What’s the Value of College?

As the federal student debt portfolio continues to balloon, the federal government must consider stronger accountability mechanisms to protect students from low-value institutions and unsustainable debt. The Bipartisan Policy Center has a newly updated tool that allows users to search for the return on investment (ROI) for colleges and universities across the country..

BPC’s modeling reaffirms that not all higher education institutions provide a positive return for students. Previous estimates have suggested that a bachelor’s degree, on average, leads to approximately $1.2 million in additional lifetime earnings, but BPC’s analysis shows that a fuller accounting of costs results in a different assessment for many institutions. The Department of Education disburses nearly $150 billion in financial aid annually to thousands of institutions across the country, and many students and their families may assume that these institutions meet quality standards. However, inadequate accountability standards mean low-performing institutions are rarely disqualified from receiving federal funds, allowing those schools to saddle students with debt yet provide no real benefit after enrollment.

In February, the Department of Education updated the institution-level College Scorecard data on which BPC’s modeling was based; the new data are now reflected in the model. The updated findings are generally consistent with previous findings: most (85%) higher education institutions (with long-term earnings data in the College Scorecard) show a positive ROI for their median student. Public institutions (96%) are the most likely to provide a positive median ROI while private for-profit institutions (44%) are the least likely; for-profit institutions that predominantly award undergraduate certificates are the least likely to have a positive median ROI of any category of institution and make up more than half of all institutions whose median student had a negative ROI. Updated model results can be searched and downloaded on the main report page.

Understanding college ROI can not only be valuable to prospective students and their families, but in theory, it could also help Congress better target student aid and reduce future student debt. Although BPC modeling relies on quality data sources, there are still limitations to the available data that may need to be addressed prior to policy application. The federal government is currently forbidden by law to record and analyze data at the individual student level, which limits the precision with which researchers and the Department of Education can assess the value of college across institutions, programs, and demographics. Congressional action would be required to allow the federal government to record and analyze student-level data, but enhanced data sharing between government agencies like the Census Bureau, IRS, the Bureau of Labor Statistics, and the Social Security Administration would be a good starting point for shedding further light on long-term workforce outcomes for students and the value that institutions provide.

Improved data on student outcomes, however, cannot fully protect students without action on regulation. Policymakers cannot afford to wait for further data availability before moving toward greater accountability for institutions, whether through stricter eligibility requirements for disbursing federal student aid, a performance-based premium or fee for participation in the federal student aid system, or both.

About BPC’s ROI Modeling

BPC’s modeling uses multiple data sources and reasonable assumptions to provide a more comprehensive ROI model than previous methods. The modeling primarily relies on data from the College Scorecard and the American Community Survey (ACS). The College Scorecard follows students for up to 10 years after initial enrollment, tracking aggregate earnings data for students who received Title IV aid. The ACS—administered by the U.S. Census Bureau—enables projection of lifetime earnings, accounting for variation across states. Combined with estimates of the net price of attendance multiplied by years to attain the predominant degree at an institution, these data allow for modeling the ROI of attendance compared to a baseline of the earnings of a median high school graduate, including the range of outcomes for students whose earnings are above and below the median.

This baseline estimate is adjusted for the fact that not all the apparent benefit of attendance is caused by attending but instead it reflects advantages held by the students who attend, differences in the labor market by state, and the up-front nature of college investment with delayed payoffs, yielding a more sensitive but also more conservative estimate. Finally, BPC adjusts for the cost of government subsidies (e.g., grant aid, state appropriations) by institution as well as for labor market discrimination—based on the race and gender of students attending each institution. (For more methodological details, see the full report.)