Considering a psychology degree? Study shows it may cost more than it pays

Every generation inherits a simple idea about education: study more, earn more. For years, that assumption has guided student choices, especially for those considering postgraduate degrees.

But in the 2020s, that equation is beginning to change. The change is not loud or sudden. It is showing up instead in research papers, wage data and hiring patterns that suggest the link between degrees and returns is becoming less predictable.A growing body of economic research points in the same direction. Economists Lawrence Katz and Claudia Goldin found in September 2025 that the college wage premium still exists, but has barely moved since 2000.

A working paper from the Federal Reserve Bank of San Francisco attributed this stagnation largely to weakening demand for degree holders. Around the same time, the World Economic Forum found that artificial intelligence skills now carry a 23 percent wage premium, compared to 8 percent for a bachelor’s degree on its own.

Entry-level opportunities are becoming harder to access

The change becomes clearer when looking at early careers. In February 2026, J. Scott Davis of the Federal Reserve Bank of Dallas found that AI is reducing entry level hiring while increasing wages for experienced workers in the same roles, Fortune reports. For new graduates, the first step into the labour market is becoming harder to secure.

Against this backdrop, some students have turned to fields seen as more stable or less exposed to automation, including psychology. But new evidence suggests that this assumption may not hold in financial terms.

The numbers behind psychology degrees

A report by the Postsecondary Education and Economic Research Center looks at the returns from graduate degrees after accounting for tuition costs and the income students give up while studying. The findings are uneven.

Psychology graduate degrees show a negative 8 percent cost adjusted return. This means that, on average, lifetime earnings fall short of what students might have earned had they not pursued the degree. Clinical psychology, a more specialised field, shows a negative 5 percent return.Other fields also show weak or negative outcomes. Social work and curriculum and instruction degrees fall into similar territory.

Even in areas often linked to strong demand, such as computer science, the cost adjusted return stands at about 6 percent.

What the study actually measures

The study, co authored by Joseph G. Altonji and Zhengren Zhu, uses administrative data from the Texas Education Research Center to estimate outcomes across 121 graduate programmes. Instead of only comparing salaries, it also considers what students could have earned if they had not returned to school.

That difference often shapes the final return more than tuition alone.“If you are thinking about graduate school, you want to get some information about what the earnings potential is coming out of the degree as well as the kinds of occupations and jobs it leads to,” Altonji said in an interview with Fortune.

Why more students are still choosing graduate degrees

The findings come at a time when more students are choosing postgraduate education. According to the US Census Bureau, the share of Americans with a graduate degree rose from 31 percent in 1993 to 42 percent in 2022.

For many, a master’s degree has been seen as a way to improve job prospects or shift careers.But the broader environment is also changing. Research from Anthropic suggests that AI could perform a large share of tasks in fields such as law, engineering and finance. At the same time, data from the Federal Reserve Bank of New York shows that the unemployment rate for recent graduates has recently moved above that of the overall workforce.

What this means for psychology students

For psychology students, the implications are gradual rather than immediate. The degree still opens pathways into counselling, research and applied roles. But the financial payoff may take longer to materialise, especially when education costs and delayed earnings are taken into account.It is also important to note that graduate degrees are not uniformly negative. On average, they still raise earnings by about 17 percent.

Professional degrees such as law and Master of Business Administration continue to show positive returns, at 41 percent and 13 percent respectively. A Doctor of Medicine degree shows much higher returns, even after accounting for its high cost.

A slower, less visible impact

What the psychology data shows is a narrower margin between cost and benefit. Many students entering these programmes already come from fields with modest starting salaries, which makes the opportunity cost of further study more significant.

In such cases, the financial outcome depends heavily on the specific career path that follows.Students will not experience this change in a single moment. It is more likely to appear over time through slower income growth, higher debt burdens and delayed financial stability. For some, the degree may still make sense in terms of interest or long term goals. For others, the trade off may be harder to justify.The question is no longer only whether a degree leads to a job. It is also whether it improves a student’s position compared to the path they leave behind. As more data emerges, that calculation is becoming a more central part of how students choose what to study and whether to study further at all.