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ABSTRACT
I consider the evidence about the return to the cost of a college degree based on research from the US. Many countries, including the UK, are increasing the share of college costs paid for by individuals based at least in part on the notion that college graduates gain a great deal of income from their degree. The US is arguably the country where this notion is most accepted and is also where students and their families pay the most for college. While there is little doubt that college graduates earn considerably more than non-graduates, how much of that should be attributed to education per se as opposed to other factors such as the greater resources and abilities of college students even before they begin college is less clear. When we consider whether the costs paid by students and their families is worth the investment, the results are mixed, depending on the college.
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No potential conflict of interest was reported by the author.
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Supplemental data for this article can be accessed here.
Notes
1. The figures do not total 100 per cent presumably because of difficulty in identifying the colleges some students attend. Undergraduate Enrolment. 2018. The Condition of Education. NCES. https://nces.ed.gov/programs/coe/indicator_cha.asp.
2. Note that actual costs paid are lower than stated tuition costs because of financial aid. Tuition Costs of Colleges and Universities. 2018. Fast Facts. NCES. https://nces.ed.gov/fastfacts/display.asp?id=76.
3. 2015–16 National Postsecondary Student Aid Study (NPSAS:16) Student Financial Aid Estimates for 2015–16: First Look. https://nces.ed.gov/pubs2018/2018466.pdf.
6. A well-known study by Kane and Rouse (Citation1995) using data from a generation prior concluded that the sheepskin effect was relatively modest. Most other studies reach the opposite conclusion.
7. Bahr (Citation2019) finds, for example, that taking courses in non-degree programmes in community colleges that are associated with occupations has a substantial payout.
8. College Student Employment. 2019. The Condition of Education. NCES. https://nces.ed.gov/programs/coe/indicator_ssa.asp.
9. Michael Greenstone and Adam Looney, ‘Where Is the Best Place to Invest $102,000 – in Stocks, Bonds, or a College Degree?,’ Hamilton Project, 25 June 2011 http://www.hamiltonproject.org/files/downloads_and_links/06_college_value.pdf.
10. PayScale is a private company that generates reports on compensation based on self-reported data from 23 million individuals. Their approach to these analyses appears to be identical to that used in academic research with the difference being that the data are theirs and it includes information of the college each respondent attended. http://www.payscale.com/college-roi/full-list/sortby/AnnualRoi/financial-aid/yes. For contemporary estimates, see https://www.payscale.com/college-roi.
11. See Louis Lavelle, ‘College ROI: What We Found,’ Businessweek, 9 April 2012, http://www.businessweek.com/articles/2012-04-09/college-roi-what-we-found#p2.
12. See https://trends.collegeboard.org/student-aid/figures-tables/percentage-undergraduate-students-borrowing-federal-loans-over-time. The percentage of graduates who held student loans is not easily measured as students pay back Federal loans whether they graduate or not.
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Peter Cappelli
Peter Cappelli is the George W. Taylor Professor of Management at The Wharton School and Director of Wharton’s Centre for Human Resources. He is also a Research Associate at the National Bureau of Economic Research in Cambridge, MA, served as Senior Advisor to the Kingdom of Bahrain for Employment Policy from 2003–2005, is a Distinguished Scholar of the Ministry of Manpower for Singapore, and was Co-Director of the US Department of Education’s National Centre on the Educational Quality of the Workforce from 1990–1998. He was recently named by HR Magazine as one of the top 5 most influential management thinkers, by NPR as one of the 50 influencers in the field of ageing, and was elected a fellow of the National Academy of Human Resources. He received the 2009 PRO award from the International Association of Corporate and Professional Recruiters for contributions to human resources. He hosts the SiriusXM radio show ‘In the Workplace’ and writes a monthly column for HR Executive magazine. His recent work on performance management, agile systems, and hiring practices appears in the Harvard Business Review. His most recent book is ‘Will College Pay Off?’ Public Affairs Press, New York.