Why college leaders say ROI outcomes need to be more closely watched

The Bipartisan Policy Center's new report shows which institutions are excelling or underperforming for students.
By: | February 10, 2022
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The majority of institutions of higher education are giving students a solid return on investment, but there are nonetheless hundreds of individual exceptions that should be scrutinized more closely by colleges and policymakers, according to a new study released by the Bipartisan Policy Center.

Using data from the College Scorecard and the American College Survey, researchers say that public colleges and universities overall offer the best median ROI, followed closely by private four-year nonprofits. However, smaller for-profit colleges, many of which are now being monitored by the Department of Education, offer “little value to students.”

Why is this so important? Although $150 billion each year in aid is given to institutions, there are many colleges, especially certificate-granting for-profits, that consistently underperform and yet still share in the wealth while failing to position students well for the future. Leaders who came together to address this problem for the BPC report, entitled Which Colleges Are Worth the Cost? Institution-Level Return on Investment for Students and Taxpayers, say more accountability and better measures are necessary from the government to call out institutions that are not delivering for students.

“Most federal aid can only be distributed at institutions that are accredited, but accreditation is not a very meaningful measure of institutional quality or student outcomes,” said Kevin Miller, associate director of higher education at the BPC. “What we are proposing in our report is a turn toward a more comprehensive estimate of the value of institutions, specifically ROI. The idea is that, in the long run, college pays off well beyond the initial costs of enrollment. We should assess which institutions are not paying off for students and taxpayers who fund those institutions. We can’t wait for that perfect day. We have to start now.”

That begins with a deeper dive into robust data that is emerging via the Scorecard and from other resources. Miller and other higher ed leaders say that while Department has done well to gather estimates on student earnings, it has not utilized the information to hold struggling colleges accountable in most instances.

“We now have data on tens of thousands of college majors across the country, where we can see how much the graduates are actually making, and relative to how much debt they have upon graduation,” said Michael Itzkowitz, senior fellow of higher education for national think tank Third Way. “If I’m a student, I can look at every institution practically across the United States and see what graduates are making in the same specific field that I’m interested in studying. This has opened up a whole trove of data for researchers in terms of which college majors are providing a positive ROI, and which ones that have a little bit more risk.”


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But leaders say it is imperative that the data is challenged more closely by federal agencies moving forward and also offered more prominently to prospective students so they can make more informed decisions on institutions—and those they may want to avoid—when they conduct searches. Institutions that do not meet specific thresholds on ROI should be denied the opportunity to disburse student aid or pay a premium if certain student outcomes aren’t achieved, they said.

Inside the numbers

For its analysis, the BPC looked at 3,349 institutions (a little more than 1,500 publics, nearly 1,000 private nonprofits and 762 for-profits) and included a separate category for 89 HBCUs. All told, the report covers more than 15 million students who had graduated 10 years prior to track their earnings and weigh them against cost and other factors. While publics and private nonprofits scored at 96.3% and 89.5% in terms of median ROI, respectively, for-profits only managed to hit 41%. For-profit colleges that ranked in the 25th to 50th percentile of merit actually saw negative returns on investments.

Not surprisingly, the most highly selective institutions and those that offer strong programs in high-earning fields were found to have the best ROI. HBCUs fared well on two of the models created by the team at nearly 89%, but failed to hit 50% under its intermediate model, which factored in government subsidies and labor market discrimination.

One of the deep concerns from thought-leaders who shared in the analysis is that women, students of color and low-income students, who often face more hurdles than other attendees, may be easy prey for underperforming institutions. Those colleges are often more costly from the start but have faced very little challenge from the Department in the past or from students that struggle to assess the true value of institutions because of a lack of high-profile data or warnings.

“Tuition is about four times higher, if not more, in a for-profit college than a similar certificate program in a community college,” said Stephanie Cellini, professor of public policy and economics at George Washington University. “We see over and over again, study after study that earnings are lower in the for-profit sector than in public community colleges for similar certificates and similar students.”

Community colleges actually showed quite a nice return on investment in the BPC model, helped by their low cost to students, who also take very few loans. As has been noted in numerous studies, those who make it to completion, either at two-year or four-year institutions typically do better in terms of lifetime earnings than those who only have a high school diploma or equivalency. To make outcomes more equitable, the BPC report also suggests that grant programs be increased at community colleges, HBCUs and Hispanic-serving institutions.