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Education policy maven Rick Hess of the American Enterprise Institute think tank offers straight talk on matters of policy, politics, research, and reform. Read more from this blog.

Education Opinion

Yes, Your College Education Will Still Pay Off

By Guest Blogger — August 28, 2020 3 min read
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This week Brendan Bell and Cody Christensen take over Straight Up to share some reflections on what it’s like to be starting graduate school this coronavirus fall. Both have just stepped away from hugely successful turns on my AEI Education team. Brendan was a high school social studies teacher before serving as my program manager and is now starting up as a law student at the University of Pennsylvania. After three years with AEI’s Center on Higher Education Reform, Cody is entering the Ph.D. program in education policy at Vanderbilt. Drawing on their experience in ed. policy, Cody and Brendan will talk about returning to school amidst a global pandemic and the various issues it raises.


In July, students at Harvard University received a rude awakening. The university announced that its classes would be entirely online for the 2020-21 academic year. Harvard also announced that its tuition, nearly $50,000 annually, would remain unchanged. This news set off a flurry of criticism. Many students are under the impression that online education costs less to administer, and thus, they expect tuition discounts in return. After all, it hardly seems like a wise investment to pay steep tuition prices for Zoom lectures that are also available online for free.

With many colleges making similar decisions as Harvard, students across the country are asking a basic question: Is college still worth it?

The simple answer is yes. On average, a college investment pays off over a lifetime of higher earnings. On balance, those with college degrees significantly outearn those with only a high school education, although some majors (engineering, finance, computer science, to name a few) are more likely to pay off than others. And a college education appears to be especially valuable for students on the academic margin—those individuals that are tempted to drop out or forgo enrolling entirely due to their low grades.

That said, there are some caveats to consider. While each additional year of schooling is associated with relatively higher earnings, the largest gains are seen among students who actually graduate. In some cases, students who drop out prior to graduation end up financially worse-off than those that never went to college in the first place. This is especially relevant for students who drop out after taking on a substantial amount of student loans, which they are still obligated to pay back.

But how does all of this factor in for our current moment? Many students are displeased about sky-high tuition prices for an online-only education, and some think that they’d be better off sitting out the fall semester entirely. That decision entails a complicated set of tradeoffs. Observational data show that students who “pause” their education are less likely to return to school or graduate—especially if they pause after completing their first year. In other words, continuing your postsecondary education online may be less than ideal in the near-term, but sticking with it is the best opportunity to stay on equal footing with your peers across the nation.

There is more good news for students that successfully navigate online learning environments. Much of the value of a college education has very little to do with what or how you learned. The value comes from the diploma itself, something economists refer to as a signaling effect.

Economists disagree about the exact extent to which an education’s value is due to the signal it conveys, but the consensus viewpoint is that roughly one-third to one-half of the earnings premium that stems from a bachelor’s degree is simply from signaling. This should be comforting for students that continue their education online—even if you think you’re learning less in online classes, much of the value of your education comes from the diploma that you receive at the end, not that messy learning stuff in the middle, anyway.

Now, whether obtaining a degree should be such a strong signal is a different question and gets to deeper debates about the role of American higher education. Indeed, many critics have made strong arguments about the flaws of our current system, which puts a high premium on the college degree rather than concrete skills or knowledge that come from a higher education. For instance, our former boss has made the case that using the bachelor’s degree as a default hiring device can impede social mobility and doesn’t adequately gauge the skills required in today’s workforce.

But even if you agree with Rick’s diagnosis, the reality is that, in this moment, earning a college degree is still worth it on average. And if you’re an individual trying to make a decision about this upcoming fall, that’s what matters most.

—Cody & Brendan

The opinions expressed in Rick Hess Straight Up are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.