How Much Is a Credential From My College Worth? Using CEW’s ROI Tool

By Anthony P. Carnevale

What if you knew how much your investment in college would pay off down the road? Even better, what if you had that information before deciding what to do and where to go?

American higher education is risky business for students and taxpayers — and it’s gotten riskier. We can’t ignore the fact that the cost of college has risen 19 times faster than average family incomes since 1980. So if students are spending more and more to go to college, they need answers to basic questions about the value of postsecondary education. In other words, they need to know what financial return to expect on the first major investment in their future.

That’s changed as the Department of Education has provided a great deal of data through the College Scorecard, though without much guidance on how students and their families can use it. This isn’t the kind of information that tour guides offer up on a college visit. The data span more than 4,500 colleges and universities, including 2-year schools and institutions offering certificates. We calculated the ROI of these institutions using net present value (NPV), and developed an online, sortable table for users to compare schools by various metrics.

Here’s a brief guide to the data and rankings included in our ROI tool.

1. Net present value: The main ROI metric, this is the value of investing in a college education today. We calculated lifetime earnings minus the cost to attend, taking into account the time over which people earn money. Students don’t receive a lump sum after they graduate; their lifetime earnings are built as they earn a salary each year. But economists know that $1 million today is worth more than $1 million next year, and even more than it is 40 years from now. So for each institution, we reduced students’ lifetime median earnings by 2 percent per year to determine their value in the present.
2. Time intervals: NPV is included in the table at intervals of 10, 15, 20, 30, and 40 years after students enroll, plus rankings to compare institutions. In general, higher education is best seen as a long-term investment, but some students looking for a quicker payoff might be interested in short-term credentials like certificates and associate’s degrees.
3. Graduation rates: NPV takes into account students who enroll at each institution and receive financial aid. But not all of those students complete their degrees. That’s why it’s important to look at the graduation rates, the rate at which full-time, first-time students complete their credentials within the expected time. Some institutions may have low median debt but low graduation rates, which could suggest that students owed less because not all of them were enrolled for the full length of the program.
4. Net price: Most students pay less than the sticker price for a college. Net price is the average cost of attendance for students (tuition, books, cost of living, and fees) minus scholarships and financial aid.
5. Debt and earnings data: Debt varies for students depending on what scholarships and financial aid they receive, and how much tuition they pay up front. Earnings also vary depending on what students study and the careers and additional education they pursue. The data in our tool are median values.
6. Missing schools: Not all higher education institutions are included in our tool since not every school reported earnings and cost data to the Department of Education. We couldn’t calculate net present value for the schools without those variables. In addition, data were harvested in May 2019, so schools that have shuttered, merged, or changed names since then may not be up-to-date.

For more information, explore the ROI tool, full report, and recent media coverage of the findings.

Dr. Carnevale is Director and Research Professor of the Georgetown University Center on Education and the Workforce, an independent, nonprofit research and policy institute affiliated with the Georgetown McCourt School of Public Policy that studies the link between education, career qualifications, and workforce demands.

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