The wage premium accompanying a college degree has long been a selling point for higher education. But the paradox facing colleges and universities today is that even while the degree continues to deliver a strong premium in the job market, public confidence in college is on the decline. There is rising skepticism across political lines that K-12 schools should be so focused on preparing students for college and that the degree should be a prerequisite for well-paying jobs.1
Various surveys over the past three years show that the pandemic upended our lives, habits, and traditions, including college as the default after high school. Americans have drastically shifted some of their priorities for K-12 education as a result. Preparing children for college has plummeted from the 10th-highest priority to 47th, according to a 2023 study by Populace, which found that the public wants schools to help students develop practical skills most of all.2 Even among recent college graduates, survey findings from the Strada Education Foundation revealed that one in three bachelor’s degree recipients don’t feel their education was worth the cost (figure 1).3
Attitudes about higher education are souring at a time when some states, including Maryland, Pennsylvania, and Utah, have stopped requiring a four-year degree for most jobs in state government. The private sector is moving toward skills-based hiring, too, with Delta, General Motors, Google, Apple, and IBM, among others, dropping the bachelor’s degree prerequisite for many positions, further eroding the perception that college is the sole path to economic and social mobility.4
Higher education has yet to come to grips with the trade-offs that students and their families are increasingly weighing with regard to obtaining a four-year degree. Yes, the very top of the higher education market is largely immune from many of these pressures. There is a flight to what consumers perceive as quality at big-name public universities and elite private colleges, as judged by rankings and admissions selectivity. But the problem facing the vast majority of colleges and universities is that they are no longer perceived to be the best source for the skills employers are seeking. This is especially the case as traditional degrees are increasingly competing with a rising tide of microcredentials, industry-based certificates, and well-paying jobs that don’t require a four-year degree.
That said, the four-year college degree still largely outperforms those alternatives in terms of providing a wage premium and mobility in careers, especially for first-generation students and other underrepresented students in higher education. In a recent study, the Burning Glass Institute concluded that the bachelor’s degree delivers an immediate wage premium over the high-school diploma of 25% within a year of graduation, a dividend the credential maintains over the first 12 years of a college graduate’s career.5
But not all bachelor’s degrees are created equal: The payoff, according to the Burning Glass Institute research, is also heavily dependent on an institution’s reputation, a student’s major, and the skills they learn. Given most students neither attend highly selective colleges nor major in fields with the highest return on investment, colleges can no longer insist the degree is valuable without providing students with the skills employers want.
Even as college leaders develop approaches to improve the value of the degree for current students, they also need to consider their total value proposition by upskilling and reskilling alumni who need to keep up with the demands of the modern economy. The global workforce is going through a great disruption in skills. In the United States alone, 37% of the top 20 skills considered necessary for the average job have changed since 2016. One in five skills is entirely new. And certain sectors—including fields that are also popular college majors such as finance, media, business management and operations, human resources, and information technology—have changed faster than others.6
While it remains clear that opportunity and mobility in the United States are difficult to achieve without postsecondary education, what is becoming increasingly apparent is not all colleges and degrees deliver the same result. The “economic returns from higher education are often illustrated on a national level using broad brush strokes,” the Postsecondary Value Commission convened by the Bill & Melinda Gates Foundation concluded in its final report in May 2021, while stating that “the payoff from higher education can vary widely.”7
Armed with data from the federal government’s College Scorecard and other sources, prospective students are looking more closely at their potential return on investment (ROI) when searching for a college and a degree. At the same time, several organizations, including the American Council on Education, are brokering new ways to measure degree outcomes above and beyond earnings and economic mobility.
As these tools improve and students use them more as they weigh from where, and whether, to get a degree, the pressure on the value of higher education will only increase. No longer can colleges coast on the historical value of the degree; they now need to prove it going forward.
To succeed in this new era of higher education, institutions should more effectively measure outcomes that matter to parents, employers, and students pre- and postgraduation to make a clear case for the value of higher education, and specifically, for their institutions and programs. State governments are increasingly calling for studies on the ROI of a college degree. By engaging in this discussion proactively, or even leading the charge, higher education institutions can help shape this conversation about ROI to be a holistic and meaningful representation of the value of higher education.
Postsecondary Value Commission, Equitable value: Promoting economic mobility and social justice through postsecondary education, May 2021.
View in ArticleThe authors would like to thank the following colleagues for their sizeable contributions to the report: Tiffany Dovey Fishman, Pete Fritz, Cynthia Vitters, and Jake Braunsdorf. They would also like to thank the participants in Deloitte’s inaugural Forum on the New Era of Higher Education, whose perspectives and insights helped shape the contents of the report.
Cover image by: Sonya Vasilieff and Sofia Sergi
