The College Degree Premium: Is It Shrinking?

The offer letter arrived in early May, ten weeks before commencement. The 2025 graduate, a marketing major at a public university in Ohio, had sent out 60 applications since January. One came back: $41,000 a year for a title — social media coordinator — that had paid about $35,000 a decade earlier. She accepted, because the alternative was an empty summer and an apartment lease she could not cover.

Around the country, the class of 2025 met a labor market that did not behave like the one their older siblings found. Employers hired, but cautiously. Starting offers for many office jobs came in below what the previous year's graduates had been promised, and a share of those offers carried titles that sounded senior and paid like entry level. Career offices at public universities logged the same story in different cities: more applications per opening, longer waits, lower first numbers.

The stakes are large either way. A bachelor's degree still buys roughly $1 million more in lifetime earnings than a high school diploma, according to Georgetown University's Center on Education and the Workforce. Yet the newest data — from the Federal Reserve Bank of New York, Pew Research Center, and the Bureau of Labor Statistics — show the premium stalling, and for recent graduates in a soft entry-level market, dipping. The question is what the stall means: a bad hiring season that will pass, or a lasting change in what a degree is worth.

The premium, measured

The premium is one of the most durable facts in the American labor market. Among full-time workers ages 25 and older, the median bachelor's degree holder earned $1,493 a week in 2023, according to the Bureau of Labor Statistics; the median worker with only a high school diploma earned $899. That is roughly $78,000 a year against $47,000 — a gap of about 66 percent that has persisted through recessions, booms, and the remote-work era.

Over a career, the gap compounds. Georgetown's center estimates that a typical bachelor's degree holder earns $2.8 million over a working life, against $1.6 million for a high school graduate — a difference of about $1.2 million.

The gap is not evenly distributed. It grows with age, it is larger for graduates of selective institutions, and it varies by geography. Census Bureau data show the dollar value of the degree differs by metro area: worth about $30,000 a year more than a high school diploma in Cleveland and more than $45,000 more in San Jose.

Pew Research Center's analyses of Census data reach the same place from a different direction. College graduates are more likely to be employed, more likely to sit in management roles, and less likely to live in poverty at every age. In 2023, about 86 percent of bachelor's degree holders ages 25 to 34 were working, Pew found, compared with 74 percent of high school graduates in the same age group.

None of this has changed. What has changed is the margin at the entry level, where the premium is earned — or not — in the first decade after graduation.

The newest data on recent graduates

The Federal Reserve Bank of New York tracks a narrower measure: the college wage premium for workers ages 22 to 27 who hold a bachelor's degree. That premium peaked near 50 percent in the tight labor markets of 2019 and 2021. It has since fallen to about 42 percent — the lowest reading in the bank's series since the early 2000s — and quarterly updates through 2025 show no rebound.

The bank's "The Labor Market for Recent College Graduates" reports explain why. The underemployment rate, which counts recent graduates working in jobs that do not require a degree, has hovered near 40 percent: roughly two in five graduates in their twenties are serving coffee, folding clothes, or staffing front desks. The unemployment rate for recent graduates, about 4 percent, looks healthy next to the national rate, but the wage numbers do not. Inflation-adjusted wages for recent graduates have declined since 2020, the bank found, even as wages for experienced workers rose.

The pattern is familiar to anyone who watched 2001 or 2009. Employers cut hiring first at the bottom of the experience ladder, and graduates who land their first job in a soft market carry the penalty for years. Research on cohorts that graduated into the 1980s recession found that starting a career in a bad year can depress earnings for a decade or more.

A recruiter in Columbus who has filled entry-level marketing and operations roles for a decade described the 2025 season as the strangest she had seen: requisitions approved, then frozen, then reopened at lower pay bands. "We hired the same number of people we always hire," she said. "We just paid less for them, and we knew we could."

The class of 2026 is watching. The National Student Clearinghouse Research Center reported that first-year enrollment at four-year colleges fell in the fall of 2024 — the first such decline in more than a decade.

The majors that still pay

Inside the averages, the dispersion is severe. Georgetown's return-on-investment research, a series of reports from its Center on Education and the Workforce, ranks majors by early-career and mid-career earnings. Engineering and computer science sit at the top, with mid-career median earnings above $120,000 and unemployment rates in the low single digits even in weak years. Health fields follow, then business. At the bottom sit education, the arts, and a cluster of humanities majors whose mid-career medians hover near $60,000 — below what many engineering graduates earn by age 30.

Major group	Early-career median	Mid-career median
Engineering	about $80,000	about $125,000
Computer science	about $78,000	about $120,000
Health	about $65,000	about $95,000
Business	about $60,000	about $92,000
Education	about $45,000	about $65,000

Median annual earnings by major group, rounded from Georgetown Center on Education and the Workforce estimates.

The differences within the degree are larger than the difference the degree makes. A petroleum engineering graduate can expect roughly $100,000 in early-career pay, Georgetown estimates; an early-childhood education graduate, about $40,000. Both hold diplomas. The labor market is pricing skills, not parchment.

The spread shows up in unemployment, too. Georgetown's reports on recent graduates found that unemployment and underemployment rates vary by major by more than ten percentage points, with health and engineering graduates near full employment in most years and architecture and the arts running far higher.

A 2024 graduate in Nashville, an electrical engineering major, watched friends in the liberal arts spend months hunting for work while she signed in November of her senior year for $82,000. Her brother, a history major five years earlier, had needed two years to find a permanent job and started at $38,000. Same family, same university, different fields — a gap of more than two to one at the starting line.

That is the part of the story that survives every downturn. The premium is real, but it is not one premium. It is a bundle of field-specific bets, and the field is doing most of the work.

The debt and the doubt

The second half of the return-on-investment question is the cost side, and it has moved against students. The average bachelor's degree holder who borrows leaves school with about $30,000 in debt, according to College Board data and Federal Reserve surveys, and total federal student loan balances stand near $1.6 trillion. Tuition at public four-year universities has roughly doubled in inflation-adjusted terms since 2000, while the wages offered to new graduates have barely moved.

The doubt has become measurable. A 2023 Gallup survey found that 55 percent of Americans said a four-year degree was worth the cost, down from 70 percent in 2015. Among adults without a degree, a 2024 Pew Research Center survey found the most common reason for not enrolling was cost, not lack of interest. The argument that college does not pay has moved from internet forums into statehouse debates.

The skepticism is unevenly distributed, and that matters. Families with savings and parents who attended college remain broadly committed. The retreat is concentrated among students who would be the first in their families to enroll — the ones facing the worst debt-to-income math.

The data offer a nuance the headlines miss. About 7 percent of borrowers who entered repayment in recent years defaulted within three years, federal data show, but defaulters are disproportionately students who did not finish. Completers borrow more on average and default far less. The degree, even an expensive one, still functions as insurance against the worst outcomes — which is why economists keep calling the premium durable.

Colleges have noticed the mood. More than a dozen private nonprofit institutions announced closures or mergers in 2024, several public systems have frozen tuition, and a wave of institutions now advertise their graduates' median earnings on their websites — a concession that the credential now has to justify its price.

Policy has moved in to soften the debt side. Income-driven repayment plans cap monthly payments at a share of discretionary income, and in 2023 the federal government began a new income-driven plan that cancels balances after a set number of years; a federal court has since blocked parts of it, leaving borrowers in a familiar limbo of applications and pauses.

Why the premium dips — and recovers

A premium that falls for young workers while holding for older ones is usually a cyclical story, and the history supports that reading. The New York Fed's young-worker premium fell after the dot-com bust and again after 2008, then climbed to records in the late 2010s as employers competed for scarce talent. Each dip was followed by a recovery when hiring reopened.

"The degree is still the best bet most young people can make," said a labor economist who studies the market for new graduates and asked not to be identified. "But the bet is paid out through the first job, and right now the first job is the weak link."

The question for the current cohort is whether this cycle behaves like the others. Some evidence says it will. Employers pulled entry-level postings in 2024 and 2025 while maintaining hiring for experienced roles, Other evidence points the other way. Credential inflation has pushed degree requirements up the job ladder for two decades: analyses of job-posting data find that more than 40 percent of postings for roles that once required only a high school diploma now ask for a bachelor's degree. Automation has absorbed a share of the clerical work that used to be the first rung for graduates.

Employers have begun to respond. A campaign that began in 2022 and now counts more than a hundred large employers has publicly committed to dropping degree requirements for some roles, and the first studies of skills-based hiring find modest wage effects so far. The change is real but slow, and it has not yet touched the entry-level office jobs where most graduates start.

The economist offered a middle reading. The premium will not vanish, he said; the lifetime numbers are too large and too consistent. But the entry-level market has thinned, and the graduates who pay the price are those who treat the degree as a finish line rather than a starting position.

What this means for the decision

For a prospective student and a family, the newest data argue for precision, not pessimism. The field matters more than the institution's brand for most earnings outcomes; Georgetown's numbers show more variation within a university than between many universities. A few practical moves follow.

Choose a major with a visible labor market. Engineering, computer science, health, and accounting funnel graduates into jobs with published salary ranges. The humanities and arts require a plan for how the skills convert into employment. That is not an argument against studying literature; it is an argument for pairing it with something marketable, the way a student chooses a minor.

Price the transfer route. Students who start at a community college and finish at a four-year university — roughly one in four bachelor's degree holders — graduate with meaningfully lower balances, and the diploma does not say where the first two years happened.

Weigh the institution type. The average premium hides institutions where the bet loses: analyses by Third Way found that the typical student at a majority of for-profit colleges earns less after graduation than the typical high school graduate, once debt is counted.

Treat the first offer as the anchor it is. Research on earnings dynamics shows that a low starting salary follows a graduate for years, because raises are computed as percentages of what came before. The counter is to negotiate the first one and to change jobs in the first five years, when the market pays more than loyalty does. Marketivate's future salary calculator shows how a starting salary compounds over a decade, and the salary inflation tool separates nominal raises from real ones — the two numbers that decide whether a young worker is gaining ground.

The degree premium was never a guarantee written per student. It was an average written across millions.

The alternative on its own terms

Registered apprenticeships grew by more than 10 percent between 2020 and 2024, according to the Labor Department, and the trades now advertise salaries that compete with many bachelor's degree careers. Median pay for electricians exceeds $100,000 in the San Francisco metro, Bureau of Labor Statistics data show, and the training is paid — no tuition, no loan balance.

The limits deserve equal billing. The trades remain about 90 percent male in most specialties, apprenticeships are concentrated in a handful of states, and licenses do not travel: a journeyman card in Ohio means little in California without retesting. Nor is every apprenticeship a path to six figures; median wages for apprentices start near $20 an hour in many programs and climb with the license. The boom is real but uneven.

The choice, then, is not degree or nothing. It is degree, trade, or a hybrid — a two-year technical certificate, a union apprenticeship, or a bachelor's degree in a field with a visible labor market. Each is a bet with different odds, and the odds have never been more legible.

What to watch

Three signals will tell whether the stall becomes a trend. The first is the hiring season for the class of 2026: early postings from large employers, tracked by campus career offices and the National Association of Colleges and Employers, will show whether starting offers recover. The second is the New York Fed's young-worker wage premium, updated quarterly; a return above 45 percent would match the pattern of past recoveries. The third is enrollment. If first-year numbers at four-year colleges fall again in 2026, families are voting with applications, and the market will respond.

For the graduate holding an offer below expectations, the data offer a colder comfort: the entry-level penalty is real, but it is not permanent. Workers who switch jobs in their twenties recover most of it, and by mid-career, the earnings curves of those who started in bad years converge with those who started in good ones.

The premium is not shrinking in the way the loudest arguments suggest. It is narrowing at the edge — the edge where careers begin — and holding everywhere else. That is a reason to study the numbers before choosing a major, and a reason to start the first negotiation early. The million-dollar gap is still there. It is just no longer automatic.