Are College Degrees Still Worth the Investment?

This week in our newsletter:

• Gen Z is Ditching Entry-Level Corporate Roles
• Why Stock Markets Aren’t Afraid of War
• The Rise of “Climateflation”: How Warming Temperatures Drive Up Living Costs
• Who Wants to Be a Millionaire?

For decades, the four-year college degree was sold as an express ticket to the middle class– a reliable path to a well-paying job and, with it, the kind of financial security your parents could brag about at dinner parties.

But lately, that once-airtight pitch has started to leak.

For one, the number of entry-level white-collar jobs is declining, thanks in part to AI efficiency gains. In fact, the entry-level job market is currently the worst it’s been in about 37 years. Close to 43% of US graduates aged 22 to 27 were “underemployed” at the end of 2025, meaning they were working in jobs that don’t require their degree.

Numbers like those force a question that, until recently, almost no one bothered to ask out loud: Is a college education still worth the investment?

The Short Answer: Yes, but Not for Everyone.

Analysts at the Federal Reserve Bank of New York estimate that the typical college graduate earns roughly a 12.5% return on their investment. That handily beats the long-run return on stocks, bonds, and most everything else you’d find on a financial advisor’s pie chart.

Moreover, college graduates earn about $30,000 per year more than workers who didn’t go to college– a gap commonly referred to as the annual college wage premium. Over the course of a career, that premium can more than offset the rising cost of tuition.

But there are also many instances where college graduates don’t see such high returns.

For the bottom 25% of earners, the rate of return for a college degree drops to about 2.6%. That means that around a quarter of all college graduates will see little benefit from going to college. That’s not accounting for the true cost of college, which extends beyond tuition to include the opportunity cost of forgone wages during years spent out of the workforce.

What you study matters too. Engineering, math, and computer majors all have returns of around 18%, while fine arts and liberal arts majors have returns closer to 8%.

So, while the case for college hasn’t disappeared, the exact numbers are dependent on individual circumstances– and decisions made long before graduation day.

It All Comes Down to Planning

College is often treated as the default decision, but it shouldn’t be. It should be a strategic one.

This means thinking carefully about what you’re actually investing in, and starting that conversation early on.

Students Need to Start with Deciding on a Career Path

Before anyone starts filling out applications, the most valuable conversation you can have with your child is about their career direction. It may be that in this discussion, you realize college isn’t actually the right move.

“If a student is pursuing a career that’s in high demand, college can be a strong investment and worth it. But going to college without a clear direction can become a very expensive mistake,” explains Brian Safdari, Founder and CEO of College Planning Experts.

“In some cases, trade schools or alternative paths may be a better fit. The key is helping students identify the right career path first, then choosing the best route to get there.”

Of course, that’s easier said than done. After all, we’re asking teenagers to pick a career before they’ve gotten their full driver’s license. College also used to be the place where students went to figure themselves out. But at today’s tuition prices, that’s an expensive way for your child to discover they wanted to be an electrician all along. The soul-searching is better done up front.

Research into Different Career Choices

In practical terms, this means talking to professionals in the field and using available tools to do some of the heavy lifting. The goal here isn’t certainty but informed direction.

“Families can start by helping the student understand where they fit within the career landscape. This means exploring their strengths and aligning them with real opportunities,” Safdari advises.

“Families should research career paths, look at long-term demand, and evaluate salary potential.”

A few tools that can assist in your research:

• Career assessment tools by Myer-Briggs, YouScience, and Xello are designed to help high school students uncover interests and potential pathways.
• The US Bureau of Labor Statistics’ Occupational Outlook Handbook provides data on the number of new jobs and the job growth rates for different occupations.
• Career advisors work with students to identify suitable career paths.
• Salary.com provides national salary insights.

Also, encourage your child to seek out people working in their desired field, especially those in your own professional network. An honest conversation about what their day-to-day job actually entails can be more informative than any brochure.

Consider the Alternatives to College

In some cases, trade schools are actually the strategically smarter option, and not a consolation prize for those who skipped college.

Trade schools often take less than two years to complete, cost a fraction of college tuition, and lead directly to in-demand careers. That last point is worth dwelling on, especially in an economy shaped by AI, where entry-level white-collar jobs are in decline.

In contrast, many skilled trades that require hands-on work, physical presence, and real-time problem-solving, such as electricians, plumbers, and construction workers, are far more difficult to automate or outsource.

That’s why some career experts are going as far as calling the jobs in skilled trades “AI-proof”— a phrase that, like “permanent peace” and “recession-proof,” should always be read with a raised eyebrow, but which is at least directionally true for now.

Demand for these roles is also rising. A wave of retirements among older workers, combined with a limited influx of younger replacements, has created persistent labor shortages across many trades. That imbalance is pushing wages higher and improving job prospects.

Beyond trade schools, apprenticeships are another highly attractive pathway, where apprentices are paid to train, instead of paying to train.

Non-degree certificates and short-term credentials have also become increasingly popular in recent years. These programs are typically faster and more affordable than a traditional degree. Research from Brookings finds that a job-relevant credential can increase wages by roughly 3% to 4%, particularly for early-career workers and those without a college degree.

There’s a catch here, though– the market for these programs is largely unregulated, and quality can vary greatly. Some are developed in close partnership with employers and lead directly to job opportunities. Others only look impressive on LinkedIn and not much else.

Full disclosure: We at Financial Poise have long espoused the idea that college is overdone. You can see an example in High School Grads Are Skipping College. That’s A Good Thing.

Choose the Right College Degree

If college is still the right strategic move, then the next step after choosing a career path is helping your child choose the degree that actually gets them there.

“Broad, general majors have always carried more risk, such as liberal arts or communications. These fields can make it harder to stand out in a competitive job market,” says Brian Safdari.

“Specialized degrees tend to create stronger opportunities. As I like to say, ‘The riches are in the niches.’”

That being said, a niche degree can also limit your career options long-term, and you may face a higher risk of your job becoming obsolete as AI advances.

It can also be tempting to chase whatever major looks ‘AI-proof’ this week. The trouble is that the target keeps moving. Software engineering, for years the canonical safe bet, has seen major job cuts. Yesterday’s recession-proof major is today’s cautionary tale.

That’s why many college students have been combining technical skills with more human-centered disciplines that develop skills like communication or critical thinking. No one really knows which degrees will be competitive in the job market a decade from now. But having a combination of specialized skills and a broader area of study can help students remain adaptable.

Start Your Financial Planning Early

“Start by understanding the cost of attendance (“COA”) at each of your child’s dream schools. Give yourself at least 2 to 3 years to plan so you can strategically position your finances and make college affordable without sacrificing your retirement,” says Safdari.

Those numbers will vary depending on the degree and the school. According to the latest average COA estimates, it costs about $27,000 per year for an in-state public school, $45,700 per year for an out-of-state school, and $58,600 per year for private, non-profit colleges. And on top of that, you’ll also need to factor in the cost for daily living expenses.

“Families who start planning 2 to 3 years early often reduce their out-of-pocket costs significantly. I’ve seen families reposition assets, adjust income timing, and apply strategic aid positioning that can save tens of thousands over four years. Learning about your SAI (student aid index) helps you maximize grants regardless of your income or assets. This is like tax planning strategies. Learn how to play the financial aid, legally and ethically.”

“Time is your greatest asset. It allows you to build a smart strategy to cover the gap without putting your financial future at risk.”

Our bottom line: College is no longer the default option. The right answer for one teenager is the wrong answer for another, and the surest way to overpay is to treat the question as settled before you’ve actually asked it. Pick the career, then pick the path. Run the numbers like you would for any other six-figure investment, because that’s exactly what it is. And if your kid ends up an electrician making $140,000 a year while their cousin is paying off an MFA in puppetry, well, that’s the market doing what the market does.