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Three simple steps to assess return on investment for higher education

FILE - A woman walks on the Columbia University campus, Monday, March 9, 2020, in New York. (AP Photo/Mark Lennihan, File)

Higher education is facing a crisis. Universities across the country are combatting declining enrollment, with nearly 1.3 million fewer students working towards postsecondary credentials than in 2020. And for those students who have transitioned to college or some other form of postsecondary study, lost instructional time is likely to leave many students feeling behind or unsuccessful.

Historic declines in math and reading scores on the National Assessment of Educational Progress (NAEP) exam and 30-year lows on the ACT assessment paint a grim picture for the college and career readiness of the next generation of college students in America. 

The rising costs of higher education, compounded with the reality that many students will enter college at an academic disadvantage, has led many of them to begin asking the question: “Is college for me?”

Historically, the attraction of college has been predicated on the premise that having a degree invariably leads to better jobs and higher salaries — and for generations this was true. However, the appeal has dwindled in recent years, especially for low-income, rural, and racially underrepresented students. Students today are taking on thousands of dollars of debt with little assurance that such benefits will exist for them after graduation.

As the student loan debt crisis and the cost of higher education have skyrocketed, people are beginning to question the return on investment (ROI) of higher education. In households across America, students are asking if forgoing work and a salary right after high school is worth a postsecondary degree. Parents are asking if they are setting their children up for failure by allowing them to take on such large amounts of debt and policymakers are debating if their investments in higher education are resulting in the workforce needed to sustain the economy. 


When students weigh the cost of attending college, they typically weigh whether they stand to make more money across their lifetime compared to the cost of attendance — their ROI. But unlike the stock market or other financial markets, where stockholders can see returns yearly, quarterly, or even daily, students’ returns vary on the institution they attend and their subject of study.

Studies show that decisions about postsecondary education are among the most important we make in our lifetimes. Yet many still feel lost and unprepared when facing such a life-changing decision. There is a lack of public information on employment rates, salaries and lifetime earnings creating a barrier to calculating anticipated return on investment. All of this results in a lack of trust in institutions and leaders, students burdened with insurmountable debt and other students sidelined from even participating.

Below are three simple solutions that can correct the market imbalance that exists in higher education.

Pass the College Transparency Act at the federal level and similar laws at the state level: 

The College Transparency Act (CTA) would authorize the federal government to create a comprehensive data system that combines postsecondary data with other federal data to provide a more holistic understanding of student outcomes. This data would then be used to calculate postsecondary outcomes such as employment rate, average earnings of graduates from specific programs and career prospects available after completion.  This is an essential first step toward ensuring students’ ability to make informed decisions regarding their postsecondary education. There is currently no system that tracks data in a uniform way. Specific institutions, and even certain states, such as Florida’s MyFloridaFuture Tool, have designed their own tools to make college and career planning more transparent. However, these systems are limited to certain institutions and are not easily comparable. 

Hold institutions accountable for improving student ROI:  

Creating robust data systems including economic information is essential to holding institutions accountable for students’ ROI. Recently, research institutions such as Georgetown University’s Center on Education and the Workforce have created metrics to measure students’ ROI at specific institutions and programs. However, these metrics do little to incentivize institutions to improve their students’ ROIs. 

Enter performance-based funding. Over the past 20 years, this funding has provided 32 states with the opportunity to allocate a portion of a state’s higher education budget according to specific metrics, such as course completion and degree completion. For example, Tennessee’s outcomes-based funding model uses weighted metrics to account for institutional mission; reward institutions for enrolling special populations, such as rural and adult students and allocate funds to institutions based on their graduation outcomes. Additional measures such as the number of Pell-eligible students enrolled, the number of Black graduates, and the number of rural students persisting through college have been recently added to incentivize schools to support these student populations. We applaud these measures and recommend adding additional metrics that reward schools for increasing students’ ROI and data transparency.

Provide students with information on postsecondary pathways earlier: 

Finally, most discussion around postsecondary education revolves around the traditional four-year university, but we know the postsecondary landscape is much broader, as over 37 percent of college students attend 2-year institutions. Students deserve exposure to all forms of postsecondary education and deserve to know their options and their return on investment. By exposing students earlier in their education careers and teaching them how to use the tools and information available to make decisions, we can prevent another generation of students from being burdened by debt with little to show for it.

While not exhaustive, these solutions can get our country’s relationship with higher education back on track.

Higher education looks different than it did just a few years ago, as do the students making significant financial decisions around their future and college. If we fail to innovate around how we think about and communicate the value of postsecondary education, we risk losing an entire generation of students — many of whom, as evidenced by declining NAEP, ACT, SAT and other assessment scores, as well as enrollment figures, are already feeling left behind. 

But as we have seen, there are viable, tangible steps that we can take to show students the value of higher education — we simply must be willing to take them. 

Javaid Siddiqi, Ph.D. is president and CEO of The Hunt Institute.