March 29, 2024

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Students’ Investment in Higher Education: What is the ROI?

by Mark Schneider (Higheredjobs.com)

Higher education is expensive. We often look at college expenses exclusively from the perspective of the rising tuition bill facing students and their families; however, we need a much broader perspective on measuring how expensive college has become. Because higher education is highly subsidized by governments, we need to include how much money taxpayers are investing in educating students in colleges and universities.

The nation as a whole is getting much better at estimating the costs that students will bear in pursuing their college degrees. We now require colleges to post “net price calculators” that take into account the fact that so many students get financial aid. However, we do not have calculators for taxpayer investments, such as state appropriations and government grants to students (for example, federal Pell grants).

While there are many benefits to higher education, we need to measure better the labor market success of students after they graduate. There is wide variation in the wages that graduates earn from, for example, psychology programs across regional state universities. This variation should affect enrollment decisions of students, it should affect their decisions about how much money to borrow for pay for their education, and it should affect how government allocate funds to support different programs. Clearly, if a student need to $75,000 to obtain a degree in a program where the average salary for graduates is only $30,000, the student may want to think more carefully before borrowing. Similarly, if a state university system supports 10 regional campuses and the wages of graduates in the same field of study varies substantially across the 10 campuses, perhaps this might be worthy of further investigation by policymakers in the state capital.

I believe that we can improve the performance of higher education institutions by better measuring the returns on investments (ROI) and providing this information to students and to policymakers, who then can hold colleges and universities more accountable for the quality of the education they deliver.

Students can hold colleges accountable for performance through their enrollment decisions. To make better decisions, the nation has to continue to search for better ways to provide easy to understand information about a handful of aspects of campus performance:

What are the chances that someone like me will actually graduate?
How long will it likely take for me to earn my degree?
How much will it actually cost me to attend?
What are my employment prospects after I graduate?

With this information, it is relatively easy to calculate the total student cost for obtaining a degree and the expected ROI. This could also provide guidance about how much debt a student likely could afford to take on. These simple calculations could be produced for multiple schools in a region, a state, or even the nation and it could help students choose between colleges they are considering.

This should be viewed as a decision aid — not as a machine for producing a decision about something as consequential as a choice of college. Nonetheless, students should know which campuses have low ROIs and factor that information into their enrollment decisions. This could put consumer pressure on schools to improve their performance.

Similarly, we could imagine calculating taxpayer ROI. How much have taxpayers invested in producing a graduate from different programs across the state? How much money has come back to the state through higher taxes paid by these graduates? My work at www.collegemeasures.org is providing some of these measures and calculations.

I believe that the results of these kinds of calculations could be factored into state funding decisions and rewarding campuses and programs that represent a good return on investment.

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