The Imminent Disruption of Higher Education

While there are many secondary reasons why people choose to attend college (parental pressure, networking opportunities, future name dropping, etc.), primarily it is, or should be, an investment of their time and money.  With the ROI being an enhanced education, certified with a degree, that will open otherwise closed career doors and eventually enhance their future earning potential.

For a bachelor’s degree, the average time invested is 4.5 years.  The money invested is the total net cost to attend college for 4.5 years, plus the opportunity cost, (what you could have earned working instead), which is about $180,000.  Add this amount to the average student loan debt of $40,000 at graduation, and the graduate begins their career around $220,000 behind someone who bypassed college and immediately started working out of high school.

This financial hole gets much deeper for advanced degrees.

The assumption is that over the course of one’s career the net income will be greater with a degree than without, and that at some point, there will be a break-even point where the college grad caught up with their non-degreed self. The length of the ROI breakeven point is very dependent on the degree choice, the number of years attending college, and how long it took to find work after graduation.  For those degrees that yield the highest paying jobs, expect breakeven after 5-7 years.  For people with less marketable degrees, the college investment may never pay off.

Question: Has this college degree ROI improved or deteriorated over the last 50 years?

To answer, start with some Grok assisted research.The query is bold, the answer is summarized in italics.

list by year, starting in 1980, number of in-person, non-profit colleges and universities in the U.S.

In 1980 there were 3182, in 2025 there are 3480, a 10% increase

list by year, starting in 1980, the number of students enrolled at in-person, non-profit colleges and universities in the U.S.

In 1980 there were 10M, and in 2025 there are15M, a 50% increase

list by year starting in 1980, the population of the U.S.

226M in 1980, 342M in 2024, a 51% increase

list by year, starting in 1980, corrected for inflation, the average starting salary for college graduates with a bachelor’s degree for all in-person, non-profit colleges and universities in the U.S.

In 1980, $70,000; In 2025, $65,000 (both in 2025 dollars), a decrease!

list by year, starting in 1980, corrected for inflation, the average annual under-grad tuition for all in-person, non-profit colleges and universities in the U.S.

In 1980, $14,500; In 2025, $45,000 (both in 2025 dollars), a 210% increase

Answer: It has clearly deteriorated. For a lower starting salary, college grads are investing three times as much money.

While the number of higher education institutions has only increased by 10%, they were able to accommodate a 50% increase in students, driven by the 50% increase in the population.  You would think that if their expenses were fixed, the colleges would have been able to lower tuition proportionately.  They are non-profits after all… But instead, they increased tuition by 210%!  How did they convince more students to pay more?

The answer is a basic economic principle.  If you want to increase the price of an asset, increase the demand for it.

The increase in the number of students was an increase in demand.  But the other increase in demand was the result of the U.S. government increasing the subsidization of student loans.

how does the U.S. government subsidize student loans?

The U.S. federal government subsidizes student loans primarily through the Department of Education's Federal Direct Loan Program (also known as William D. Ford Direct Loans), which originates over 90% of new student loans. These subsidies make borrowing more affordable than market-rate private loans by reducing or eliminating interest costs for borrowers during certain periods and providing pathways to forgiveness that effectively turn loans into partial grants for many. Subsidies cost taxpayers billions annually—estimated at over $100 billion in net present value for recent cohorts under fair-value accounting, driven largely by forgiveness and interest benefits.

Which meant that the students did not have to pay more, at least initially. They (and taxpayers in general) would pay more later, in the form of student loan debt.

It is obvious that the higher-level education system took advantage of this double increase in demand. Not only by increasing tuition 3X but realizing a tremendous boost to their endowments.

list by year, starting in 1980, corrected for inflation, the net endowment for all in-person, non-profit colleges and universities in the U.S.

in 1980, $80B; In 2025, $850B (both in 2025 dollars), a 1000% increase

And now we have reached the point where outstanding student loan debt is approaching $2 trillion, and this debt is one of primary reasons why Millennials have become disenchanted with capitalism.

However, a state subsidized system of non-profit institutions that do not compete for revenue can hardly be described as a free market.  This is in fact a very centralized, socialized system in itself, and the fact that it has become stagnant, subsidized and over-priced should not be a surprise to anyone.  The expected outcome of socialism, the same failed economic system that so many Millennials are turning towards for solutions.

While many argue that it is too early to write off a college degree, I believe that we are witnessing the beginning of the disruption.  Back in 1984 when I received my engineering degree the source of educational information was quite limited, and virtually all engineering opportunities required a degree.  This has changed.  The internet has democratized the source of information, and custom A.I. tutors will soon democratize the higher education process.

It will become increasingly difficult to argue that a college degree is a measurement of “discipline and intelligence”, when the logical decision for the motivated, disciplined and intelligent will be focused, low-cost self-education. You will be graded by actual accomplishments, and not a diploma.   Many companies today no longer require college degrees for positions. At the further extreme, Palantir's Meritocracy Fellowship encourages the best and brightest to not even attend college.

It is kind of ironic that the very technology that was developed at university labs will force this transition.  Universities will not disappear; they will just have to unwillingly adapt to the new reality.  They will become leaner and more cost-efficient, focusing on what is required for successful careers, and dropping the rest.  They will accept and incorporate A.I. as part of the learning process.  Our government must stop the excessive subsidization of the existing bloated system; it will just prolong the change for a couple more years at great taxpayer expense.