The “college premium”is the shorthand term for the income differential accruing to those who complete four-year degrees. Often attributed to research begun in 2011 by Georgetown University’s Center on Education and Workforce (CEW), the college premium concept came about from estimates comparing the average lifetime earnings of college graduates ($2.3 million) to those of high school diploma holders ($1.3 million).[i] In the subsequent decade, the CEW estimate swelled from its initial $1 million to $1.2 million as the premium made college seem like a mandatory life choice.
But families often pay heavily for this benefit, as top-tier universities edge ever closer to tuition costs of $100,000. This year, Vanderbilt University came nearest to this much-watched threshold, projecting tuition of $98,426, though it also emphasized that most students receive financial aid. This trend is evident in other prestigious institutions like Brown, NYU, Tufts, and Yale, whose costs are similarly approaching six figures. While these universities cater to a specific segment, it’s noteworthy that the national average tuition is $56,000 for private colleges and $26,000 for public universities. The rising costs across the industry continue to be a significant concern.[ii]
Seen in broader terms, these costs reflect a decade-long pattern of tuition increases among all U.S. colleges and universities, amounting to twice the inflation rate.[iii] This rate of increase isn’t a deliberate decision by educational institutions; instead, it’s driven by several historical factors that converge to push tuition upward. One contributing factor is the relationship between financial aid and tuition fees. As students and their families receive more grants, there’s a tendency to be more accepting of higher tuition fees, which in turn enables colleges to increase prices. Additionally, many students harbor the misconception that any college degree will automatically lead to better earnings, leading them to spend less time evaluating the actual costs of their education.[iv]
More transparency is needed in tuition pricing. Advertised tuition fees often don’t include potential discounts or grants, making the actual cost of education unclear and reducing competitive pricing pressures on institutions. Geographical limitations further exacerbate the problem, as most students look for colleges close to home, facing limited choices and less competitive pricing among the few local options.
Moreover, regulatory barriers prevent new educational providers from entering the market, which could otherwise help drive down costs through competition. These factors collectively ensure tuition rises, financially burdening students and their families.[v]
Analyzing matters such as tuition transparency and the regulatory barriers that limit competition in the educational sector, Richard Ohmann’s critique of the college premium, as outlined in his book Is College Worth It? Class and the Myth of the College Premiumcan be seen as further evidence of how the structure of higher education manipulates students and their families.[vi] Ohmann argues that the college premium not only misleads by suggesting that higher education is a clear pathway to higher social mobility, but it also manipulates by aligning more closely with the interests of the affluent and the market rather than the educational needs of all students.
The purported benefits of the college premium often justify the rising costs of higher education, which students and their families increasingly bear. This manipulation is multifaceted: students are encouraged to pursue college degrees under the premise of achieving higher lifetime earnings, yet the actual benefits of the college premium are disproportionately skewed toward those from wealthier backgrounds who can more easily afford these costs and are more likely to reap the benefits of high-paying jobs post-graduation.[vii]
This system not only reinforces existing socioeconomic disparities but also places a significant financial burden on those less able to afford it, often trapping them in debt. Ohmann points out that the alignment of higher education with market demands — particularly evident in fields like STEM — means that colleges are training students in skills that directly benefit the corporate sector.[viii] Thus, the college premium is a mechanism that subsidizes corporate training costs at the expense of public funds and student debt while maintaining the allure of higher income potential as justifiable reasoning for high tuition fees.
The college premium, therefore, does not function as a neutral, meritocratic reward for educational achievement but rather as a complex tool of socioeconomic manipulation. It upholds a system where the wealthy have significant advantages in accessing and benefiting from higher education while perpetuating the narrative that college is the key to financial success, incentivizing students and their families to invest heavily in it despite the lack of competitive pricing or transparency in tuition costs.
In this light, the escalating tuition fees at prestigious universities might reflect the cost of delivering higher education and a crafted perception of value that aligns with institutional prestige. The higher the cost, the more exclusive the institution appears, potentially enhancing its allure to prospective students and their families who equate price with quality. This perception is cyclically reinforced as these high tuition fees contribute to the schools’ reputations for exclusivity and excellence, attracting more applicants willing to pay premium prices for what they believe to be superior education and greater socioeconomic returns.
[i] Ryan Craig, “The College Premium Isn’t What Forbes Says it is,” Forbes (Dec. 1, 2023) https://www.forbes.com/sites/ryancraig/2023/12/01/the-college-premium-isnt-what-georgetown-says-it-is/?sh=5b735d02545a.
[ii] Ibid.
[iii] Melanie Hanson, “College Tuition Inflation Rate,” Educational Data Initiative (Aug. 13, 2023) https://educationdata.org/college-tuition-inflation-rate
[iv] Ibid.
[v] Ibid.
[vi] Richard Ohmann and Ira Schor, Is College Worth It? Class and the Myth of the College Premium (Baltimore: Johns Hopkins, 2024).
[vii] Ibid.
[viii] Ibid.