College education yields 12.5% median ROI for graduates

In the United States, new research conducted by the Federal Reserve Bank of New York in 2024 indicates that the total cost of obtaining a college degree, including tuition fees and opportunity costs from not working, has increased significantly from $140,000 in the late 1990s to around $180,000. This comprehensive study highlights the substantial financial implications for students and families, amidst ongoing debates about the value of a college education. College graduates, however, are projected to earn a median annual income of approximately $80,000 since 2020, indicating that significant financial benefits accrue for those who invest in higher education. The research assessed various factors influencing the financial return of a college degree, including out-of-pocket expenses and the income disparity between degree holders and those with merely a high school diploma. This disparity is noteworthy as individuals with only a high school education have a median income around $47,000, showcasing a stark contrast in earning potential. Additionally, the study reveals that the so-called "college wage premium" tends to increase over time, with an expected growth of around 60% for workers by the time they reach 55 years of age. Interestingly, while the rising costs of obtaining a college degree do have a moderating effect on the average return on investment (ROI), the decline is not substantial for students who complete their education in a timely manner. Even for those whose total investments amount to over $260,000, the median ROI remains at least 9%. Furthermore, the research shows that students who take longer to graduate—specifically, those who complete their degree in five or six years—can expect their ROI to decrease, reaching 9.3% for five years and just over 7% for six years. This data suggests the importance of completing a degree in four years to maximize financial returns. The research collaboratively concludes that for most students, the benefits of obtaining a college degree still outweigh the expenses involved. However, it is vital to recognize that around a quarter of college graduates may encounter a negative ROI owing to factors such as attending overly costly institutions or entering low-paying job sectors after graduation. This underscores the necessity for students to consider areas of study and employment opportunities that align with higher earning potential in their future careers. As discussions surrounding higher education continue, these findings provide significant insights into the evolving landscape of college education economics.