary, it may very well be the norm: 77% of graduates express regret at not better planning how to manage their student loan debt.
This occurs, perhaps, because many students aren’t aware of how much they’re borrowing—according to Brooking’s Brown Center on Education Policy, half of first-year college students underestimate how much debt they have. To address this issue, a rising number of colleges are taking measures to help students make more informed borrowing decisions.
Many college graduates are underemployed.
Unfortunately, just because you have a college degree doesn’t mean you’ll have a job that matches your qualifications.
According to the New York Fed, 41% of recent graduates are underemployed. The 41% figure is certainly an improvement from the 46% back in late 2013, but it nonetheless indicates that many people’s potential aren’t being fully realized.
What exactly is underemployment?
This term refers to workers in jobs below their qualifications because of education, as well as workers who are part-time but want full-time employment. You can think of the former as overqualified workers—for instance, someone with a biochemistry degree working as a taxi driver.
Returns vary depending on your degree.
Not all college majors are created equal. Different subjects have different economic value, so what you study can indeed influence how much you earn later on.
According to Glassdoor, the most lucrative college majors are:
- Computer science
- Information technology
Of course, that doesn’t mean other subjects are worthless.
Justin Pritchard, a certified financial planner and founder of Approach Financial, Inc., shares that he earned a degree in Spanish Literature and Language, and also took “a lot of Sociology classes.”
While these subjects don’t directly tie into his current role, he says, “I think the whole experience helped me understand people and life in general. As a financial advisor now, I help people plan their lives, so I think the experience was useful.”
Not all industries require a bachelor’s degree.
When considering future career paths, it’s worth noting that some industries don’t value having a degree as much as others.
Chris Roane, financial blogger behind Money Stir, quit college after attending one semester, opting instead for an entry-level position doing website development. Over 15 years later, Roane continues to do web development—he’s even been promoted to leading the full web development team at his current company.
“In my experience as a PHP web developer, having a degree is not a huge advantage in this field,” Roane shares.
“Experience, problem-solving ability, and communication are things we look for, regardless of the education level. At least as far as backend developers (PHP) and frontend developers, a degree usually doesn’t mean you will make more money. That isn’t to say that a college degree would not be useful in this field, or that it can’t make you into a better programmer. It just doesn’t usually translate into more money directly.”
Daniella, writer behind I Like to Dabble, echoes a similar sentiment. After graduating with a degree in computer science, she now works as a software engineer alongside people who never went to college.
“In tech, you can survive or even do better with certifications in your specific field rather than a four-year degree,” Daniella says. “Employers want specific certifications and experience; some don’t care about seeing a bachelor’s on your resume. These people also make no less than me in my profession.”
Some colleges now offer income-share agreements as an alternative to student loans.
Income-share agreements, or ISAs for short, act as contracts between students and their universities, specifying that a certain percentage of their income after graduating will go towards funding their education.
Or, in simpler terms, students borrow money for their education through ISAs and return it later through their future employment. These agreements are generally set for a fixed number of years, and unlike traditional student loans, do not charge interest.
As a result, new graduates aren’t faced with unaffordable student debt if they end up in a low-paying job after college.
For this reason, ISAs are gaining popular support, even being lauded as “the future of higher education” and solution to student loans. However, it’s unclear how quickly they’ll be adopted into the mainstream, as they remain relatively limited in practice.
Conclusion: Is Going to College Worth It?
Whether or not you view college as a worthwhile expense may ultimately depend on what your career plans look like.
“For entrepreneurs, nobody cares what your degree is in,” CFP Pritchard notes, “so hard work, good fortune, and smart choices may be all you need.”
As for traditional job-seekers looking for roles with established corporations, he says, “The degree is probably still worth it, but that may be changing. That said, it might make sense to focus on a specialized education in a certain skill area (welding or nursing, for example) and get it done with more quickly.”
In the end, the numbers and stats demonstrating how going to college benefits people are ultimately predicated on the fact it improves one’s employability. That is, having a higher education makes you more appealing as a job candidate, which in turn lands you more job opportunities.
However, if avoiding debt is a big concern, it may be a better idea to spend a gap year (or two) working and saving for college. The job experience can provide some perspective on what you want out of a career and help guide your college plans later on, when you’re more financially and mentally prepared.