It’s really not a simple task to figure out if college is “worth it” — financially speaking or even personally.
Some obvious empirical problems in calculating the returns on a college degree include separating inherent ability (work ethic, IQ) from whatever skills or knowledge were actually acquired through college — or perhaps just being in a college environment. “Higher education ought to make students brainier and richer,” reported The Economist last year. “It too often fails to do either.”
Raw, unadjusted comparisons between groups with and without a four-year undergraduate degree often show income premia in the hundreds of percent. That implies that college makes good financial sense, but such superficial analyses overlook three things:
First, you’re comparing different people with one another. There might be important differences (inherent abilities, work ethics, etc.) between the people who do or do not complete a four-year degree. To the extent that you would have earned a higher salary with or without a university degree, these figures overestimate the financial return to college itself.
Second, those with college degrees typically incur significant costs, in the tens of thousands of dollars a year, to attend said colleges, saddling them with interest payments for years to come. This puts them well behind their peers in a lifetime-income comparison. (The “Toll of Student Debt in the U.S.,” as The New York Times put it, is well-publicized and acutely on millions of people’s minds.)
Third, the relevant comparison group spent years earning income and acquiring assets — even if that’s only drawing rights in a pension scheme or stocks in a 401(k) account — that in turn throw off some sort of income, while the college-going crowd partied away years of their life (and maybe their family’s savings) that had obvious opportunity cost in buying stocks or real estate or starting a business.
It takes a lot of extra income to overcome the negatives of debt and missing out on earnings, plus promotions and learning-on-the-job that over time provide the most tangible increases in wages over a person’s career.
The two relevant components that make or break a college-return calculation are the extra earnings you can expect to bring in over the course of your career and the costs you incurred for attending it. They work in tandem, and make the assessed return of investment U-shaped; the returns are highest for the extremely elite universities, where extra earnings dominate (but this only holds for the very top). That’s followed by in-state or much cheaper public flagship universities since their comparatively lower expenses dominate. The rest of the private, elite, and higher-rated, prestigious universities are clustered in the middle, providing mediocre returns.
I recently tried to make these very abstract and counterfactual considerations more concrete by looking at my own records. While I can’t assess which career opportunities I found precisely because of my debt-financed education, I can assess the financing side of things… and it’s incredible how much the financing itself has mattered, as is the case with many financial assessments, from mortgages to Warren Buffett’s investment returns.
We can call it the carry trade of attending university: you can sidestep some of the student debt troubles, including the well-known obstacles they pose to a thriving financial life so well-publicized elsewhere, if you finance your college education with cheap, depreciating debt.
The horror stories of so many Americans, whose student debts often run in the tens or hundreds of thousands of dollars, miss on both of those accounts. They’re not cheap, and they’re issued in the world’s dominant currency so they won’t receive the windfall of a structurally depreciating currency.
Federal subsidies and intransparent T&C about interest rates and payback times, combined with college recruiters overpromising about future career prospects and realistic income trajectory, have created the debt mess that is America’s student debt debacle — now almost a tenth of all household debt. The average rate on federal student loans runs 6.5%-9% (undergraduate vs graduate degrees); private loans can run well into the double-digits.
I repeat: This is not cheap, at least not unless price inflation (and wages) are increasing at similar rates (which they only did briefly during the post-pandemic years). Out-earning that interest, let alone setting aside funds for repayment, is going to be challenging even for the most prosperous of households.
For my own story, the constantly increasing debt figure during my student years was definitely terrifying to look at in a spreadsheet or repayment account, but it was cheap and safe debt that I couldn’t have had access to any other way — and, overshadowing anything else, issued in SEK: Between the time I drew my first student debt liability (August 2012) and I received my last payout (April 2018), the currency in which these debts are denominated (SEK) depreciated against the U.S. dollar by 32%. Thank you very much. (In the years since, it depreciated a further 11%, or 28% if I had had the foresight to make these calculations before Trump’s tariff announcements wreaked havoc on the DXY).
There are even some moments where the unidirectional movements of USD/SEK more than compensate for the increase in my debt load: For most of my second year of college, I was technically getting paid by financial markets to squander money at university.
This only works if I service my student debts with dollars — which I am, and which I probably wouldn’t have done had I not gone to elite universities abroad. Financially speaking, that’s a hedge.
The logic here, of a monetary economy so fueled by credit expansion and a reserve-currency center of the world sucking most assets into its gravity, is that debts, to acquire appreciating assets, are good so long as you can service them. I would never have had the guts, nor the incentives, to do this if I couldn’t have access to this most obvious of currency windfalls.
With monetary devaluation in the background, you’re constantly working against the monetary tide, one of the most powerful forces know to mankind — like trying to constantly walk uphill in one of those tandem staircases found at amusement parks. But that same force also devalues the real burden of your previously incurred debts. In some important ways, this is how much financial return manifests itself; it’s part of the reason why real estate companies or private equity firms use as much financial leverage, i.e., debt as they do: short the currency. The formula is to take out debt that depreciates in real terms while the assets you’re acquiring appreciate.
I’m reminded of an absurd observation, delivered in a timely online meme format courtesy of Twitter user “Sweep”: “When the NFT you bought isn’t worth 1 ETH anymore, the ETH isn’t worth $4K anymore, and the $4K isn’t worth $4K anymore.”
The $1,500 or so I added to my debt balance on average every month during my student years doesn’t buy the same things they did when I received those funds. It is easier for me to earn back that nominal quantity in 2025 than it was a decade ago. A million bucks isn’t what it used to be. Some of the (meager) assets I acquired in the meantime have appreciated at a much higher rate than the interest expense required to service this scarily looking pile of debt.
A college experience might be worth it even if it doesn’t make much financial sense. But read the fine print and definitely mind the rates, repayment conditions, and monetary background before you saddle your future self with intimidating debt burdens.
