Study: Does Going to College Make You Richer or Poorer?

Student loan debt balances have grown more than 200% over the past decade, and increasing numbers of borrowers carry student loans into their 30s and 40s. What’s more, avoiding such debt isn’t easy, with far more college students taking out student loans (69%) than not (31%).

Given the financial burden on students today, Student Loan Hero wondered if college was still worth the sky-high costs that often go with it. Does a college degree lead to a higher net worth, or is it possible that — at least in the near term — not going to college could spell better financial health?

To answer this question, we examined recent Federal Reserve data on net worth, financial assets, and debt repayment to compare trends among college graduates, those with some college, and those with only a high school education.

Key findings

  • College graduates younger than 35 have a higher median net worth ($20,980) than high school graduates or those with some college education in the same age group, despite having significantly more debt.
  • Those with just a high school education have a higher net worth ($10,275) than those with some college education but no degree ($7,200).
  • Over the past two decades, however, the median net worth of under-35 college graduates and those with some college have fallen by about 47%. Those with only high school educations fell by a more modest percentage (nearly 10%) over the same period.
  • The median total debt level of under-35 college graduates has grown 57% since 1998, hitting $64,000 in 2016 up from $40,870 in 1998. Those with some college saw median debt levels grow by about 4.5%, to $19,180 from $18,369.

College graduates have higher net worth (despite the debt)


Net worth refers to the value of all your assets (including savings, investments and property), minus your liabilities (such as credit card debt or student loans). Since many college graduates take on a lot of debt for school, you might expect them to have lower net worth than their counterparts with no student loans.

But according to the results of our study, college degrees lead to greater net worth, despite the debt that often comes with them. We found that under-35 college graduates have a higher median net worth than high school graduates or those with some college education.

Specifically, the graduates in this group had a median net worth of $20,980, while high school graduates clocked a median net worth of $10,275, and those with some college education but no degree came in last, at $7,200. College degrees tend to lead to high-paying jobs, according to Labor Department data, which in turn could contribute to the higher net worth enjoyed by those with a degree.

But their net worth is lower than it’s been in decades


While a college degree appears to be an asset when it comes to building net worth, today’s graduates are lagging behind previous generations when it comes to wealth.

Specifically, the net worth of graduates under 35 is nearly $51,000 lower than the $71,943 median net worth of the same segment in 2001. In fact, over the past two decades, the median net worth of under-35 college graduates and some college educated households has fallen by 47%.

While those with a high school education or some college education have lower net worths than college graduates do, the decline hasn’t been so dramatic. For instance, the net worth of individuals with a high school education fell only 10% over the last 20 years.

Having student loans with no degree can hurt net worth


Although a college degree usually involves debt, it seems to pay off with a higher-income job and a stronger net worth. But the same cannot be said for individuals who attend some college but leave before earning their degree.

Those with some college education had a lower net worth ($7,200) than those who hadn’t attended college at all ($10,275). This difference might be due in no small part to student loan borrowing — racking up loans but lacking the prospect of a well-paying job to pay them off.

Leaving college without a degree may cause debt repayment problems


Not only did those who left college before graduating have the lowest rates of net worth, but they tended to show higher rates of delinquency on their debt. Looking at data between 1989 and 2016, this group tended to miss payments on their debt more frequently than the other two groups.

In 2016, for instance, 28% of those with some college education had missed a payment in the previous year, as compared to 20% of high school graduates and 10% of college graduates. Missing payments can lead to default, which in turn can damage credit, making it even harder to improve your financial health.

High school graduates have less debt but lower net worth


Although high school graduates tended to have a lower net worth than those who went to college, they also usually had better financial health when it came to debt. In 2016, the median debt for high school graduates was $9,900, while for college graduates, it was more than six times higher at $64,000.

This gap has grown over the past 20 years, with median total debt levels of under-35 college graduates growing 57% since 1998. Those with some college saw median debt levels grow by 4% to $19,180, and those with only high school educations actually had slightly lower median debt than they did two decades ago.

While total debt is only one piece of the puzzle when it comes to financial health, owing less can make it easier to meet your savings goals.

Is college worth it? The data still says yes


With both the cost of college and the rate of student loan borrowing at all-time highs, it’s natural to question whether higher education is worth the costs.

According to the data, this financial investment does appear to have solid returns in the form of higher net worth and a stronger likelihood of keeping up with debt repayment.

At the same time, those who aren’t sure about college should proceed with caution, as leaving school before you earn your degree appears to cause even greater harm to your finances than not going to college in the first place. If this describes you, look into ways to manage your debt and boost your financial health.

This might involve going back to school to finish your degree or consolidating debt to simplify repayment. If your credit is subpar, look for strategies to improve it fast. And if you have student loans from your time at school, remember there are some banks that will approve you for student loan refinancing, even if you didn’t graduate.

Whatever steps you can take to get up to date with debt and increase your earnings will help you in both the short and long term, regardless of your education level.

Interested in refinancing student loans?

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