Does College Pencil Out? An Examination

What’s in this article:

• What college actually costs today
• The earnings case for a degree
• The debt behind the diploma
• The opportunity cost: a simple comparison worth making
• The college choice isn’t one-size-fits-all
• Five questions to sit down with as a family
• The college choice bottom line

You remember their first day of preschool. New room, new faces, a small taste of a world where you aren’t within shouting distance. It felt huge. You chose that preschool not only for the ABCs, although that was important. It was about giving your child a safe place to grow, to stumble in small ways before the stakes got bigger. Sound familiar?

Since you’re reading this, chances are you or a family member is about to make a bigger version of that same decision—except this time there may be significant money on the table and a teenager with a seat at the table. All of this amid headlines about artificial intelligence eating entry-level and professional jobs, the rapidly rising costs of a college education, and a growing interest in AI-proof skilled trades as an alternative to a professional degree.

College is more than a financial decision. And it’s more than yes or no. There’s a myriad of choices to sort through. But the numbers are a good place to start; they may clear away some of the noise and offer a bit of clarity as you evaluate your options.

What College Actually Costs Today

The stated tuition and what a family actually pays for their student’s educational journey are rarely the same number. That gap can trip a family up more than the sticker price itself. Here’s how the 2025–26 average college costs break down by path:

Keep in mind that in addition to variations in tuition, room and board may differ depending on the location of the school; you’ll want to carefully examine the prices of the colleges you are considering and the additional expenses you expect to incur.

The Earnings Case for a Degree

Recent research shows that on average, a degree still pays off. Bachelor’s degree holders earn a median of $2.8 million over a lifetime, compared with $1.6 million for high school graduates—roughly a 75% premium, or about $1.2 million in extra lifetime earnings. Week to week, the median earnings are $1,543 for someone with a bachelor’s degree versus $930 for a high school graduate.

But averages describe a crowd, not your kid. What a student studies tends to matter more than where they study it. For instance, median earnings for graduates in STEM fields are higher than the median for all bachelor’s degrees, whereas workers who studied social sciences or education and public service generally earn less than the overall median. (It’s important to note that all fields have a wide spread of earnings distribution, depending on the specialty and particular career path.)

For many of these majors, a graduate degree can further increase potential earnings with more lucrative career opportunities.

The Debt Behind the Diploma

It’s worth repeating a fundamental rule about debt: debt should be used to buy appreciating assets rather than those that depreciate. For instance, a mortgage buys a house that usually holds—and often increases—its value. A college degree is supposed to work the same way; students take out loans with the expectation that their diploma will increase their earning power and balance out the cost of the debt. For families that don’t need to take on student debt, the college decision is just about value, not risk. But students who borrow are under pressure to graduate on time, pick a major with a paycheck attached, and take a job whether or not it’s the right fit—because the loan payment comes due on schedule whether or not the career does.

U.S. federal student loan debt now totals $1.86 trillion, spread across 42.6 million borrowers. The average borrower owes $30,520 in federal student debt for a bachelor’s degree. Each year, nearly 30% of undergraduate students take out federal loans, and 20% of all American adults report having outstanding student debt.

How quickly a student pays off their loan makes a huge difference in the ultimate cost they will pay. The table below shows the difference in the final cost of the loan based on their monthly payment and repayment period. The average student borrower takes 20 years to pay off their student loan debt, with 21% of borrowers seeing their total debt balance increase during the first five years of their loan.

And it isn’t only the graduate who carries the debt burden. Some parents are opting to use Parent PLUS loans to help out. These loans can help fill in the gaps, but come with a higher interest rate than most federal student loans (9.07% for the 2026-27 school year) and have an origination fee, currently 4.228%. For parents who may be trying to wind down their careers and start thinking seriously about retirement, borrowing for college can throw a wrench into long-term planning.

The Opportunity Cost: A Simple Comparison Worth Making

The cost of college isn’t just about student loans; what many parents and students are questioning now is the opportunity cost. What other skills and knowledge could a young adult pursue in lieu of a university education? How far could they go on a career path that doesn’t require a degree? While you may not be able to quantify the immeasurable qualities of different opportunities available on different pathways, there is one comparison that may be helpful. What if the dollars you would spend on a college education were invested instead?

$100,000 invested for 40 years at an 8% average annual return grows to roughly $2.17 million—before taxes, assuming no withdrawals along the way. Compare that to the difference between the median lifetime earnings of a bachelor’s degree holder ($2.8 million) versus someone with a high school diploma ($1.6 million); the bachelor’s degree yields an average $1.2 million lifetime premium, significantly less than $2.17 million. It’s important to recognize the many variables of this comparison, from the different earnings power of different degrees, to the varying costs of schools, to the unpredictability of markets. Additionally, the $1.2 million lifetime premium is measured in today’s dollars and not compounded. It’s not a perfect parallel or a simple trade-off, but does offer some perspective to help understand the opportunity cost.

It’s impossible to know exactly what the next 40 years of markets will do, and you probably only have a broad-brush outline of your student’s future career path. But it’s still worth making the comparison to help understand both sides of the balance sheet. What are you giving up in favor of pursuing a degree or by choosing a more expensive school or in taking on a larger loan?

The College Choice Isn’t One-Size-Fits-All

Every family faces a different situation, and each student has unique goals and dreams. A future engineer, nurse, or accountant with a clear path to a $70,000+ starting salary is working with a very different equation than a student who’s still figuring things out. There are some alternative options that can buy you some time and savings that may be worth considering:

• Two years at a community college before transferring to a four-year college can shave tens of thousands of dollars off the total cost, with no difference on the final diploma.
• Trade and technical programs often cost a fraction of a four-year degree and can lead to strong, steady earnings in skilled trades that are genuinely short on workers.
• A gap year, military service, or a couple years of work experience can deliver a similar independence-building benefit as college offers—sometimes better, and without a tuition bill.

Five Questions to Sit Down With as a Family

There’s no formula that spits out the right answer here. It depends on the student, the school, and your family’s bigger financial picture. Before you commit to a path, talk through these together:

• What does this specific degree, at this specific school, typically lead to in terms of starting salary and long-term career opportunities?
• How much debt would this path require, and who is expected to repay it—the student, the parents, or both?
• If we invested the cost difference between this school and a lower-cost alternative, what could that money become over time?
• Does this decision put our own retirement timeline or financial security at risk?
• Is a four-year degree actually the best path to this student’s goals—or would community college, a trade program, or work experience get them there just as well, or better?

The College Choice Bottom Line

This is a personal decision; every family, student, and school is different. And it’s much more than a financial decision. But before anyone falls in love with a particular campus, mascot, or university motto, running the actual numbers, for both the student and the parents, is a great place to start.

The best financial decisions are those you can still appreciate ten years later. A degree that genuinely expands a child’s opportunities is often worth every dollar. A marginal degree at a maximal price is worth a second look before signing on. Your Coldstream team is always glad to help you run these numbers for your own family, looking at 529 funding, cash flow, and loan scenarios to see if college pencils out for you.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

This article is for informational and educational purposes only and does not constitute legal, tax, investment, or financial advice. Readers should consult with qualified professionals regarding their specific circumstances.