In 2014, when the Federal Reserve Bank of New York first calculated the payoff for a college degree, the nation’s economy was in the doldrums, many graduates were struggling to find jobs, and others questioned the worth of those degrees.

Economist Richard Deitz gathered decades of data on college costs and employee compensation, then calculated the return on investment for the average college graduate over a typical professional life.

He found the ROI had trended up from 1970 and settled at about 15%. By comparison, the historic rate of return on stock market investments is about 7%. Deitz and fellow economist Jason Abel published their findings in the Fed’s Current Issues in Economics and Finance

They repeated their calculations five years later, in 2019. The return on investment for a bachelor’s degree remained virtually the same: 14%.

Since then, the global economy has been roiled by disruptions related to the COVID-19 pandemic and the chorus of college doubters has grown louder. Deitz is still taking the long view. 

“I don’t think the dial has moved very much,” he said. “You’ve got to remember that the benefit of a degree is based on your entire life’s earnings.”

The more you learn, the more you earn, mostly

Generally speaking, the more you learn, the more you earn. There are significant variations, based on degree type, occupation, gender, and race and ethnicity, according to the Georgetown University Center on Education and the Workforce, yet degree attainment is a primary factor in earning potential and career mobility. 

Analysis by the U.S. Department of Education shows that 25- to 34-year-olds with bachelor’s degrees had median full-time annual earnings of $59,600 in 2020; with a master’s degree or higher, $69,700. For workers with high school diplomas alone, median earnings were $36,600 a year, 63% less than those with a bachelor’s. Over a lifetime, people with bachelor’s degrees earn about $1 million more than people with high school diplomas alone. 

Even those annual earnings might seem remote when students are considering the income they might forsake to go to college. Then, there are the risks of debt, which about half of college students nationwide take on to pursue their studies.

People who do not gain postsecondary education face other risks, not only the loss of extra earnings, but also a missed chance to discover new ways of thinking, living, and being that may be stimulated with higher education. 

Today’s global economy demands cultural competence among professionals, skills that may arise when students interact with peers with diverse backgrounds, according to a study titled “Educating the workforce for the 21st century,” published in Research in Higher Education. “Given the changing demographic landscape, the role of higher education in preparing students for the challenges and complexities of a diverse society has received considerable attention,” the study said.

Attending college can lead to better health, higher savings rates, and even increased feelings of well-being, according to economists Lisa Barrow of the Federal Reserve Bank of Chicago and Ofer Malamud of the University of Chicago. Other researchers have confirmed benefits including increased civic involvement, such as voting, volunteerism, and philanthropy. 

Most of us have heard compelling anecdotes about college dropouts who became tech billionaires and indebted baristas and bartenders who can’t find other jobs despite their college degrees. Even so, Barrow’s and Malamud’s study published in the Annual Review of Economics found that “college is a worthwhile investment, while not necessarily for all, almost certainly for most.”

Unequal degree attainment

For all the promise of college, degree attainment remains both modest and highly unequal in American society. The percentage of U.S. adults with bachelor’s degrees stands at 38, up from less than 5% in 1940.

The GI Bill of 1944 and the Higher Education Act of 1965 helped broaden access to higher education for a more demographically diverse student population, yet socioeconomic disparities remain striking. In 2020, according to estimates from the Pell Institute, 59% of 24-year-olds from families in the highest income quartile had completed bachelor’s degrees, compared to 40% in the second quartile, 25% in the third, and 15% in the lowest earning quartile.

U.S. Census Bureau data show 42% of white adults and 61% of Asian American adults have bachelor’s degrees. By comparison, 28% of Black adults and 21% of Hispanic adults have attained bachelor’s degrees.

The rural-urban divide is equally striking. The U.S. Department of Agriculture reported that 21% of rural adults held college degrees in 2019.

The numbers are significant, because they quantify the talent, prosperity, and lifetime opportunities that may be unlocked with more equitable access to higher education – a mission-based imperative for Colorado State and other land-grant universities. 

Rising costs and student debt

Rising costs of college attendance is one of the central concerns among those who question the value of college degrees.

The increases are clear: At public, four-year schools nationwide, the average cost of tuition and fees in academic year 1991-1992 was $4,160, measured in 2021 dollars, according to the College Board. Thirty years later, in 2021-2022, that cost had increased to $10,740, a rise of nearly 160%. Until the recent surge in inflation, U.S. college prices notably outpaced inflation for many years, said Sandy Baum with the Urban Institute in Washington, D.C.

A prime reason has been declining state investment in public higher education. Colorado is at the bottom of the heap: It ranked No. 49 in the nation for public higher education appropriations per full-time equivalent student in 2021, according to a report from the State Higher Education Executive Officers Association. Only New Hampshire spent less.

In Colorado, responsibility for the lion’s share of tuition costs has shifted from the state to students and their families. 

In 2000, “the state covered 68% of the cost of college, while students and families were responsible for 32%. By fiscal year 2011-2012, the balance had effectively reversed, leaving students and families responsible for two-thirds of the costs, while the state paid a third,” the Colorado Department of Higher Education reported. The shift is one reason baby boomer and Gen X parents are often baffled by college costs, and education debt has become a top worry for many college students and families.

However, the problem is often exaggerated, Baum noted. In 2021, 7% of borrowers had education debt in the six figures – the scenario that most often grabs headlines. Nationwide, 55% of public four-year college graduates had relied on loans to pay for school in 2020; 45% did not have debt. Among those who borrowed, the average total was $26,700.

Last academic year, 52% of CSU graduates had relied on loans to pay for school; 48% did not have debt. Among those who borrowed, the average total was just under $26,000. 

Those with high debt relative to their income may qualify for a federal income-driven repayment plan that limits payments and may offer loan forgiveness if a balance remains after a specified period, usually 20 years.

The role of financial aid

The many options available to help college students avoid debt are critical at land-grant universities such as CSU, because affordability is central to access. Data show that most students nationwide receive some type of aid to attend college, whether federal, state, institutional, donor funded, or a mix. For this reason, posted college tuition prices typically do not reflect the final amounts paid.

Among the best-known resources are federal student loans and federal Pell Grants. The grants do not have to be repaid and are a main way students with limited resources pay for college. Pell Grants provide funds for living expenses, which may easily double the cost of tuition and fees. Even with the annual Pell maximum increasing by $400 last year to $6,895, the grant doesn’t have the purchasing power it once had, given rising tuition and the cost of living in many college towns. 

Additional financial aid from schools themselves can fill the gap. In fact, CSU students from the lowest-income households may attend the University at virtually no cost if they take advantage of support available.

CSU’s Colorado Tuition Assistance Grant aids in-state students from low- and middle-income families. Since its inception in 2011, the program has disbursed more than $210 million to more than 33,000 students. 

Support starts with FAFSA and advising

A necessary first step to financial aid is completion of the Free Application for Federal Student Aid, or FAFSA, but only 46% of Colorado high school seniors did so in the 2020-2021 application cycle, compared to the national average of 52%. As a result, Colorado students miss out on an estimated $30 million in grant aid each year.

The CSU System’s Rural Initiative, led by the Office of Extension and Engagement, includes outreach to help students complete the FAFSA, as well as take other steps toward college. 

A national organization called College Track, based in Oakland, California, provides a model for guiding first-generation students from low-income communities to degree completion and beyond. A new partnership with the CSU System will establish a College Track center at CSU Spur in north Denver.

“There are talented students in all walks of life and in every high school in America,” said Shirley Collado, College Track president and CEO. “They just need to be seen and to have the opportunity.”

PHOTOS: CSU Photography