What Is the Return on Investment for Higher Education?

March 25, 2022

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Title: Which Colleges Are Worth the Cost? Institution-Level Return on Investment for Students and Taxpayers.

Authors: Kevin Miller and Shai Akabas

Source: Bipartisan Policy Center

The Bipartisan Policy Center has released a new report on the return on investment (ROI) for higher education institutions. Expanding on the prior studies, this report estimated ROIs for 3,349 higher institutions in the United States, by comparing students’ earnings after graduation—their college earning premium—and the costs of attending that institution.

Using data from the College Scorecard and the U.S. Census Bureau, the authors measured each institution’s college earning premium by the lifetime additional earnings gained by that institution’s graduates relative to the typical earnings of high school graduates. The cost of attendance was measured by multiplying the average annual net price with the length of attendance for the predominant degree awarded at each institution. ROI was estimated by subtracting the cost of attendance from the college earnings premium.

For a more accurate assessment, this report used two adjusted models in addition to this baseline model. The intermediate model made three corrections, including selection adjustment for students from higher-income families, discounted rates of return over a lifetime, and state-specific earnings estimates of high school graduates. The full model considered labor market discrimination against women and underrepresented groups, and per-student public subsidy from local, state, and federal institutional support.

Among the key findings:

  • Most institutions provided a positive ROI in all three models: 86 percent in the baseline model; 71 percent in the intermediate model; and 81 percent in the full model.
  • Public institutions were the most likely to provide positive median ROIs (93 to 99 percent), while private for-profit institutions were the least likely to provide positive median ROIs (21 to 48 percent).
  • Prestigious private institutions and institutions with a focus on high-earning technical fields showed the largest estimate of median ROI.
  • Most HBCUs showed positive ROIs in the full model with an adjustment of labor market discrimination (89 percent), while only 48 percent of HBCUs showed positive ROIs in the intermediate model without the adjustment.

The report concluded with data limitations and policy implications, noting that more comprehensive and detailed data will give a fuller picture.

Click here to read the full report.

—Ji Hye “Jane” Kim

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