College was supposed to be ‘good debt.’ For many borrowers, it isn’t paying off

Student loans have long been considered "good debt." But soaring tuition costs, recent changes to the federal lending system and a volatile job market are forcing a generation to question that logic.

Historically, funding a college education led to higher-paying jobs and greater economic opportunity. However, the math for many has shifted over time, making an investment in an undergraduate and graduate degree riskier.

For starters, there's just way more student-loan debt now. Today, more than 42 million Americans carry federal education debt, and the outstanding total exceeds $1.7 trillion. That's up from closer to $516 billion and 28 million borrowers 20 years ago.

Nearly 8 in 10 adults say colleges and universities are doing only a "fair" or "poor" job at keeping tuition affordable, and 55% gave the same score when it comes to schools preparing students for well-paying jobs in today's economy, according to a Pew Research Center study published in 2025. And earlier this year, findings by NerdWallet showed nearly 80% of Americans surveyed agreed that the federal student loan system is broken.

Read more CNBC 'Good Debt' coverage

As college costs and balances on student loans rise, so has skepticism about the benefits of education debt. Most recently, President Donald Trump's "one big beautiful bill" act, or OBBBA, eliminated several affordable student debt repayment plans and slashed the safety net for borrowers, including the option to pause federal loan payments during periods of unemployment.

Meanwhile, the rapid rise of artificial intelligence is disrupting entry-level hiring. As opportunities narrow in some fields, particularly technology, students and their families are increasingly questioning whether a college degree is worth the cost.

"Students are being asked to make a decision with very long-term financial consequences without being able to predict their job prospects or what the rules governing their debt will look like," said Carolyn Fast, director of higher education policy at The Century Foundation, a progressive think tank.

It wasn't always so pricey to pursue higher education. And as such it was easier to see a return on your investment.

In the 1971-72 academic year, the average annual price of tuition and fees at a private four-year college was $14,550, after adjusting for inflation, according to the College Board, a nonprofit organization that tracks trends in college pricing and student aid. By 2025-2026, the average tab had soared to $45,000.

Tuition has risen about 5.5% a year, on average, since 1983, outpacing inflation and wage gains, according to a 2026 report by J.P. Morgan Asset Management.

After factoring in room and board, the annual tab at a four-year private institution now averages $60,920, according to the College Board, but some colleges charge more than $100,000 a year, when all expenses are included. The sticker price alone is causing more students to question whether a college degree is worth it, recent studies show.

"Investing in college is riskier when schools are capturing the gains," said Michael Madowitz, the principal economist at the Roosevelt Institute, a left-leaning think tank.

College administrators argue they've had to contend with declining enrollment, rising costs and steep cuts in state funding for higher education, according to a report by the Center on Budget and Policy Priorities, a nonpartisan research group based in Washington.

"When states cut higher education... colleges and universities generally pass those costs on to students in the form of higher tuition," the report said.

As attending college has become more expensive, many families are leaning on loans and other sources of funding.

The average student loan balance across all borrowers is currently $40,768, up from $30,414 a decade ago, according to data from the U.S. Department of Education.

A growing share of borrowers are even deeper in debt.

Over the last 10 years, the number of student loan borrowers owing more than $100,000 has swelled to 3.8 million from 2.4 million, according to an analysis by higher education expert Mark Kantrowitz. Among these borrowers, the average balance rose to around $187,000 in 2026 from $172,000 in 2017.

"Good debt is usually an investment that will grow in value or help you earn money, and examples include mortgages and student loans," Kantrowitz said. "But too much of a good thing can hurt you."

Larger balances also tend to take longer to pay off. The number of people over age 50 with student debt has risen to nearly 10 million from around 7 million in 2017, Education Department data shows.

The longer people carry education loans, the more often they struggle to reach other financial security milestones, such as owning a home or saving enough for retirement, said Nadine Chabrier, a senior policy counsel at financial research nonprofit the Center for Responsible Lending.

"Student loans that constrain wealth-building for 20 or 25 years cannot be called 'good debt,'" Chabrier said.

The longer people carry education loans, the more often they struggle to reach other financial security milestones.

David Plunkert | CNBC

The OBBBA extends federal student loan repayment timelines even more. Under the new Repayment Assistance Plan, or RAP, borrowers face a 30-year repayment term that mirrors a traditional home mortgage. Plans the OBBBA eliminated were 20 years or 25 years long.

"Time itself is a risk," said Rich Williams, former deputy assistant secretary at the Education Department. "The longer the repayment horizon, the more chances for a job loss, an illness or a paperwork failure to knock a borrower off track."

And many borrowers have fallen behind. As of June 30, roughly 9.3 million federal student loan borrowers were in default, up from around 6.2 million at the same time in 2016, according to Education Department data released in September. That's a roughly 50% increase over the past decade.

The Trump administration's recent overhaul of the federal student loan system and implementation of the OBBBA has added another layer of risk for borrowers.

After the changes, borrowers have fewer affordable repayment plans and relief options after an unexpected financial shock. The OBBBA eliminated the Unemployment Deferment and the Economic Hardship Deferment, which allowed borrowers to pause their payments during periods of joblessness or other setbacks.

Borrowers say it's confusing and stressful to have the terms of their loans shift so frequently. And some of the new policies have come without warning.

Richard and Kasie Bares

Courtesy: Richard and Kasie Bares

Richard Bares and his wife, Kasie, a nurse at the University of Wisconsin-Madison, were looking forward to being free of student debt by the end of the year.

They began repayment in 2009 and said that once their debt was finally canceled, they hoped to take a family vacation and set aside more for emergency savings. Both are now in their mid-forties.

But over the past few months, the Education Department quietly recalculated many borrowers' progress under the popular Public Service Loan Forgiveness, or PSLF, program and clawed back some qualifying payments. Created in 2007, PSLF excuses the federal student debt of government and nonprofit workers after 120 qualifying monthly payments.

An Education Department spokesperson said the agency is correcting "coding errors" the Biden administration made. "These errors resulted in inaccurate payment counts for some borrowers," the spokesperson wrote to CNBC in an email.

After the department's adjustment, Bares learned they'd need to make student loan payments for another two years.

"It made me sick to my stomach," Bares said.

"The goal posts are moving all the time," he said. "At least with a home loan, you know what you're getting."

Changes in the job market — notably the rise of artificial intelligence — are also making more students question whether a college education is a guaranteed ticket to financial stability.

Many entry-level roles are simply disappearing: Job openings for these roles plummeted by 35% between 2023 and 2025, largely due to AI, according to a report by labor research firm Revelio Labs. Nearly two-thirds of students polled are pessimistic about the job market, a CNBC and SurveyMonkey Quarterly AI and Jobs Survey from May found.

"The security a degree typically provides is really not showing up in that first job," said Roosevelt Institute's Madowitz.

AI is also having a rapid and unprecedented effect on the job application process, he added.

"The number of rejections you face in a world where AI screens workers, and many applicants are mass applying via AI, would spin the heads of someone who graduated five years ago," Madowitz said.

Research does show the earnings advantage associated with a college degree has grown since the early 1980s. However, the wealth gap has expanded even more: Wealth among college-educated households tripled from 1983 to 2016, while non-college households experienced minimal gains, according to a 2020 report by the Federal Reserve Bank of St. Louis.

Yet, a more recent analysis by Goldman Sachs found that the "safety premium" of a college degree is shrinking. Although college graduates are still more likely to be employed than their non-degree counterparts, that advantage is smaller than it's been in decades.

The unemployment rate among recent college graduates has slowly ticked higher, rising to 5.7% in June 2026 from 4.9% a year earlier, according to a New York Federal Reserve analysis of data from the U.S. Bureau of Labor Statistics.

A somber new report from Cornell University found that higher education now "faces an unprecedented crisis." Amid growing concerns about college costs and career prospects, Americans are losing confidence in the nation's colleges and universities, according to the interdisciplinary faculty committee that produced the report.

"From questions about access and affordability to concerns about the value universities provide to the world, public trust is declining," the committee wrote. 

Even so, Williams, the former Education Department official, said the good-debt-versus-bad-debt framing isn't the right way to look at student loans. Borrowing from the government is the only way many families can send their children to college, he said.

"A high-quality education is still one of the most reliable paths to the middle class in America," Williams said. "So the question may not be whether student debt is 'good' or 'bad,' but rather whether we've made a good program too risky and too complicated to use safely."