Key Points
- College graduates earned about 87% more per hour than workers without a degree in 2022. By 2026, that premium had shrunk to about 78%, back to where it was in the mid-1990s.
- Real hourly wages for college graduates fell about 2% over that time, while wages for workers without a degree rose more than 3%.
- Borrowers now carry an average federal balance of $39,547, and the shrinking wage premium leaves less money to repay it.
The extra pay that comes with a bachelor’s degree is shrinking for the first time in decades. A new working paper from economists José Azar, Mireia Giné, and Javier Sanz-Espín finds that the U.S. college wage premium fell sharply between 2022 and 2026 and is now back at its mid-1990s level.
That premium (the increase in earnings due to having a college degree) has long been the core financial case behind whether college is a good investment.
Using Current Population Survey wage data for workers ages 16 to 64, the authors compare hourly pay for workers with at least a bachelor’s degree against pay for those without one. In 1979, degree holders earned roughly 51% more per hour. That edge climbed to a peak in the mid-2010s, stood at about 87% in 2022, and has now fallen to about 78% by 2026.
A degree still pays, but the payoff that families weigh against the cost of college got noticeably smaller over the last few years.
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Why It Matters
After inflation, hourly wages for college graduates fell about 2% between 2022 and 2026, the first such drop in data going back to 1979, while wages for workers without a degree rose about 3.3%.
The authors call it the first period since at least the 1980s in which real college wages declined, which matters for anyone running the numbers on whether a a degree is worth it before taking out student loans.
The researchers trace the drop to falling employer demand for college-educated labor, not an oversupply of graduates. From 2022 to 2026, employer demand for college workers fell every year relative to demand for non-college workers, even as the number of graduates entering the workforce kept growing.
In the paper’s 1914 to 2026 historical model, this is the only multi-year stretch with negative demand growth for college labor, marking a reversal of more than a century of rising returns.
The AI Factor
The rise of AI explains part of the decline. The authors use an occupational exposure index built by Eloundou and coauthors, which scores how much of a job’s tasks a large language model could speed up.
In 2022, the average college worker’s occupation scored 0.473 on that index compared with 0.302 for non-college workers, because degree-heavy fields like software development, writing, and analysis overlap with what AI can do.
Meanwhile, construction, moving, and janitorial work, and other common jobs for men without degrees barely register. That split reshapes which college majors line up with career opportunities.
Treating the November 2022 release of ChatGPT as a shock point, the paper finds wage growth in highly exposed occupations slowed after 2022. Moving from the 10th to the 90th percentile of AI exposure is associated with 4.9% lower wages by 2026, relative to 2022.
Applied to the exposure gap between college and non-college workers, the authors estimate AI accounts for roughly 28% to 32% of the wage premium’s decline. The rest remains unexplained, and the paper lists tight low-wage labor markets, remote-work tradeoffs, minimum wage increases, and changes in who earns degrees as candidates, all factors.
The drop also hit some groups harder. Male college graduates went from earning about 98% more per hour than men without degrees in 2022 to about 84% more in 2026, while the edge for women slipped only from about 82% to 78%. The authors link that gap to men’s concentration in exposed fields like software and women’s concentration in nursing.
By age, the drop was steepest for workers 46 and older and smallest for those 30 and under. The paper also finds the shrinking premium explains 41% of the overall drop in U.S. wage inequality over the period.
How This Connects
The wage findings come at a time when Americans are dealing with a record amount of student loan debt. Americans owed $1.86 trillion in student loans at the end of the second quarter of 2026, according to the Federal Reserve. The average federal student loan borrower owes $39,547 across 42.8 million borrowers, per our student loan debt statistics.
That’s the disconnect. Yes, college graduates earn more. But when the lower premium is going to service higher student loan debt, the premium gets erased.
The strain already shows: 7.7 million borrowers held $180 billion in defaulted loans as of December 2025, and 23.2% of borrowers in repayment were more than 30 days late, according to Federal Student Aid data we covered in April. The paper doesn’t study student loans, but a smaller premium means less income above what a worker without a degree earns, and that extra income is what pays the loan.
Income-driven plans soften the blow on monthly bills. The new Repayment Assistance Plan sets payments based on income and can run up to 30 years, so lower wages mean lower payments but a longer road. Borrowers can model that tradeoff with our RAP calculator or compare it against older options in our breakdown of RAP versus IBR.
The Caveats
This is a working paper posted to SSRN and hasn’t been peer reviewed. Its 2026 figures use CPS data from January through July only, and the authors note that restricting every year to those months makes the 2022 to 2026 drop larger, not smaller.
The AI exposure index measures what language models can technically do, not whether employers actually adopted them, and the paper says exposure doesn’t necessarily mean a job will be automated rather than assisted. Those limits matter before anyone uses one study to rethink the case for college.
However, we’re already seeing the impact AI is having on students changing college majors, along with unemployment rising for college graduates as well.
What’s Next
The authors call out the biggest question directly: whether a falling college wage premium pushes students toward vocational training or forces colleges to change what they teach.
Families planning for fall 2027 should also factor in the new federal borrowing limits that took effect July 1, 2026, which cap how much students can borrow just as the payoff from borrowing is shrinking.
Gallup also recently announced that the opinion on the value of higher education has fallen to the lowest level surveyed. So it will be key to see if these trends continue, or reverse next year.
Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.