College graduates’ earnings are substantially higher than those of non-completers, even when accounting for the debt accrued, according to a new study from the University of Washington in St. Louis.
While recent studies have already shown the premium earnings of a college degree, researchers from Washington’s Center for Social Development weighed the benefits against student loans.
The average amount of loan debt accrued by college seniors has nearly doubled from 2004 to 2019. Forty-one percent of master’s degree programs failed to pass a debt-to-earnings test created by Georgetown University.
“Given the rising costs of postsecondary education, the demonstrated burdens of student debt, and the uncertainty in the labor market, it is unsurprising that students are often wondering if college is still worth it,” the Washington study reads.
Debt-adjusted earnings provide a more genuine perspective on what college graduates stand to gain, researchers argue.
The study found that graduates earned $10,400 gross annually more than their peers who dropped out. When accounting for debt, the premium drops to $8,000.
On average, loan payments made up nearly a quarter of recent graduates’ earnings. The levels were highly dependent on program level: 9% for associate degree earners, 19% for bachelor’s and a whopping 57% for master’s students.
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However, the amount graduates owed grew smaller over time, increasing their total earnings premium. Secondly, the higher earning trajectories of master’s graduates allowed them to pay off their debts faster.
STEM graduates earned up to three times more than students with manufacturing, healthcare or education degrees. They also owed the lowest amount in proportion to student loans.
Hispanic students earned the lowest relative to student debt. While Asian learners recorded the highest returns, Black students exhibited the lowest proportion of loan repayments relative to earnings.
“Our results suggest that it’s better to take on student loans to complete post-secondary education than to not complete post-secondary education without student loans,” the report reads.
Researchers examined the outcomes of over 22,000 learners who began college no later than 2018 and either graduated or stopped out by 2023. The study paired their earnings data by industry, program level and region to account for any variance in graduates’ outcomes. Earnings and debt levels of stopped-out students were also compared to credential completers from the same enrollment year, field of study and institution.
