There was a time when going to university seemed like a no-brainer. Like any investment decision, choosing to pursue a degree involves weighing the opportunity cost: the wages, work experience, and compound savings growth forgone during the years spent studying against the expected future return. Universities offered better qualifications that opened doors to better jobs with greater earning potential. Are degrees even worth the economic and time investment anymore? How did they lose their value?
Jade Truong
ESSA Monash Clayton
[Jade Truong is a third-year Bachelor of Laws (Honours) and Commerce (Economics) student at Monash University, with a keen interest in the intersection of modern trends, behavioural economics, and consumer psychology.]
Credential inflation- Has a bachelor’s degree become the new year 12 certificate?
Economists have long debated why education raises earnings. Under human capital theory, a degree makes graduates genuinely more productive, which justifies higher salaries. Signaling theory offers a different explanation: a degree doesn’t necessarily build skills so much, its main function is filtering candidates. A degree sends capability signals to employers that a graduate has the discipline and cognitive ability to complete demanding tasks. A graduate is assumed to be able to read, write, meet deadlines, be consistent and follow instructions well. As more people obtain degrees, that signal weakens, the credential no longer separates high performers from the rest of the pool as effectively as it once did.
The number of students graduating with a university degree has increased competition in the job market. In 1950 only 30,630 students were enrolled in Australian higher education (Booth & Kee, 2009). Statistics show a dramatic shift of 43% of the Australians who completed Year 12 in 2023 went straight into higher education the following year and 47% of Australian residents aged 25 to 34 already hold a bachelor’s degree or higher (The New Daily, 2026). Degree inflation is evident in these higher participation rates as university is made much more accessible now compared to in the past, creating an increased supply of university graduates. As more Australians graduate from University, a degree no longer delivers the security and financial advantages it once did. Degree inflation has reached a point where applicants have to truly outshine others; a degree is now simply just the bare minimum. An employer who once required a degree for a relatively ordinary office job might soon require a postgraduate qualification, several internships and two years of experience.
AI threats.
The AI boom across recent years has changed workplaces and systems, igniting job security fears amongst many sectors. Tasks can now be streamlined and completed ten times faster by AI than a human, data sets can be analysed quicker than ever.
Although fears of redundant positions and cut hours in the workforce as companies increasingly invest in AI, this does not mean that university degrees have lost all value. A key distinction must be made between the ability to operate AI and strategic AI use to solve a challenge. Using AI simply as a tool to feed information to is not guaranteed to produce good, reliable results. Utilising AI as an assistant to solving a challenge on the other hand requires a specific skillset and level of critical thinking that still requires a human behind it all. Institutions could build around this opportunity by restructuring the way students learn. There should be less emphasis on reproducing knowledge, something AI does well, instead redirecting to critical thinking and problem solving. Students could be encouraged to use AI as something to bounce off of and to clarify and critique concepts, providing instant personalised tutoring and feedback. A university degree is therefore still important in growth and AI can offer increased efficiency and effectiveness of learning if used correctly.
Moreover, there are therefore levels of benefits from a university degree, depending on the content studied. Pursuing a degree that leads to roles at high risk of AI duplication such as data entry or book keeping are less likely to yield desirable “worth it” results compared to less susceptible degrees in fields like medicine and health, law and education. Although AI increases the worthiness of certain degrees, many remain less impacted. Moreover, the popularity of AI could lead to the creation of new jobs in Australia’s future, such as AI engineers and AI ethics managers, which could in return create demand for university degrees and skill training for these roles.
This shift reflects a broader labour market principle: as AI drives down the cost of routine, codifiable tasks, the economic value accrues to workers whose comparative advantage lies in judgment, ambiguity, and strategic thinking; precisely the skills degrees in fields like medicine, law, and education are built to develop.
Substituting university transcripts with coding folios.
Value in the conventional university structure is being challenged by competition in the development of start-up culture and emphasis on skillsets instead of degrees, acting as substitute goods. Many university degrees are known to teach ‘one-size-fits-all’, outdated content that is typically unable to adapt fast enough to challenges in the modern growing technological world. Large employers like Google, Apple and Microsoft are drifting away from simply looking at degrees and, as too much competition pushes them to focus their hiring on skills instead, with some abolishing degree requirements entirely for some roles. Outsmart College, launched by former Duolingo executives, has raised more than $38 million to build “the university of the future” (Outsmart College, 2026). Moreover, entrepreneurs like the former CEO of PayPal, Peter Thiel, pays young people $100,000 to drop out of school and launch startups. According to Volnytska (2026), Y Combinator became a university of founders, compressing years of trends into a few months. Emphasis on empowering innovation and “out of the box” creativity that breaks away from traditional, one-size-fits-all content taught in universities is growing more rapidly than ever, lowering the value of a university degree. In economic terms, coding bootcamps, skills-based hiring, and ventures like Outsmart function as substitute goods to the traditional degree, competing for the same signal of competence that universities have historically monopolised, and forcing incumbent institutions to justify their price premium.
A decrease in student satisfaction.
A survey of approximately 120,000 students across all Australian Universities (The Quality Indicators for Learning and Teaching (QILT) survey) found graduate satisfaction was at its lowest since the poll began in 2016.
Additionally, the Institute for Fiscal Studies has estimated that a quarter of UK graduates can expect to be financially worse off after attending university (The Guardian, 2026), especially those who take creative or performing arts degrees. Much of the variation came from the careers that students choose after graduation. It was found that those studying fields like law, economics or medicine are more likely to go on to highly paid jobs. Students are reluctant to invest so much time and money into pursuing a degree that might not yield promised success and security. The latest 2026 British Social Attitudes (BSA) survey found the proportion of people who believe a degree is not worth the time and money has jumped by 20%, from 14% in 2005 to 34% in 2025 (The Guardian, 2026). This points to a diminishing marginal return on the degree as a financial asset: even as the number of graduates rises, the earnings premium attached to holding a degree has not kept pace, eroding the historical return on investment for an increasing share of students.
A university degree still holds high value.
However, a university degree is still highly respected, valuable and a worthy pursuit for many. This also reflects the degree’s role as a positional good as its value lies partly in relative scarcity and network access rather than the knowledge itself, which is consistent with the “value lies in access, not knowledge” argument made by Volnytska. Despite the inflation of degrees, university graduates are more employable, with higher salary expectations than someone without a degree. In the 2025 graduate outcomes survey conducted by QILT, 80% of those with non-school or tertiary qualifications are employed compared to 58% without, 75.4% of undergraduates secured full-time employment within four to six months of graduation (Australian Government Department of Education, 2026). Australian undergraduate degree holders earn a median starting salary of roughly $71,000 to $91,000 per year, compared to non-degree holders who face a median of around $48,500 (Australian Bureau of Statistics [ABS], 2026).
Moreover, elite universities’ real product was never education but the network. It allows an individual to be surrounded by similar minded, ambitious people, opening up opportunities and driving goals. Environments foster strong connection, collaboration and intellectual stimulation. These connections overall help with post-grad employment, and serve as a third space that allows people to make lifelong friends alike to them.
For specific regulated professions like law and medicine, public-sector jobs, and prestige networks, degrees are also a prerequisite to entry. This value lies in access, not knowledge.
Conclusion
Ultimately, student debt is growing and sticking around for longer as young people navigate their career enhancement. Repayment times have blown out from about seven years to approximately ten years on average, with more people carrying debt into their 30s and 40s (Futurity Investment Group, 2023). With credential inflation and new ways to build a career, it is not hard to see why student satisfaction has declined. However, a university degree is still a very worthy and fulfilling pursuit for many, with dependence on the field studied. The decision to pursue a degree is best understood not as a guaranteed payoff but as a risk-adjusted bet, where expected returns vary enormously by field. Students should weigh the sunk time and financial cost against a realistic, subject-specific estimate of future earnings.
References
Australian Bureau of Statistics. (2026). Employee earnings, August 2025. https://www.abs.gov.au/statistics/labour/earnings-and-working-conditions/employee-earnings/latest-release
Australian Government Department of Education. (2023). New survey highlights benefits of getting a degree [Media release]. https://ministers.education.gov.au/clare/new-survey-highlights-benefits-getting-degree
Australian Government Department of Education. (2026, June 26). Graduate Outcomes Survey: Strong graduate employment, more people move between university and VET [Media release]. https://ministers.education.gov.au/clare/graduate-outcomes-survey-strong-graduate-employment-more-people-move-between-university-and
Booth, A., & Kee, H. J. (2009). The university gender gap in Australia [Conference paper]. Melbourne Institute. https://melbourneinstitute.unimelb.edu.au/assets/documents/hilda-bibliography/conference-papers-lectures/2009/Booth_Kee_Gender_Gap.pdf
Futurity Investment Group. (2023, March 6). The impact of HECS debt and HELP debt. https://www.futurityinvest.com.au/insights/futurity-blog/2023/03/06/the-impact-of-hecs-debt-and-help-debt
Outsmart College. (2026). Higher ed reimagined. https://joinoutsmart.com/
QILT. (n.d.). Graduate Outcomes Survey (GOS). Australian Government Department of Education. https://www.qilt.edu.au/surveys/graduate-outcomes-survey-(gos)
The Guardian. (2026a, June 25). One in four graduates will lose financially from university, IFS research suggests. https://www.theguardian.com/education/2026/jun/25/one-in-four-graduates-will-lose-financially-from-university-ifs-research
The Guardian. (2026b, June 2). The Guardian view on universities: Public confidence in degrees is wavering – ministers should shore it up [Editorial]. https://www.theguardian.com/education/2026/jun/02/shrinking-graduate-premium-sours-views-on-university-poll-shows
The New Daily. (2026, July 28). The Stats Guy: The end of the university pay premium?! https://www.thenewdaily.com.au/work/2026/07/28/the-stats-guy-the-end-of-the-university-pay-premium
Volnytska, I. (2026, July 19). The death of the degree. Project Syndicate. https://www.project-syndicate.org/commentary/universities-must-be-rebuilt-around-ai-develop-retain-talent-by-iryna-volnytska-2026-07
