We explore whether the benefits of a college degree outweigh the costs.

Although most California parents (71%) want their children to graduate from college with at least a bachelor’s degree, nearly just as many (69%) worry about being able to afford a college education. Sticker shock and an understandable reluctance to take on debt lead many students and parents alike to wonder if college will actually yield higher earnings, better jobs, and a brighter future down the road.

Over the last decade, the college wage premium—the difference in wages between college graduates and comparable high school graduates—has flattened out at historically high levels.

California workers with a bachelor’s degree earn a median annual wage of $96,000, double the median wage for high school graduates. Only 12 percent of those whose highest level of education is a high school diploma earn $96,000 or more. Indeed, bachelor’s degree holders in the bottom quarter of the wage distribution earn more than half of workers with at most a high school diploma.

The college wage premium increases steadily over a person’s career. The median wage gap between college graduates and high school graduates nearly doubles (from 69% to 120%) when comparing annual earnings of those ages 22–27 and those ages 45–54.

Finding a stable, well-paying job after graduation is not always easy, and young adults just beginning their careers often need time to transition into the labor market. While some graduates initially experience underemployment—securing roles that do not require a bachelor’s degree—most eventually transition into professional occupations with more opportunity for on-the-job learning and wage growth. Importantly, the vast majority of college graduates in our state (78%) see a positive return on investment within ten years of graduation—and virtually all do so over the course of their careers.

College costs can be daunting, but the widespread focus on rising sticker prices (the publicly listed cost of tuition, fees, and living expenses) is often misleading. In fact, the vast majority of students pay a significantly lower net price after factoring in financial aid. This is especially true for the lowest-income students.

In 2023, the average net cost of attendance at a California State University (CSU) campus was $10,100 (70% below the sticker price), while at the University of California (UC), it was $15,700 (59% below). When adjusted for inflation, CSU and UC students paid approximately 20 percent less in 2023 than they did in 2015. Net costs are much higher at private colleges ($36,700 at nonprofits; $34,200 at for-profits), but even those costs are lower than five years prior. Despite these trends, net costs remain out of reach for many students struggling to bridge the gap between financial aid and high living expenses.

Nontuition costs are increasing for all students, but they make up an especially large portion of overall costs at public colleges, where tuition and fees are lower. For students living off-campus but not with family, nontuition costs account for 62 percent of total expenses at UC and 76 percent at CSU. Notably, the main factor driving up costs is not tuition but food and housing (41% of overall costs at UC and 56% at CSU); these expenses are rising for all Californians.

An estimated 27 percent of California students at four-year universities took out federal, institutional, or private student loans in 2023–24, lower than the national rate of 41 percent. About a quarter of CSU and UC students took out loans, compared to 43 percent of students at four-year nonprofit private colleges and just over two-thirds at four-year for-profit colleges. Median debt amounts are also lower among students enrolled at public institutions.

Public college students who do take out loans have significantly lower default and delinquent rates than their peers at for-profit colleges. These statuses can damage credit scores, leading to higher interest rates and reduced access to mortgages and car loans.

Students who never finish their degree do not see the same wage bump as college graduates. This financial loss is compounded for those who took out loans to attend college. Three years after college, 22 percent of non-graduates have loans that are in default or delinquent, compared to 8 percent of graduates.

Earning a degree in a timely manner is also important, as those who take longer than four years to complete their degree face extra schooling costs, run the risk of losing financial aid eligibility, and further delay their entry into the workforce.

The wage benefits of a college degree differ considerably across majors. For example, graduates in computer science earned a median wage of $130,000 annually in 2024, double what graduates in education made ($65,000). There is also a great deal of variation within majors: the top-earning graduates in business made $150,000 annually (75th percentile), more than twice as much as the lowest-earning graduates in business ($60,000 for the 25th percentile).

The large gaps in earnings between graduates with quantitative versus liberal arts degrees are driven partially by differences in early career earnings. As workers gain experience or earn graduate degrees, this wage gap typically narrows. Industry needs also evolve. For example, the rise of AI may increase demand for liberal arts degrees as employers seek workers with critical thinking skills and communication abilities.

Although workers across gender and racial/ethnic groups see a wage premium for earning a college degree, marked disparities still exist in the labor market. Male workers with a bachelor’s degree have a median annual wage of $101,000, compared with $86,000 for college-educated female workers. However, the gender gap is lowest among those with a bachelor’s degree only and largest for those with graduate degrees. Likewise, white and Asian workers make more than Black and Latino workers across all levels of educational attainment.

College major is a primary driver of gender and racial earnings gaps in the labor market. Women and underrepresented groups are not only less likely to major in high-earning fields, but they also see lower financial returns on those majors—largely due to the careers they enter. Other factors like discrimination and the motherhood penalty also contribute to these gaps.

Despite persistent disparities in the labor market, higher education is still a critical driver of economic progress. It is the key policy lever for improving mobility from one generation to the next, especially for low-income, first-generation, Black, and Latino students. As the state’s economy has evolved, the job market has increasingly demanded more highly educated workers, a trend that is projected to continue.

In addition to having higher earnings and better job benefits, college graduates are less likely to be in poverty or need social services. Society as a whole is better off, thanks to higher tax revenue and less demand for public assistance programs, lower crime and incarceration rates, and greater civic engagement.

Overall, college remains a good investment. While a college degree does not guarantee financial security, for the vast majority of students it represents their best chance of achieving economic prosperity.

Yet if current enrollment and completion rates continue, most California 9th graders will not earn a bachelor’s degree. And at every step along the way, low-income students—who account for more than half of the state’s public K–12 students—are less likely than their higher-income peers to make it to and through college. Unfortunately, a similar story holds true for other underrepresented groups.

Although students, the state, and higher education systems have made enormous progress, more work is needed to improve student success at key transition points from high school to college and into the labor market.

Ensuring that more students can experience the benefits of a college degree means boosting affordability and connecting students to good careers. Helping students and families make informed decisions is also critical. Key priorities should include:

• Providing high school students with information about the return on investment of specific colleges and majors
• Improving communication about financial aid and actual college costs
• Continuing to help low- and moderate-income students cover costs, especially nontuition expenses
• Enhancing the focus on career readiness and post-graduation outcomes
• Providing college students with information on jobs, wages, and career paths in different fields
• Better aligning the skills that students learn in college with employers’ needs

At the PPIC Higher Education Center, we will continue to monitor ongoing efforts in these areas and advance evidence-based solutions to enhance educational opportunities for all California students.