The Million-Dollar Question: Is College Still Worth It in 2024?

This story was originally published at BiggerPockets.com

Is college worth it? Many Americans are beginning to boldly state, “Nope!” But does the growing anti-higher education sentiment point to facts or fiction around the cost of college? We invited Dr. Anthony P. Carnevale, research professor and director of the Georgetown University Center on Education and the Workforce, to the show to give us up-to-date data on the true ROI of a college degree.

With America’s shockingly low college graduation rate and student loans being one of the biggest limiting factors of financial freedom for many Americans, it’s understandable why so many people are skipping college to go straight into the workforce. But the data paints an entirely different picture. Those who opt out of the traditional four-year degree system could be making a massive mistake, one that could cost them seven figures in the long run. A sum that size could be the game changer for finding financial independence.

In this show, we ask Dr. Carnevale about why college has gotten so expensive, the problem with freezing tuition, which majors make the most (and the least), and whether where you go to college even matters. Plus, he shares some shocking statistics about how much a degree is worth and why one group of Americans is ditching degrees in today’s strong economy.

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Dave:
Hey, everyone. Welcome to On the Market. I’m your host, Dave Meyer. And today, we are going to dip our toes into a very, very controversial, hotly-debated topic in economics and finance. Is college worth it anymore? If you listened to our show a couple of weeks ago, we sort of dove into this topic a little bit, but we wanted to do a much deeper dive. And to do that, we’re writing on Dr. Tony Carnevale, who is a professor at the Georgetown University Center on Education and the Workforce. And we’re going to talk to him about this big topic, is college worth it? And we’ll get into some intricacies and nuance, like what degrees offer the best ROI? What happens if you don’t graduate? And what is the deal with student loans and why is college so expensive in the first place?
And just if you’re curious why we’re doing this show, I think it’s really important for anyone, whether you’re considering college yourself or you’re a parent of someone considering college, to think about this question really, really carefully because it is easy to look at the price tag and say, “It’s not worth it.” But as you’ll hear through my conversation with Dr. Carnevale, there’s a lot more nuance to it. We all, as investors, are in this game to improve our financial situation. The decision you make about college is one of the most important decisions you will make about your financial future. So, we’re trying to give you as much information, as much data as we possibly can to help you and your family make that decision. So, with no further ado, let’s bring on Dr. Carnevale from Georgetown University.
Dr. Carnevale, welcome to the show. Thank you so much for joining us. We’d love to start off by just having you explain to us what you do at Georgetown University.

Anthony:
I am a professor in the Policy School at Georgetown, and also the director of the Georgetown University Center on Education and the Workforce.

Dave:
All right. So, what we’re excited to talk to you about today is some trends that are going on with college enrollment. And ultimately, get to some of the cost issues and value questions that are coming up about college. So, I’d love to just learn more about the trends that you’re seeing with Gen Z and college enrollment.

Anthony:
There are two things going on with college enrollment or two major effects. One is that COVID, in the end, somewhat miraculously for us economists who keep calling for a recession and never get it, the economy is roaring. And when that happens, people don’t go to college. Now, that’s much less true of females and much more true of males. If boys can get decent jobs, they’ll skip college. That’s been the case forever.

Dave:
I never realized that. I would think almost the opposite that people if they felt that they were able to pay for college, that they would take on the financial burden and somewhat risk of taking on student loans. But I guess it also makes sense that it’s seen as less necessary. Is there any reason why you see that gender discrepancy?

Anthony:
Yes. The reason is plain as day and that is that males make a lot more money than females at every age. So, male jobs, especially at the moment, they’re more plentiful, but they pay more. So, if you’re a female, you’re going to have to get one more degree pretty much than a male to make as much as that male. That’s been the truth since the 1950s.

Dave:
Got it. And so, basically, even though certain men are seeing that they can get high-paying jobs without college, women, because of the pay discrepancy, still feel that the investment in a college degree is worth it because they need that to increase their future earnings? You mentioned that this decision to forgo college ultimately comes back to hurt people. Can you quantify that at all? Is there some overriding number that says people who go and get a four-year college degree make X dollars more than those who don’t attend college?

Anthony:
The standard number there is a million dollars.

Dave:
Wow. In lifetime earnings?

Anthony:
Depending on how you do the numbers, that is if you control for cost, which we do in our work, loans and the like, and the fact that you’ll have lower earnings in your college years, although most college students work now. But in the end, it’s a pretty safe million dollar bet, not always. For four year degrees, for example, it’s a very good bet that you’ll get that million dollars about 70% to 75% of the time.

Dave:
That is obviously a very compelling number for everyone to think about, a million dollars in lifetimes earnings is very substantial. I think the question when it comes to is college worth it focuses these days at least more on the cost side of the equation. Because clearly, as you said, the benefit side of the equation is somewhat quantifiable and known. But with college becoming so much more expensive and tuition rising so much faster than the pace of inflation, do you feel like the cost benefit analysis has shifted?

Anthony:
Not really, because for college graduates, let’s say four-year college graduates and people with graduate degrees, but let’s say four year college, they are the only demographic in America that have actually improved their net worth and net earnings over a career since 1985. They are the only group.

Dave:
That’s an interesting point and it’s very important to know that wages have been stagnating for a lot of demographics over the last decades, as you just pointed out, and college graduates being an exception to that rule. But one of the things I wanted to ask you about, Dr. Carnevale, is that a lot of people who enroll in four-year colleges don’t wind up graduating and the graduation rate in the United States is what I find to be shockingly low. So, can you first tell us a little bit about the graduation rate and what negative benefits there are for people who do take on the costs of college but don’t wind up finishing?

Anthony:
There is a net benefit for what economists call some college. No degree, some college, no awards, which would include two-year and four-year degrees, graduate degrees, but it would also include certificates which are given generally by community colleges. So, the cost factor has dimmed, especially when you get into the four-year college market, especially the more expensive ones like the one where I work, Georgetown, it can harm your first five-year earnings if you’re going to an expensive school. But eventually, you catch up because you’ve got another 40 years to go. I mean you work a lot longer than you go to college. So, when you do the number, you’re running 45 years against five.

Dave:
So far we’ve talked about the benefits of attending college, but I want to cover any drawbacks or potential risks of attending college after this quick break.
Welcome back to our conversation with Dr. Carnevale from Georgetown University. Say you attend a university like Georgetown, tuition’s above $50,000 a year. So, let’s say you take two years, that’s 120 grand of tuition and you don’t graduate. Are your future earnings enough to overcome that $120,000 of tuition that you took on just because you attended college and still didn’t earn a degree?

Anthony:
Some college benefit is there, but it is much diminished because there’s two elements to getting a college degree. That is you have the degree itself and you tell employers you have the degree. So, there’s a signaling effect. So, employers, when they hire people, they do it in part based on signals and one signal is a degree, so you lose that signaling effect. Now you do get the earnings effect, which is more mysterious because the signaling effect, it’s substantial. It’s well over half the value in the end.

Dave:
So, just having the degree and saying, “I have a degree,” is half the value of a college degree, not actually the skills that you learn in the pursuit of that degree.

Anthony:
Well, that’s right. I mean the easy thing to do is just tell everybody you got a college degree whether you have one or not. On the other hand, it’s very easy to check. There’s an institution that is devoted actually, and employers use to check and see if you actually have the degree.

Dave:
And how does the benefit break down among different majors and different degrees? There’s commonly jokes about certain types of humanities or social sciences that earn less. And obviously, you look at engineering degrees as the other end of the spectrum. But do you find that certain degrees or certain careers should avoid college because there’s just not enough benefit and you can get the same earning potential with or without a degree?

Anthony:
The best major and has been for a while is petroleum engineering. That far exceeds almost anything else. I think the last time I looked, and there is a current number, but the last time I looked, it was a starting salary of 125, 130 grand a year.

Dave:
Wow.

Anthony:
STEM, of course, as everybody keeps telling us, and it does show in the numbers, science, technology, engineering, math, those are the high earners. Among STEM degrees, there’s one that isn’t and that’s biology. And as is characteristic of all these degree clusters, this is the one that is dominated by women. It’s the same business degrees of various kinds and they’re eight or nine of them easily. The business degrees generally pay, except one of them, and that is hospitality, and hospitality is dominated by women. And then you get degrees that guarantee employment in a decent salary, but the returns are relatively low. Education.
As you say, in general, the humanities don’t pay as well. On the other hand, one of them for reasons that are somewhat mysterious, American history does. So, the humanities, the arts, those kinds of degrees don’t pay very well, especially if you don’t end up working in field. So, there are two things that have happened since ’85 and that is that the value of a college degree, say a BA for example, more than doubled relative to the value of a high school degree. The value has been sustained. It hasn’t grown much since the late ’90s, but it’s still doubled. It moves up slightly over time, comes down a little, but it hovers. But the other thing that happened that is even more important and has revolutionized the college industry, if that’s what you want to call it, the differences by field of study have grown enormously. That wasn’t true in the 1970s and the 1980s, but now, what you make depends more and more on what you take.

Dave:
Interesting. And as you mentioned, a BA, the value of a bachelor’s degree has more than doubled. But from my understanding, the cost of college has gone up more than 4X think in the similar time. So, can you just tell us a little bit about why? You see these massive numbers. Why is college so expensive?

Anthony:
Because there’s no natural predator. I suppose if you’re a grizzly bear in Alaska, nobody can hurt you. I’m not sure of that, but it’s a guess. What constrains colleges from raising their prices? Nothing. They can sell college for whatever the buyer will bear. This has been an issue for a long time. When, in the ’80s, it became more and more apparent that people… If parents, for example, were going to ensure middle class access or to continue their own middle class status through their children, they had to send their kids to college. Well, the demand increased dramatically and it hurt. There are a lot of people who wouldn’t have gone to college in the 1970s because there are plenty of good jobs in the ’70s without college degrees. That’s not true anymore. And so, people are forced to do this.
So, naturally the price issue comes up and it’s very difficult for the government to control this. This is not a regulated industry unless you’re going to a public college. And in general, what the states have done, another reason the costs keep going up, is that if you’re in a college that is a public college in a state, the legislature keeps giving you less and less money. So, when they give you less and less money, you raise tuition to make up for what they take away. If you’re a very slick politician, what you do and I’ve seen this numerous times, is you complain about the cost of college. You take money out of the appropriation. You stop funding as much as you used to. And that’s been going on since the ’90s in states.
And then, if you’re really slick, the next thing you do is you freeze tuition. So, you take money away from the college, but you do not allow them to raise tuition to make up for what you took away. That is a standard trick in state politics. And meanwhile, when you take the money away, nobody’s at the hearing. When you freeze the tuition, you get votes.

Dave:
That makes sense. But I think there’s a few things I’d like to understand here. One, are people getting anything more? Because you’re paying four times more and your benefit is 2X. So, by that estimate, you’re paying 2X for what you used to be and you are paying more and more, but is the benefit really there? What is changing and what are schools spending all this money on?

Anthony:
There are increased costs in all fairness to colleges. Colleges compete with each other. About 400 colleges in America are competitive on the basis of prestige. Harvard versus Georgetown, versus Yale, versus Dartmouth. Well, there are about 400 colleges that are in that game. They have to provide more and more services and better services. And so, these are costs that colleges take on because they’re competing with… Usually, the way it works, if you’re a college president, there are about 15 colleges that you’re competing directly with, so you got to keep up with them. If they get a better gym and a climbing wall, you’re going to get one too. If there’s a new program in environmental dancing, you’re going to get a professor because the dominant model is the cafeteria model. That is you go to the cafeteria and there are lots of choices.
So, the systems are not very efficient. So, if you’re in the state of New York, legislators say this to me, we’ve got, I’m making these numbers up, we’ve got 20 places that are public that we pay for from the legislature and they all have English literature courses. So, why do we need 20 places? Maybe we could get more efficient by having two campuses where there’s actually an English literature faculty. And then, other young people who want to take that course to fulfill, for example, their BA requirements, they take it online. That is happening in the United States. There’s an attempt, especially in the public system, there is an attempt to constrain costs with efficiency. It’s been going on for a while, it will continue. In the private systems, there are even more pressures to be selective because people buy selectivity.
People will, number one, they will pay damn near anything to go to a selective college because I’m the dad and I want to have bragging rights with my friends on the job and at the cookout. I want to be able to wear a Harvard sweatshirt and I’ll pay damn near anything for that. In fact, I will bribe people at Harvard to let me in or Georgetown, it’s also true. People bribed our tennis coach to tell people that we have to admit this kid because they’re a great tennis player and they aren’t. So, this is a luxury item and it gets treated that way.

Dave:
I think that’s a good way to put it. Basically, what you’re saying is it’s a luxury item and it’s about people’s egos. It’s not actually driven by providing a better educational experience. I mean, you hear this, if you follow this stuff, which I do, you hear these crazy, what I would call boondoggles, where they’re building giant pools or things for students that just really don’t matter. And so, I think that’s a lot of the reason why people look at the cost of college right now and say, “This isn’t for me.” Because even though there is, like you said, a quantifiable financial benefit over the long run, it just feels a little weird to be paying this much when the quality of the education is not reflected in that tuition. More from my conversation with Dr. Carnevale after this quick break.
Welcome back to On The Market. We are here talking to Dr. Tony Carnevale about the cost-benefit analysis that goes into a college education. Well, one other question I want to ask you about the funding is about student loans, and this is something I think about quite a lot. But you said there’s no natural predator in colleges, and they can raise tuition to whatever they want. In my mind, the federal government, although it has what I believe a positive intent, they’re trying to help people afford college, the fact that they guarantee student aid to students regardless of what colleges charge, doesn’t that just incentivize colleges to keep raising tuition because they keep raising tuitions $70,000 a year, and the students turn to the federal government who then gives them a loan. And so, it just creates unlimited demand. Whereas if the government puts some sort of restrictions on student loans, they would have to think a little bit more carefully about how much they’re raising tuition and how they would be impacting demand from students who might attend their university.

Anthony:
Yeah, that’s the federal government. And if you’re a politician at the federal level, you’re very aware of this. The general attitude is if we increase aid to colleges in America, it’ll just get sucked up in increased tuition. It’s difficult to prove that statistically, by the way, because the tuitions are rising a lot faster than federal aid. So, in the end, yes, again, what the government has done, and I think in the end it is an appropriate response, is that probably 15 years ago in the state of Florida, we’ve had wage record data on people since the Roosevelt administration, since the New Deal because you had to have people’s wage record to figure out if they could get on unemployment insurance or social security. So, the government’s had your wages since you started working, and you have a social security number.
And so, we first used that data to chase down deadbeat dads and things like that. But what the government did about, oh, 10 to 15 years ago is it said essentially there was a bipartisan decision, which I think is still very strong, and that is, “We’re not going to tell you where to go to college. We’re not going to tell you what to take. That would be inappropriate,” and I agree with that, “but what we’re going to do is we’re going to make this process transparent.” That is the first bill in this case was called the right to know before you go, that has resulted in the college scorecard in more and more data, by the way coming. I can tell you for any college you want to name what a particular degree is worth that in each field of study. And so, the idea is if I sign up at that college and sign up for that major, I will be told that, “This is what happened to everybody else who did that, which is probably very likely what’s going to happen to you.”
So, that’s the government’s response. Now, the problem with it is all this data is available, it’s on government websites in states and at the federal level, national level, but students don’t use it, very few do. And so, the system is more and more transparent. It’s getting more and more transparent. We can tell you it is now moving into the training realm that you’ll have to have a minimum annual earnings of 25K or that program will not be eligible for federal money. So, we’re doing accountability and training, and there’s going to be a lot more training because the demand for skilled labor in America is going up. It’s been going up since the ’80s, and it’s going to rise even more because the demography is such that America is not growing anymore. So, these should be good times going forward for American workers because employers are screaming that they can’t find people, and that’s a big deal. We’re now going to give Pell Grants for training, not just education.
There is one other thing that I would add that I haven’t said, and that is that one of the reasons people are down on college, pricing I think is the core reason in all of this, but one of the reasons is the politicians, many of whom I know, I’ve spent a lot of my life doing politics. What has happened in American politics is that if you’re Joe Biden, you got to get the blue wall, you got to get those states in the middle, west and north, or you can’t win the presidency or the Congress. In the Republican Party, if you don’t have the white working class, you’re going nowhere. So, in both cases, there’s a lot of disparagement of college and an urge to create alternatives, which in the end I think is a good thing, but it becomes part of the story that you hear all the time now that college isn’t worth it anymore.
Because for instance, like you say, one case in point. With the Infrastructure Act we’re going to have in almost everybody’s community across the country for seven years, there area going to be ribbon-cutting ceremonies. Everybody who’s anybody’s going to show up, every elected official and anybody else who’s anybody locally, they’re all going to show up to get their piece of the ribbon. And they wouldn’t be having the ribbon-cutting ceremony if there weren’t reporters there. What’s the point? So, in the end, somebody, a reporter, a journalist will say, “Does this mean you don’t have to go to college?” And everyone on that stage in both parties will say yes. So, Joe Biden, who… I’m a Democrat, I’m not anti Joe Biden, but in the end, Joe Biden was saying a few months ago that with the Infrastructure Act, we’re going to have jobs at $160,000 a year for high school graduates. Well, that’s going to be one 10th of 1% of all jobs for high school graduates. But yeah, they’ll be there.

Dave:
All right, thank you. Well, Dr. Carnevale, we really appreciate you sharing your research, your expertise on this topic. If you want to learn more about Dr. Carnevale, we’ll absolutely put his contact information in the show notes below. Thanks again for joining us today.

Anthony:
Thank you. It was a pleasure.

Dave:
Another big thanks to Dr. Carnevale. So, let me just share some thoughts about what we just heard. First and foremost, the most quantifiable stat that I heard was that college is still worth it in terms of future earnings. So, that if you go and get a four-year college degree, you are likely or on average are going to earn $1 million of future earnings over the course of your career. If you extrapolate that out, that’s about $25,000 per year over the average working lifespan. That is quite a lot of money. And so, there is really a benefit. What I think is sometimes lost in that statistic is how much nuance there is between one, whether or not you finish your degree, because graduation rates are not very good for… On average, I think they’re close to 50% across the entire country. And so, if you take on the cost of college but don’t get that degree, you’re not getting that million dollars of benefit, but you’re losing money by taking out those loans.
The second thing that is lost, and we did talk about a bit here, is that different degrees earn different amounts and have different ROIs. And so, I really encourage everyone who’s thinking about college or thinking about grad school or maybe you have a child who’s thinking about college or grad school, is to look at the data that Dr. Carnevale was talking about. It’s actually quite interesting and quite good. I interviewed someone named Preston Cooper on the Bigger Pockets Money Show twice. He calculated using government data, the ROI of every single college degree at every single college in the whole country. And it can tell you which ones are worth it and which ones are not. So, I know that we’d love to debate this topic and say, “College is worth it. College is not.” Unfortunately, there’s not really a cut and dry answer. It is not that black and white.
It really comes down to which college are you going to and which program even within that college are you going to major in? Because that determines the ROI. And luckily, there are organizations, like what Preston Cooper did, to figure that out. So, we’ll definitely put a link to his data and research in the show below. The last thing I want to say is I just wanted to sort of reiterate something that I asked Dr. Carnevale about, which is about student loans, because I think people generally have strong opinions about this, and student loans have obviously gotten very, very expensive over the last couple of years. And I just kind of want to explain my personal philosophy about this. I believe that the government should provide support and help people figure out a way to go to college. But the way they’re doing it right now is basically saying that any college, any student, if you need aid to go to college, we will provide you with a loan.
And so, when colleges are thinking about how much to charge the tuition, they’re like, “Oh, we could raise tuition 5% next year. We can raise tuition 10% next year,” and the government is going to give students money to take on that tuition cost. And so, there’s no incentive for universities or colleges to control tuition costs. And I do believe the government does this with positive intent, but clearly, in my opinion, something about this isn’t working. And the best way for people to make some difference is to look at that data and to start only going to programs where there is a positive ROI. And eventually, over time, the programs and the colleges that don’t offer a positive ROI are going to fade away. At least that’s my personal opinion on how this whole thing might play out over the next couple of years.
Okay, so hopefully you guys learned something from this show. It’s a little bit different from some of the real estate and purely economics things that we’re talking about, but this really matters. At the end of the day, most of us invest in real estate because we want to improve our financial situation, and a decision about college, a decision about graduate school makes a huge impact on your financial future as well. So, hopefully, you like this type of content. Thank you all so much for listening. We’ll see you for the next episode of On The Market.
On The Market was created by me, Dave Meyer and Kaylin Bennett. The show is produced by Kaylin Bennett, with editing by Exodus Media. Copywriting is by Calico Content. And we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

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In This Episode We Cover:

  • Keller Williams’ settlement of $70M in the NAR agent commission lawsuit and what this means for the future of agent commissions 
  • The rise of “niche” brokers and agents and why they may THRIVE in the coming years
  • Our crucial advice for first-time homebuyers that you CANNOT miss
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  • And So Much More!

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