I read an interesting analysis of data on the return on investment for higher education in all 50 states. The analysis limited the dataset to colleges and universities, but it attempted to quantify the ROI for students based on their major and the school they attended.
ROI data from higher education institutions can get really skewed if one simply looks at the numbers. For example, a program may have a fairly small number of graduates each year, but they go on to occupy extremely high wage jobs. The salaries for these grads may benefit the graduates themselves tremendously, but this small number of students don’t necessarily generate a lot of economic benefit for the area.
On the other hand, a larger program with more graduates – even if they have lower average earnings – may generate significantly more economic benefit because the program “scales better” in terms of economic mobility.
To illustrate: 10 Program A graduates making $250,000 each collectively create $2.5M in economic ROI. 100 Program B graduates making $125,000 each collectively create $12.5M in economic ROI. From a return perspective, Program B is more successful because it generates $10M more in economic benefit than Program A does.
It would be delightful to see the same sort of analysis applied to community colleges. That way, it would be very easy to determine which academic programs are worth keeping and which ones should be replaced. The issue isn’t trivial. According to the data, which the Foundation for Research on Equal Opportunity (FREOpp) analyzed, more than 25% of four-year degree programs offered by Michigan colleges and universities have a negative return on investment. Students never recover their investments in pursuing these programs.
State education funding should discourage negative return on investment
Never is a pretty harsh assessment; yet, these programs ramble on, taking more and returning less every year. Michigan was in FREOpp’s top-five states for average return on investment for four year degrees, but how much better would the state’s educational ROI be if our colleges and universities eliminated the unproductive programs?
Better yet, what might happen to higher education ROI in Michigan if the state legislature penalized colleges and universities that continue to run these educational tar pits by reducing their state funding? If 12% of College A’s degree programs have negative ROI, then the legislature should punitively reduce the institution’s funding. Why should the public fund educational programs that trap people in poverty? That’s just bad public policy.
Higher education institutions generate tons of operational data every year. Shouldn’t we start using it to improve the economic outcomes for students?
Photo Credit: Karin Dalziel, via Flickr
