For Gen Z, Student Debt Is Scarier Than a Low-Paying Job

As spring approaches and high school students across the country get ready to walk across the graduation stage, they are planning their next steps and weighing their options for the best path for themselves and their future goals. Many students are considering higher education and see themselves on the pathway to four-year college. At the same time, students are increasingly unsure about higher education, whether it is the best path to economic security, and what options exist to pay for four-year college—even if they think higher education is the right path for them.

In July 2024, Third Way and Global Strategy Group hosted two in-depth online QualBoard journaling exercises to dig deeper into what we learned in our high school student poll. This memo unpacks how two groups of today’s high school students think about college:

• The first exercise focused on cost-pressured students (those who want to attend four-year college but are very concerned about cost).
• The second focused on cost-dominant (those who want to attend four-year college but aren’t planning to because of cost) and non-interested students (who are not interested in four-year college regardless of price).

This analysis sheds light on how these students conceptualize which path is best for them, their perceptions versus the realities of college costs, and the consequences of this generation’s trepidation with higher education’s price tag and aversion to student loans. The key takeaway? A narrow policy focus on canceling student debt has contributed to lower- and middle-class students questioning whether college is for them at all.

How Teens View the Cost of College

Cost weighs heavily in post-high school decision-making. Although students cautiously believe that higher ed is valuable and often necessary for economic security, they don’t think it is for everyone, a sentiment acutely felt by teens from less privileged backgrounds. From their perspective, it’s not a question that students from lower-income backgrounds can go to college, but they see that pathway as much harder. There’s an underlying concern that the desire to pursue four-year college isn’t enough and that you must come from a specific background with a particular support system to succeed. When asked to describe the kind of person who gets a four-year degree, students emphasized wealth and family income.

When teens start considering four-year college, they’re looking at a college’s ability to prepare them for the future and provide a course of study they’re interested in pursuing. This aligns with why most students go to college in the first place and is a top concern for all students when weighing their options, even if they are unsure if they’ll ultimately pursue a four-year degree.¹ When asked what it means for a university to provide good value, students drilled in on metrics like post-graduation employment rates and anecdotal evidence from former students. However, teens have difficulty finding this information, even if an institution offers it. When information is hard to find, misconceptions can fill that void, leading to the wrong idea that a student feels that four-year college isn’t for someone like them or someone from their background.

Even though students view four-year college as necessary to get a good job in their desired field, its financial benefits relative to its cost aren’t inherently assumed. Students who view higher education as worth it tend to have a role model showing them the benefits of a college degree (or the realities of not having one) and that college can be worth it, even if they may have student debt for some time after graduating. Yet despite seeing those examples, concerns about student loans are at the top of most students' minds, in addition to the cost of living and other financial worries beyond college tuition. In an open-ended prompt, students told us what the life of a typical person who graduated from a four-year college would look like, highlighting the fact that they perceive financial security as a gamble, even for college graduates.

Stigma Plus Cost Equals More Pressure

Misperceptions about other pathways, including two-year college, impact students and their next steps beyond high school. Teens recognize that attending a two-year college is not only a cost-saving move but can also start them on a trajectory to either a stable career or four-year college. Even so, there’s a perception that two-year institutions offer a “less-than” degree for students who didn’t excel in high school. This perception is reflected in cost-pressured students’ attitudes toward these programs. For cost-dominant students, this perception only further alienates them in searching for their next step, fearing that a two-year pathway would be lesser than—despite its benefits—and feeling like four-year college isn’t suitable for someone like them.

The main difference between a cost-pressured and cost-dominant student isn’t their dreams or what they can see of their future selves—it’s the perceived financial barrier of four-year college. A cost-dominant student is far more likely to self-select out of a four-year college based on price and into a two-year college. They believe this first step will be more affordable, let them work while pursuing a degree, and stay closer to home, leading to financial security. Still, this self-selection out of a four-year degree can have consequences: despite nearly 80% of community college students indicating they plan to transfer to a four-year institution, only about a third (33%) do—and less than half (48%) complete a bachelor’s degree within six years of entering community college.²

Two truths coexist with the two-year college pathway: students can recognize a stigma that feeds hesitancy while still appreciating its value relative to cost. If that stigma can be lessened, there’s reason to believe that students would be more interested in two-year college as a place to start their postsecondary journey. In an open-ended prompt, students recognized that attending a two-year institution and transferring to a four-year college would help alleviate some of their concerns about cost. Working to celebrate the broad benefits of attending two-year colleges is a crucial tactic that may help more students see higher education as a possibility for them, opening pathways to degrees that lead to good-paying jobs in fields of interest.

Loan Aversion Stokes Fears for the Future

It’s easy to see how witnessing the loud push over the past few years for loan cancellation—a policy proposal only a slim majority of voters actually like—has made teens loan-averse and not fully convinced about the financial benefits of college.³ For students already on the fence about the economic advantages of a four-year degree, taking on student loan debt is often the dealbreaker that will keep them from attending a four-year college. The fear of student debt and the perception that a four-year degree doesn’t provide the financial security it once did can lead students to self-select out of pursuing a four-year college degree, perpetuating inequality by social class.

Almost all students anticipate that without any aid or scholarships, affording college would be a hardship for them—and many want to avoid taking out loans at all costs. There’s a perception that loans will affect them and their families, on top of a perception that student loans are bad. Students think about loans in terms of the large principal borrowed, not what may be a manageable monthly payment that may come with a quality job after graduation. The immediate jump from the high price of college to avoiding loans overlooks that some debt, like student loans, can support long-term financial wellness. Students echo this black-or-white thinking when asked how paying the total cost of four-year college without any aid would affect them and their families.

Cost Confusion: Is The Juice Worth The (Financial) Squeeze?

The total price tag of college—and how to cut the check when the tuition is due—is the most significant barrier and stress point for students considering four-year college. While various funding sources exist to pay for college, students are generally unaware of what those are and how they can help relative to their unique situation. As a result, students feel forced to choose between two extremes—college with high prices and debt or no college at all. The confusion and misunderstanding around the price they’ll actually pay is a primary cause of stress for students, leading them to believe that costs are rising out of control and degrees are out of reach. An essential driver of this perception is the belief that many former college students have excessive student loan debt. In reality, only 37% of undergraduate students borrow, taking out an average of $7,700 annually to attend four-year college (and those numbers have declined from 50% and $8,400 over the past decade).⁴

These misperceptions lead students to assume college is out of reach without being bogged down with debt, amplifying the significant information gap about the distinction between the sticker cost and what a student pays. While informing students about scholarships and other forms of tuition discounting does help put students more at ease, it is hard to combat the high-cost, high-debt dichotomy that frames their view of paying for college.

Most students understand that need-based and merit-based scholarships exist, yet there’s little understanding of how to get scholarships and a skewed perception of what defines merit—for the cream of the crop of academic or athletic success. On the flip side, the same perception exists for need-based scholarships, with students believing they are only for students from lower-income backgrounds relative to their situation. Even more alarming, students from lower-middle-class backgrounds—those most likely to qualify for Pell Grants—are the least informed about the various ways to pay for college, including how Pell Grants work and who is eligible.

As a result, teens are primed to think about higher ed as unaffordable and worry about the dangers of student debt long before they start their college search. This is especially clear for cost-dominant students who fear that carrying student loan debt will cancel out the economic benefits of a four-year degree. Coupled with how influential family background and socioeconomic class are in shaping their perception of the pathways open to them, cost-dominant students are already at a disadvantage. When asked to reflect on how students pay for college and whether most pay the total sticker price, teens’ fears about cost and debt came to a head, with concerns about loans and perceptions based on social class evident.

The Repercussions of Scapegoating Student Loans

The narrative around student loans has made the college decision process—a time that should be filled with excitement—incredibly stressful because it often feels like a risky bet. That sentiment shows up in the words that come to students’ minds when thinking about potential student loan debt—they describe it with words like “harmful,” “scared,” and “fear.” At the same time, students have scant information about how student loans function. The ambiguity of how to pay for college combined with cancellation advocates framing loans as an unequivocally lousy investment leaves students at a crossroads of confusion. Ultimately, this quandary leads teens down a path where they view the potential consequences of taking out student loans to pay for college as more significant than the risk of not pursuing college at all.

Many students know that taking on student loans may be inevitable. Still, they aren’t convinced that it is worth it in the long run—likely due to warnings from parents or other family members and the single-minded push to cancel student debt with little regard for the downstream effects on access and enrollment. For those students with a positive role model who attended four-year college, they are more likely to see student debt as a temporary setback for what will ultimately be a successful financial future compared to other pathways. For others, that setback is viewed as a financial hole they may never climb out of, even with a completed four-year degree.

While students are rightfully concerned about cost and making wise financial investments, the demonization of student debt has created a generation of more loan-averse students to the point that for some teens, even the possibility of a lower-paying career is not as scary as student debt. The unfortunate focus on loans instead of affordability means that many students who would benefit the most from the economic mobility of a college degree may forego the opportunity solely because of a negative perception of borrowing—a sentiment echoed by participants in an open-ended response when asked how they feel about student loans.

Conclusion

Today’s teenagers express a souring perception of whether four-year college is worth it, and the current dialogue around student loans leaves little room for nuance, making college feel like a riskier bet than it should be. It’s incumbent on policymakers to focus on reforms that help control college costs and hold institutions accountable for student outcomes so that the next generation of college students can see themselves walking across the graduation stage with a bachelor’s degree and be confident they will reap the economic benefits of a college degree.