For several decades, a college degree was believed to be a dependable passport to financial security; however, in present-day economic conditions where tuition fees have sky-rocketed, student debt is mounting, and the job market is changing, the viability of a college education is under increasing scrutiny. Only one in four U.S. adults surveyed by Pew Research in 2024 believes that a four-year college degree is quite significant for securing one of the good jobs.
Then when exactly isn’t college worth it? An increasing number of studies, particularly those sponsored by the Federal Reserve Bank of New York, have tried to delineate certain situations in which a degree may not suffice as a prudent return on investment.
An excessive out-of-pocket cost brings down value
The more out of pocket the student pays, the less likely it is he or she will see any financial returns worth mentioning. The average amount paid by the student is 30,000 dollars for four years. But for students living on campus or lacking financial aid, that figure may rise exponentially.
The difference between living on-campus compared to off-campus could bring the total cost of college from $180,000 to $207,000, respectively; therefore, the expected return on investment would drop from 12.5% to around 11%. While that dip may seem miniscule, over the years, it could translate into hundreds of thousands of dollars’ worth of lost opportunity.
Not everybody else sees a high return
According to New York Fed economists Jaison Abel and Richard Deitz, around one-quarter of college graduates observe little return on their investments in education. These people earn a measly $10,000 more annually than a median high school graduate. Their percentage return on a bachelor’s degree is an abysmal 2.6% compared with the average of 12.5% and, indeed, below normal equity market returns.
This group may be made up of students who attended more expensive schools, followed low-paying majors, or else took longer to get their degree, all circumstances that negatively affect ROI.
Costs of delays in graduation
Time is another very vital issue. Most bachelor’s programs can be done in four years, but many students exceed this limit. Some students take up to six years to graduate. The delay has its own price to pay too: direct costs like extra fees for tuition and accommodation and indirect costs like loss of work experience and delayed income.
For the five-year grad, costs shoot up to $272,000, while a six-year grad could elevate this to $364,000. Consequently, it drastically brings down return on investment to 12.5% for those graduating in five years, and thereafter, it plummets to about 9% and 7% for those graduating in six years.
Your major matters-a lot
By far the most straightforward determinant of post-college financial success is a student’s major. The STEM fields of computer engineering, business, and health sciences reliably provide the highest incomes. The median mid-career earnings for computer engineers are $122,000, whereas education majors earn approximately $55,000.
The fields providing the lowest returns include fine arts, liberal arts, leisure, hospitality, and education. Passion is important, but students should consider the return on investment of their chosen major as well.
The bottom line
A college degree remains a good investment, but it is not an assurance of financial success. High tuition fees, questionable success in low-paying majors, delayed graduation, and meager income increases can raise doubts about whether to go to college, or how to strategically plan a col-lege education.
