“The decision not to attend college for fear that it’s a bad deal is among the most economically irrational decisions anybody could make in 2014,” wrote NY Times journalist David Leonhardt in Is College Worth It? in May of 2014. “Over the long run, college is cheaper than free,” he added, citing an article by MIT economist David Autor which pointed out that a college-educated worker can expect an additional lifetime earning of over $500,000 compared to one whose highest degree is a high school diploma. Experts and journalists questioning the value of a college education are most likely obsessing to get their toddlers into an elite nursery school, so they are on-track for the right schools over the ensuing 20 years, added Leonhardt.
In May, 2019 seminar I attended, Autor noted that over the last four decades, the US and other industrial economies have seen a remarkable rise in wage inequality by educational attainment, with the earnings of the most-educated increasing, and the earnings of the least-educated falling in real terms. Since the 1980s, the earnings of those with a four year college degree have risen by 40% to 60%, while the earnings of those with a high school education or less have fallen among men and barely changed among women.
Every year, the US Bureau of Labor Statistics publishes a set of earning projections by educational attainment. Their 2020 projections showed that the median weekly earnings for all workers is $1,029; for those with less than a high school degree it is $619; high school diploma - $781; some college, no degree - $877; associate’s degree - $938; bachelor’s degree - $1,305; master’s degree - $1,545; doctoral degree - $1,885; and professional degree - $1,893.
Beyond these aggregate numbers, which institutions of higher education give students the best economic returns, that is, the best bang for their buck. In April of 2020, Third Way, a public policy think tank, published a report that introduced a new approach for estimating the economic return of an education, - that is, the Price-to-Earnings Premium (PEP), - based on the amount of time it generally takes a student to recoup the cost of obtaining a credential at a particular school.
“The number one reason why students attend an institution of higher education is to increase their employability and gain financial security,” said the Third Way report. “In practical terms, this means they are investing in higher education expecting to earn more than they would have if they hadn’t attended an institution or program in the first place. … If students who pursue a certificate or degree subsequently earn more than their non-college going peers because of that postsecondary training, their additional income can be used to recoup the amount they paid to obtain their certificate, associate’s, or bachelor’s degree. And once they have recouped those expenses, that additional income quite literally becomes a ‘return on investment (ROI)’ for those students.”
The PEP, - i.e., the higher education earnings premium, - for each particular school is calculated by looking at the net price that the average student pays out-of-pocket, - beyond scholarships, grants, or other financial assistance from the school or other sources, - relative to the additional yearly earnings beyond what a typical high school graduates earns.
The PEP is based on the College Scorecard data from the US Department of Education. The College Scorecard includes aggregated data for bachelor degree-granting institutions, associate degree-granting institutions, and certificate-granting institutions from 1996-97 through 2019-2020. For each institution, there’s specific information on enrollment, student aid, costs, student outcomes, and other attributes.
Third Way analyzed data from 3,218 institutions, of which 48% (1,563) were public, 31% (984) were private, and 21% (671) for-profit. Let me discuss a few of their findings.
Overall, students who attended 63% of those institutions were able to recoup their costs within 5 years of getting their credentials, - 86% from public ones, 54% from private, and 24% for-profit; and almost 80% recouped their costs after 10 years, - 94% from public institutions, 86% private, and 36% for-profit. However, for 7% of institutions (228) it took students more than 10 years to pay down their costs, and 14% (442) showed no ROI whatsoever, - meaning that students will likely never recoup the investments in their education. For-profit institutions performed the worst, with only 36% (242) of their students able to recoup their costs within 10 years, and 51% (339) showing no ROI.
In addition, 66% of students attending bachelor degree-granting institutions recouped their costs within 5 years, and 92% did so within 10 years. For associate degree-granting institutions, 77% recouped their investment within 5 years, and 87% did so within 10 years. And for certificate-granting, 47% recouped their costs within 5 years, and 53% within 10 years.
“Providing information on the cost students pay out-of-pocket relative to the amount of additional earnings that they could expect can help them and others determine whether the economic outlay - and the taxpayer subsidy in the form of grants and loans that comes along with it - is worth the education they receive. Ultimately, the economic premium an institution provides to its students should allow them to pay down the cost of attendance within a reasonable amount of time.”
A more recent Third Way report published in August of 2021 was able to analyze ROI and PEP by college programs, - e.g., engineering, nursing, performing arts, - as such data was now available in the College Scorecard from the Education Department. This report analyzed data from over 38,000 college programs that graduated more than 2.2 million students. This new program-level data “now allows us to dig below the surface at many institutions across the country to explore what kind of ROI the typical student received from the specific college program from which they graduated.”
Overall, students in 46% of the college programs earned enough after graduation to recoup their costs within 5 years, and students in 64% of the programs recouped their costs within 10 years. But, 16% of programs failed to show any ROI whatsoever, meaning that over 350,000 students paid tuition and graduated from these programs but saw little to no financial premium.
Let me conclude by summarizing some of the data on bachelor, associate, and certificate programs.
Bachelor degree programs. About two-thirds of the college programs (25,691) were aimed at bachelor degree students. These students were able to recoup their investments within 5 years in 41% of these programs, and within 10 years in 65%, while 10% of the programs showed no ROI.
The bachelor degree fields of study with the highest ROI are electrical, electronics, and communications engineering; registered nursing, nursing administrators, nursing research, and clinical nursing; and engineering technology. Fields of study that showed no ROI include drama, theatre arts and stagecraft; dance; zoology and animal biology; and visual and performing arts.
Associate degree programs. About 20% of the college programs (7,882) were aimed at associate degree students. These students were able to earn back their investments within 5 years in 64% of these programs, and within 10 years in 71% of the programs, but 21% of programs, showed no ROI.
The associate degree fields with the highest ROI are registered nursing, nursing administrators, nursing research, and clinical nursing; allied health diagnostics, intervention, and treatment professions; and electrical engineering technicians. Fields of study with no ROI include human development, family studies and related services; audiovisual communications technicians; liberal arts and sciences, general studies and humanities; and design and applied arts.
Certificate programs.12% of the college programs (4524) were certificate granting programs. Students were able to recoup their investments within 5 years in 48% of these programs, and within 10 years in 52%. However, 42% showed no ROI.
The certificate fields of study with the highest ROI are transportation and materials moving, heavy/industrial equipment maintenance technologies; and registered nursing, nursing administrators, nursing research, and clinical nursing. Certificate program fields of study with no ROI include cosmetology and related personal grooming services; somatic bodywork and related therapeutic services; audiovisual communications technicians; and veterinary and animal health technicians.
“While institutional data offers a birds-eye view of how well students are succeeding as a whole, program-level data allows students, institutional leaders, researchers, and policymakers to better pinpoint which programs lead to good outcomes within a school and which ones do not,” notes the Third Way 2021 report in conclusion. “[T]hese data show that hundreds of thousands of students - even those who have done everything right and completed their credential - may be left worse off after graduating from certain college programs. With students’ livelihoods and taxpayer dollars at risk, it’s imperative that policymakers use available data to fix problems in higher education and work to ensure better outcomes for all who attend.”
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