Does college offer a return on investment? ‘It’s front of mind for universities today in a way that it was not necessarily 15, 20 years ago’

Public confidence in higher education has declined in recent years amid rising tuition prices, rising student loans and a dismal job market — as well as ideological concerns from conservatives. Now, colleges are scrambling to prove their value to students.

The term “return on investment” was borrowed from the business world and plastered on college advertisements across the United States. A group of new universities that are world-class in terms of the financial benefits they offer. States like Colorado have begun publishing annual reports on college financial rewards, and Texas is now including them in calculations of how much taxpayer money goes to community colleges.

“Students are becoming more aware of when college isn’t feasible,” said Preston Cooper, who studies the return on investment in college at the American Enterprise Institute, a conservative think tank. “It’s at the forefront of universities today in a way that it wasn’t necessarily 15 or 20 years ago.”

Most bachelor’s degrees are still worth it

A wide range of research suggests that a bachelor’s degree still pays off, at least on average and in the long term. However, there is a growing recognition that not all degrees lead to a good salary, and even some that seem like a good bet are becoming more risky as graduates face one of the toughest job markets in years.

A new analysis released by Strada Education on Thursday found that 70% of recent public college graduates can expect a positive return within 10 years, meaning their earnings over a decade will exceed the income of a typical high school graduate by more than the cost of their degree. However, this percentage varies by state, from 53% in North Dakota to 82% in Washington, D.C., and the report says states where college costs are more affordable fare better.

It’s a critical issue for families wondering how the prices of a college education can pay off, said Emilia Mattucci, a high school counselor at East Allegheny Schools, near Pittsburgh. More than two-thirds of her school’s students come from low-income families, and many are unwilling to take on the level of debt accepted by previous generations.

Instead, more students are heading to technical or trades schools and completing their studies at four-year universities, she said.

“A lot of families say they can’t afford it, or they don’t want to go into debt for years and years and years,” she said.

Education Minister Linda McMahon was among those who questioned the need for a four-year degree. Speaking at the Reagan Research Institute in September, McMahon praised programs that prepare students for careers right out of high school.

“I’m not saying kids shouldn’t go to college,” she said. “I’m just saying that not all kids have to go to be successful.”

– Reducing university fees and improving graduates’ income

American higher education has been grappling with both sides of the return-on-investment equation—the costs of education and the earnings of graduates. It has become even more important as colleges compete for declining numbers of college-age students as a result of declining birth rates.

Tuition rates have remained flat at many universities in recent years to address affordability concerns, and many private colleges have lowered their sticker prices in an attempt to better reflect the cost most students actually pay after taking financial aid into account.

The other part of the equation, making sure graduates get good jobs, is more complex.

A group of college presidents recently met at Gallup’s Washington headquarters to study public polling on higher education. One of the main reasons for poor confidence is the perception that colleges are not giving graduates the skills employers need, said Michigan State University President Kevin Guskiewicz, one of the leaders at the meeting.

“We’re trying to get out of that,” he said.

The issue has been a priority for Guskiewicz since he arrived on campus last year. He brought together a council of Michigan business leaders to determine what skills graduates will need for jobs, from agriculture to banking. The goal is to shape degree programs to match labor market needs and provide students with internships and work experience that can lead to a job.

Separation from the labor market

Bridging the gap in the labor market has been an ongoing struggle for American universities, said Matt Siegelman, president of the Burning Glass Institute, a think tank that studies the workforce. Last year, the institute, in partnership with Strada researchers, found that 52% of recent college graduates were working in jobs that did not require a college degree. Even high-demand fields, such as education and nursing, had large numbers of graduates in this case.

“There are no immune programs, and no immune schools,” Siegelman said.

The federal government has been trying to solve the problem for decades, since the era of President Barack Obama’s administration. The federal rule, first established in 2011, aims to cut federal funds for college programs that leave out low-income graduates, though it primarily targets for-profit colleges.

A Republican reconciliation bill passed this year takes a broader view, requiring most colleges to meet income standards to be eligible for federal funding. The goal is to ensure that college graduates will ultimately earn more than those without a college degree.

Others see transparency as the main solution.

For decades, students have had few ways of knowing whether graduates of certain study programs get good jobs after college. That began to change with College Scorecard in 2015, a federal website that shares broad earnings scores for college programs. More recently, bipartisan legislation in congress has sought to provide the public with more detailed data.

North Carolina lawmakers have ordered a 2023 study on the financial return of degrees across the state’s public universities. It found that 93% of them had a positive return, meaning that graduates were expected to earn more over their lifetime than someone without a similar degree.

The data is publicly available, and shows, for example, that undergraduate degrees in applied mathematics and business tend to have high returns at UNC-Chapel Hill, while graduate degrees in psychology and foreign languages ​​often do not.

Lee Roberts, chancellor of the University of North Carolina at Chapel Hill, said in an interview that colleges belatedly realized how important this type of data was to students and their families.

“In uncertain times, students are more focused — I would say so — on what their job prospects will be,” he added. “So I think colleges and universities really owe it to students and their families for this data.”

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