The Center on Education and the Workforce at Georgetown University recently released a report evaluating the return on investment (ROI) in higher education by examining College Scorecard data from individual institutions across all sectors of higher education. The report measures return on investment as the net present value of future earnings, which is the potential earnings of a credential measured in current dollars. The report then ranks institutions based on their calculated net present value at ten and forty years after enrollment. The authors conclude that higher education is a worthwhile, long-term investment.
Among the findings:
- Return on investment can vary based on the time frame used.
- The median net present value of a postsecondary credential at forty years is $703,000. The median net present value of a postsecondary credential at ten years is $107,000.
- ROI can vary based on credential earned.
- Community colleges and institutions primarily issuing certificates have the highest ROI after ten years for two reasons. First, the programs are short, meaning individuals can begin earning income sooner than under longer programs. Second, individuals typically borrow less when enrolled in these programs, so real earnings can begin to accrue earlier (in lieu of paying back loans).
- Institutions primarily issuing bachelor’s degrees have the highest ROI after forty years. These programs take longer to complete and require more debt than shorter programs, so short term ROI is low. Bachelor’s degrees eventually lead to higher earnings, and thus the long term ROI increases.
- Net present value varies by sector and by time frame.
- Private, non-profit institutions have a net present value of $838,000 at forty years, compared to $765,000 for public institutions and $551,000 for for-profit institutions.
- At ten years, public institutions have a net present value of $137,000, compared to $103,000 for for-profit institutions, and $65,000 at private, for-profit institutions.
- Public institutions have a higher 10 year ROI than private, non-profit, and for-profit institutions.
- Over forty years, a credential from a private, non-profit institution yields a higher ROI than a credential from a public institution. Students at private, non-profit institutions take on more debt than students at public institutions, but typically have higher earnings at ten and forty years than students at public institutions.
- Of the ten institutions with the highest forty year net present value, all are four-year institutions, and eight are private, non-profit institutions.
- To illustrate how ROI varies over time, only two of the ten institutions with the highest ROI after forty years are among the ten institutions with the highest ten year net present value.
- Of the ten institutions with the highest ten year net present value, eight predominantly award certificates. Seven are public institutions, two are private, non-profit institutions, and one is a for-profit institution.
