College Degrees Still Deliver Strong Financial Rewards Even After Accounting for Student Debt

A new study from Washington University in St. Louis offers a clear and data-backed answer to a question many students and families worry about today: Is a college degree still financially worth it once student loan payments are considered? According to this research, the answer remains a confident yes. Even when factoring in student debt, completing a degree continues to provide meaningful long-term financial benefits compared to starting college but leaving without a credential.

This analysis comes from the Center for Social Development (CSD) at the Brown School and uses one of the most detailed datasets ever brought to this topic. By linking information from a national credit bureau with enrollment and completion data from the National Student Clearinghouse, the researchers could evaluate not just earnings, but debt-adjusted earnings—a more realistic measure of what students actually take home after paying their loans.

Below is a clear breakdown of all the findings, along with additional background about college ROI and why completion matters so much.

What the Study Found About the Real Returns of a College Degree

The study shows that people who complete a postsecondary degree earn significantly more than those who attend college but do not finish a credential.

Here are the key numbers:

• Degree completers earn about $8,000 more per year, on average, after subtracting estimated annual student loan payments.
• Without adjusting for debt, the earnings premium rises to $10,400 per year.
• This means that while student loans reduce some of the financial advantage in the early years, the long-term payoff remains solidly positive.

The research team also analyzed different levels of postsecondary education—associate degrees, bachelor’s degrees, master’s degrees, and undergraduate certificate programs. Their findings show that the financial return exists across every category, although the share of earnings that goes toward student loan payments varies.

Here’s how much of their extra earnings each group typically spends on loans:

• Associate degree holders: around 9%
• Bachelor’s degree holders: around 19%
• Master’s degree holders: around 57% (though the higher growth rate of their salaries helps shrink this percentage over time)
• Certificate completers: roughly $5,000 higher debt-adjusted earnings than similar students who did not complete a certificate

One especially important detail is that these comparisons are made between people with similar backgrounds, regions, and fields of study, which helps isolate the impact of completing a degree itself.

Why Completion Matters More Than Many Realize

A big takeaway from this study is how much difference completion makes. Students who leave college without a credential often still take on debt, but they don’t get the earnings boost that typically comes only with finishing.

Economists refer to this advantage as the sheepskin effect—the idea that the credential itself brings significant value in the labor market beyond accumulated coursework.

This aligns with decades of prior research showing that having “some college, no degree” rarely leads to substantially higher earnings. In contrast, finishing a degree—even a two-year one—consistently leads to higher wages over time.

The new study strengthens this point by showing that even after including loan payments, degree completion is still financially beneficial across the board.

Policy Implications and the Role of Student Aid

The researchers also raise concerns about possible federal policy shifts. They note that proposals such as the One Big Beautiful Bill Act could introduce new borrowing caps for graduate students and tighten “gainful employment” rules, which would limit access to federal financial aid for some programs.

According to the study authors, most graduates already meet federal standards for gainful employment, and restrictions on aid could reduce access to degrees that typically provide positive long-term returns.

The researchers argue that policymakers should focus on:

• Expanding access to higher education
• Reducing financial barriers for students
• Supporting students through degree completion
• Extending loan availability to high-value certificate and non-degree programs

The findings suggest that thoughtful aid policies can improve both completion rates and financial outcomes for students.

How This Fits Into What We Already Know About College ROI

For decades, studies have shown that higher education is one of the most reliable ways to increase lifetime earnings. But this new research adds fresh layers of insight by incorporating student loan repayment obligations into the picture.

Here’s how this study builds on earlier findings:

• It uses real credit bureau data to examine actual loan payments instead of estimates.
• It matches individuals based on regional and academic similarities, improving accuracy.
• It includes non-degree credential programs, which have been growing rapidly and often provide solid returns.
• It focuses specifically on debt-adjusted earnings, offering a clearer picture of the true financial benefits.

This approach helps counter the widespread belief that student debt automatically cancels out the value of a degree. While loans certainly affect early-career finances, the long-term payoff remains significant.

A Closer Look at How Student Debt Impacts Earnings Over Time

One nuanced detail the study emphasizes is that the share of income spent on loans is not static. For example:

• Master’s degree holders spend a high percentage of their additional earnings (57%) on loan payments early on.
• However, master’s degree salaries tend to grow faster than undergraduate salaries.
• Over time, the loan burden becomes a much smaller share of their earnings.

This illustrates an important point: the financial value of education is not just immediate earnings, but long-term growth trajectories. Graduate degrees often lead to careers with higher ceilings, which can make early debt more manageable in the long run.

What Students Should Take Away From This

For individuals planning their education paths, this research offers some useful insights:

• Completing a credential—whether a certificate, associate degree, bachelor’s degree, or master’s degree—has measurable financial benefits.
• Borrowing for college can still be worth it, as long as the likelihood of completion is high.
• Non-degree credentials should not be overlooked; they offer meaningful returns for many career paths.
• The true value of education becomes more apparent over time, not just in the first years after graduation.
• Students should consider both immediate earnings and long-term salary growth when evaluating a program’s value.

Overall, while student debt is a real financial factor, the data continues to show that education remains one of the most powerful tools for improving economic mobility.

Extra Context: Understanding “Debt-Adjusted Earnings”

Because this study introduces a helpful concept—debt-adjusted earnings—it’s worth briefly breaking down what that means.

Debt-adjusted earnings =
average annual earnings of a degree completer
minus
estimated annual student loan payments.

This is different from traditional ROI measures, which usually look only at how much money a person earns, not how much they actually keep after repayment obligations. By using debt-adjusted earnings, this study creates a more realistic picture of graduates’ financial lives.

Extra Context: Why Certificates and Short-Term Programs Matter

The study’s inclusion of certificate programs is noteworthy because these programs:

• Are shorter and less expensive than full degrees
• Often lead directly to specialized jobs
• Have become increasingly popular among working adults
• Can provide meaningful wage increases without multi-year commitments

The finding that certificate completers earn roughly $5,000 more per year (after loan payments) than non-completers suggests that these programs can be very effective pathways, especially in technical or trade fields.

Research Paper Reference

Beyond Earnings Premia: Debt-Adjusted Returns to Postsecondary Education
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5375794