FORBES: The Financial Payoff From A College Degree Is Shrinking

Excerpt from article by Rina Torchinsky

A four-year college education is a big and long-term investment, as the 40 million plus Americans who carry $1.6 trillion in federal student debt know all too well. Nevertheless, it can be worth it, because of the college wage premium– the extra salary graduates with four year college degrees earn over those who have only high school diplomas. In fact, one of the metrics Forbes used to rank the Top 500 Colleges for 2023, is how many months or years of excess wages it takes for alumni of a college to pay off the net cost (after scholarships and discounts) of their degrees.

With payments and interest on federal student debt about to resume after a Covid pandemic moratorium that began in March 2020, the payoff from college is front of mind these days. Which is why an analysis released this week by the Federal Reserve Bank of San Francisco is particularly timely. It shows a flattening of the college wage premium, which grew substantially between 2000 and the 2010s.

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In addition to the Census data, there’s anecdotal evidence that good workers without college degrees are in higher demand these days. Some large companies, including Google, IBM, and Accenture, now offer college degree-free ways into their operations. In 2021, IBM announced it had removed bachelor’s degree requirements for more than half of its job openings in the U.S. In 2021, just 26% of job postings for software QA engineers at Accenture required a degree, according to a report from the Burning Glass Institute. Meanwhile, Oracle required degrees for 100% of postings for the same position and Apple required degrees in 90% of them.

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