The ROI of a Four-Year College Degree

Photographer taking portrait of student in cap and gown with family
UW Graduation Portrait by Frank Fujimoto, licensed under CC BY-NC-ND 2.0.

Recent news stories have highlighted skepticism shared by young people about postsecondary education. These trends include an uptick in the number of those taking gap years between high school and college, surveys showing that college students are stressed and questioning the value of their degree, all while enrollments are falling. Now is a good time for an analysis of the return on investment (ROI) of a college degree.  

What are the current enrollment trends? 

The nonprofit National College Attainment Network (NCAN) reports that through March 2022, Free Application for Federal Student Aid (FAFSA) applications were down roughly 9% year-over-year, FAFSA renewals for currently enrolled students declined over 12%, and Pell Grant renewals were down almost 16%. These changes reverberate nationally with no state seeing a positive change in year-over-year FAFSA renewals.  

This trend follows years of decline in higher education enrollment. Data from the National Student Research Clearinghouse (NSCRC) show that nationally, higher education enrollment fell by 2.7% in fall 2021, following a 5.1% decline over the two years since the start of the COVID-19 pandemic.  Freshmen enrollments have increased but remain 9.2% below smaller than pre-pandemic levels.  

Washington also experienced declines, but these were not felt evenly across institution types. Enrollment numbers show that between fall 2019 and fall 2021, community and technical colleges experienced a 24% drop in enrollments, while public-four-year institutions saw declines of only around 7%, with an overall 60,000 fewer students enrolled.  

How much does college really cost? 

Despite declining enrollments, the value of a college degree persists, as do certain myths. Surveys show that students and parents often overestimate the cost of college. According to the most recent national data, the average cost of undergraduate tuition, fees, room, and board rates charged for full-time students in degree-granting postsecondary institutions was: $45,932 for private four-year institutions, $21,035 for public four-year institutions, and an average of $28,775 across all institution types. For public four-year colleges and universities, $9,349 went towards tuition and fees, $6,655 for dorms, and $5,031 for board.  

The tuition differential between institutions is smaller than commonly perceived. In Washington the costs are lower than national trends, with in-state tuition averaging only $7,168 for public four years, and $4,468 for community and technical colleges. And net costs to students are often lower once federal, state, and institutional aid are factored in. This includes our nationally recognized Washington College Grant. Approximately $221 million in Washington College Grant funding to the public baccalaureate sector enabled over 29,000 Washingtonians to pursue a degree in 2019-20. 

What is the ROI of a Four-Year Degree vs. a High School Diploma? 

Despite these misperceptions, college degrees continue to be very valuable. The Bureau of Labor Statistics reports that among workers, those with a bachelor’s degree had median weekly earnings of $1,305 in 2020, versus $781 for those with a high school diploma. The U.S. Bureau of Labor Statistics’ August 2020 report reiterates the value of a college education. The BLS showed that, “some college increases lifetime earnings earning 14% more on average than workers with no more than a high school diploma, increasing to 23% with an associate degree, 66% with a bachelor’s degree, and 123% with graduate education. Further, college degree holders experienced lower unemployment rates during the pandemic compared to those without.” 

What is the ROI difference between institution types? 

ROI has been found to differ substantially between institution types. A working paper from the National Bureau of Economic Research found that seven years after graduation, those who began at a four year college or university earned between 23% and 35% more than high school graduates who begin at a two-year college. In addition, one study found that starting at a two-year college reduces the probability of earning a bachelor’s degree by 23% for men and 25% for women.  

Recent Changes to Washington Higher Education 

The 2022 Legislative Session brought many changes to Washington higher education. These developments included expanding the reach of the Washington College Grants, simplifying proof of qualifying for financial aid, and continued investments that help students navigate the high school to college transition.  

These changes reflect the ongoing work in WA to maintain and improve one of the greatest higher education systems in the country. Changes such as admissions going fully test-optional, reducing barriers to applications, and preparing high school seniors for college reflect the investments in collaborative efforts to promote a college-going culture. 

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