Douglas Olsen
The rising costs of university education have led many to question whether it is a worthwhile investment. From 2001 to 2023, the cost of attending an in-state, public university in the US soared by 122%, while the median earnings for the bottom 60% of income earners fell by 4%. As a result, many students are unable to afford the costs of higher education, with some turning to student loans to finance their studies. However, this has led to an increase in student loan delinquencies, causing millions of borrowers to face declines in their credit scores. With tuition fees continuing to rise, it is becoming increasingly difficult for students to afford a university education without taking on significant financial burden.
| Characteristics | Values |
|---|---|
| Number of Americans with student debt | 40 million |
| Total amount of student debt | $1.6 trillion |
| Average contribution of parents to college costs | 48% |
| Average tuition fees | $41,500 per year |
| Average tuition discount among private colleges for first-time, full-time students | Over 56% |
| Number of student loan borrowers who have seen credit scores fall by more than 100 points | 2.2 million |
| Number of student loan borrowers who have seen credit scores fall by at least 150 points | 1 million |
| Percentage increase in the cost of attending an in-state, public university from 2001 to 2023 | 122% |
| Percentage decrease in median earnings for the bottom 60% of income earners from 2001 to 2023 | 4% |
| Percentage increase in income growth for the bottom 60% of income earners from 2001 to 2023 | 0.37% per year |
| Number of years that the number of graduates with a bachelor's or associate degree has fallen | 3 |
| Number of factors indicating that students can't afford university | 11 |
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What You'll Learn
Rising tuition fees and living expenses
The rising cost of tuition fees and living expenses is a significant concern for many students and their families. In the US, the price of a college degree continues to increase, with tuition fees and living costs rising faster than financial aid packages. This has resulted in a growing number of students questioning whether a college degree is a worthwhile investment.
The average tuition fee for US colleges in 2025 is $41,500 per year, a figure that exceeds the threshold for a sound investment, according to economists. With fees rising faster than financial aid, parents now cover an average of 48% of college costs, up from 38% a decade ago. This shift has resulted in a heavier financial burden on families, with parents contributing a more significant proportion of their income to their children's education.
The rising costs of higher education have had a notable impact on enrolment and completion rates. The number of graduates with bachelor's or associate degrees has declined for the third consecutive year, indicating that fewer students are finishing their degrees. This trend is particularly prominent among low- and middle-income students, who are bearing the brunt of the increasing costs. From 2001 to 2023, the savings required to attend an in-state, public university surged by 122%, while median earnings for the bottom 60% of income earners fell by 4%.
The financial burden of a college education is further exacerbated by the cost of living crisis. As the gap between earnings and the cost of living widens, affording basic necessities becomes more challenging, let alone higher education. This situation has led to a growing number of student loan delinquencies, with millions of borrowers facing declines in their credit scores.
The rising tuition fees and living expenses have significant implications for social mobility and equality of opportunity. As higher education becomes less accessible to those from lower socioeconomic backgrounds, the gap between the rich and the poor may widen further. This trend could result in a more significant barrier to social mobility, as those from disadvantaged backgrounds may find it increasingly difficult to attain a college education and improve their economic prospects.
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Impact of the COVID-19 pandemic
The COVID-19 pandemic has had a significant impact on students' ability to afford university. The pandemic caused a decline in students' performance, with scores dipping during the pandemic and not returning to pre-pandemic levels. This was especially true for lower-performing students who benefited from the structure of in-person classes. The loss of life skills, such as time management, self-motivation, critical thinking, and social interaction, which are normally developed in high school, may be to blame for the decline in performance. The switch to online learning during the pandemic may have also contributed to the drop in scores, as students who received B's or below in face-to-face classes were likely to drop by a full letter grade in online courses.
The pandemic also led to a decrease in international student enrollment, particularly from China. This decline was driven by several factors, including campus safety issues such as gun violence and anti-Asian racism, as well as changing perceptions of the US-China relationship. Universities in other countries, such as Europe, Australia, and New Zealand, also increased their recruitment efforts to attract Chinese students. Additionally, travel and visa restrictions put in place during the pandemic continued to impact enrollment in 2024, with a nearly 15% decrease in new international enrollment at some universities.
The financial implications of the pandemic, such as job losses and economic downturns, may have also made it more difficult for students to afford university. The pandemic may have also affected the ability of students' families to contribute to their education costs. Furthermore, the isolation and loneliness caused by social distancing and lockdowns during the pandemic may have impacted students' mental health and well-being, potentially affecting their ability to focus on their studies and achieve their academic goals.
The pandemic has also highlighted the importance of social interaction and support systems for students. With campuses closed and social distancing measures in place, students may have struggled to access the resources and support networks that are typically available to them. This may have disproportionately affected first-year students, who were already facing the challenges of adjusting to university life. The pandemic has underscored the need for universities to provide comprehensive support services and to foster a sense of community, even in the face of adversity.
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Student loan delinquencies and credit scores
The rising cost of university education has led to many students questioning whether pursuing a college degree is worth it. Tuition fees and living expenses are increasing at a faster rate than financial aid. This has resulted in around 40 million Americans carrying $1.6 trillion in student debt. The return on investment for a college education is becoming questionable, especially for students who spend more time studying and paying higher fees, ultimately earning less than the median graduate.
The consequences of student loan delinquency can be severe, as it can lead to a decline in credit scores, making it difficult for individuals to access loans or credit in the future. According to a report by the NY Fed, student loan delinquency has returned to pre-pandemic levels, with more than 10% of balances past due or in default. This has resulted in millions of borrowers facing significant declines in their credit scores.
The impact of student loan delinquency on credit scores varies depending on the initial credit score. Borrowers with higher credit scores tend to experience a more significant drop when they become delinquent. For example, borrowers with scores above 720 could see their scores drop by over 100 points. On the other hand, those with lower credit scores may not experience as drastic a decline, but their borrowing options may still be limited.
The decline in credit scores due to student loan delinquency can have far-reaching consequences. It can affect an individual's ability to obtain mortgages, auto loans, and credit cards. Additionally, it can increase their borrowing costs and limit their access to credit. This can have a significant impact on their financial future and ability to make large purchases or investments.
To avoid the negative consequences of student loan delinquency, it is important for students to carefully consider their financial options and seek alternative solutions. This may include exploring scholarships, grants, or other forms of financial aid. Additionally, being mindful of spending habits and creating a budget can help students manage their finances more effectively and reduce the risk of delinquency.
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Cost of living and income growth
The cost of a college education in the US is rising, with tuition fees and living expenses increasing faster than financial aid. The average tuition fee rose to $41,500 per year in 2025, with parents covering 48% of the costs on average, up from 38% a decade ago. This has resulted in around 40 million Americans carrying $1.6 trillion in student debt.
The rising costs of higher education are causing many students to question whether a college degree is worth the investment. For around one-quarter of students, the return on investment is not worth it, with some earning little more than their peers who only have a high school diploma. The length of time spent studying also contributes to higher fees and lower earnings.
The cost of affording a basic level of economic security doubled from 2001 to 2023, according to the Ludwig Institute for Shared Economic Prosperity (LISEP). During this period, housing and healthcare costs surged, and the savings required to attend an in-state public university soared by 122%. Meanwhile, median earnings for the bottom 60% of income earners fell by 4%, and their income growth lagged, rising by only 0.37% per year, less than half that of the top 40% of earners.
The gap between earnings and the cost of living in the US is widening, with most Americans unable to afford a minimal quality of life. This gap considers not only daily necessities like food and shelter but also the ability to pay for technology, higher education, and health and childcare. As a result, student loan delinquencies have surged, with millions facing declines in their credit scores.
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Return on investment
While a college education is still a good investment for most students, the return on investment (ROI) is becoming less favourable due to rising tuition fees and living expenses. Around 40 million Americans carry $1.6 trillion in student debt, and the cost of savings required to attend an in-state, public university surged by 122% from 2001 to 2023. This has resulted in a decline in the number of graduates for the third year in a row.
The ROI for a college education varies across different demographic groups. In 2020, the ROI ranged from 13.5% to 35.9% across six demographic groups. The highest rates of return were observed for Asian men and Asian women, while Black men and Black women had the lowest rates of return in two of the three years studied. The ROI also depends on the type of degree pursued. Majors that provide technical training in quantitative and analytical skills, such as engineering, mathematics, and computers, tend to have the highest return. For example, those with health services majors can expect a median salary of $65,000 at the mid-point of their career, while those with fine arts degrees can expect a median salary of $70,000.
The calculation of ROI for a college education can be complex and nuanced. While tuition fees and living expenses are considered costs, the benefits of a college education extend beyond just higher earnings. A college education can lead to better working conditions, improved social capital, and the joy of learning. Additionally, there may be opportunity costs and demographic, social, and economic factors that can impact the ROI. For example, the labour market discrimination faced by certain groups may affect their earnings potential.
Despite the challenges, most four-year institutions of higher education still provide value for the typical student. According to Third Way's analysis, a typical student at 55% of four-year institutions will recoup the costs of their enrollment within five years of graduating. However, it is important to approach ROI calculations with caution as they may not definitively predict student outcomes. Instead, they should be used to enhance a more comprehensive decision-making process that takes into account various factors and considerations.
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Frequently asked questions
It is unclear exactly how many students cannot afford university. However, the cost of attending university has increased significantly. From 2001 to 2023, the cost of attending an in-state, public university increased by 122%. As a result, student loan debt has surged, with around 40 million Americans carrying $1.6 trillion in student debt.
Tuition fees and living expenses are rising faster than financial aid. Additionally, the cost of housing and healthcare has surged, further contributing to the overall expense of attending university.
The high cost of university can deter students from enrolling or completing their degrees. It can also lead to students taking on significant debt, which may affect their credit scores and financial stability in the long term.
Yes, students who cannot afford the cost of university may consider other options such as community colleges, online learning, or vocational training, which may offer more affordable pathways to gaining the skills and qualifications they need.
Students struggling to afford university may be able to access financial aid, scholarships, grants, or work-study programs. Additionally, some universities may offer tuition discounts or merit-based scholarships to make attendance more affordable.
