Student debt and the price of upward mobility

Editor’s note: This article first appeared in Money Matters, a newsletter from Britannica Money, on October 18, 2026.

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The earnings bump is real. So is the rising cost of getting it.

© james_pintar, Leon, Aino/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

When I graduated college in the late 1980s, it was with the help of student loans. Not a ton—not by today’s eye-popping standards—but enough to leave a hole in the budget, and an awkward one at that, because my spouse ported zero student debt into our marriage.

It was also enough debt to make us vow not to put our children in that position. But considering what transpired in the world of college education between our generation and theirs, we had only two choices: Be wealthy, or be realistic. We opted for realistic (as if we had a choice).

Between those two eras, the baseline math of higher education broke—to paraphrase Hemingway, “gradually, then suddenly”—as the cost of obtaining a degree disconnected from the entry-level wages used to pay for it. Ballooning student debt helped bridge the widening gap.

For half a century, the pitch for higher education was straightforward: A college degree is the ultimate engine for upward mobility. According to “The College Payoff,” a 40-year study conducted by the Georgetown Center on Education and the Workforce, median lifetime earnings reach $2.8 million for a bachelor’s degree versus $1.6 million for a high school diploma. That $1.2 million gap made college the default path to the middle- and upper-middle class.

But the model fed on itself. Students wanted the lifetime earnings bump, while colleges competed for students and prestige with luxury dorms, high-end dining facilities, new programs, and campus amenities aimed partly at climbing the U.S. News & World Report rankings. None of it came cheap.

Federal lending helped keep up with the rising cost. Congress raised student borrowing limits several times, including a major expansion in 1992. The same legislation also removed the dollar caps on Parent PLUS loans, eventually allowing parents to borrow up to the full cost of attendance, minus other financial aid.

That helped more families afford college. But it also meant that when colleges raised tuition, students and parents could borrow more to pay it. The cycle continued to repeat and, next thing you know, outstanding federal student loan debt had grown from about $54 billion in 1990 to more than $1.7 trillion today.

The lifetime earnings bump was still real. What changed was how families paid to get it. If you had the means, rising tuition could come out of savings, investment gains, and/or that 529 plan that Mom, Dad, Grandma, and Grandpa had been funding since you were in diapers. (Those 529s are awesome, by the way.) But if your family didn’t have those assets, there was another source of capital available: your future earnings, bridged by student loans.

College could still move you up a rung or two on the socioeconomic ladder. But getting there with student debt—as I did—meant starting from a different place than someone who got the same degree debt-free. And as tuition climbed, that difference got a whole lot bigger.

This is one way student debt can feed into the so-called K-shaped economy—the phenomenon in which people at the top continue building wealth while those lower down fall further behind. And it starts early. Two college graduates can earn the same salary, but if one is sending hundreds of dollars a month to a student loan servicer, that’s money that isn’t going toward a down payment on a first house or into a retirement savings account.

You can’t do much about what colleges charge, but you have plenty of control over what you’re willing to pay, and more importantly, borrow. The conversations should start long before the acceptance letters arrive and emotion takes over.

We started the conversation early with our kids, set expectations, and made a game out of stretching the college money as far as it would go. We were realistic about what we could afford, and they played along. Unlike their dad, they both graduated with zero student debt. They (along with the rest of their generation) are still facing the headwinds of a K-shaped economy, but at least they’re not weighed down by debt.