Report helps to answer whether college degree is worth the cost

New study compares median earnings of former students, 10 years after they enrolled, with basic income benchmarks

Most people go to college to improve their financial prospects, though there are other benefits to attending a postsecondary institution. But as the average cost of a four-year degree has risen to six figures, even at public universities, it can be hard to know if the money is well spent.

A new analysis by HEA Group, a research and consulting firm focused on college access and success, may help answer the question for students and their families. The study compares the median earnings of former college students, 10 years after they enrolled, with basic income benchmarks.

The analysis found that a majority of colleges exceed minimum economic measures for their graduates, like having a typical annual income that is more than that of a high school graduate with no higher education ($32,000, per federal Scorecard data).

Still, more than 1,000 schools fell short of that threshold, though many of them were for-profit colleges concentrating in short-term credentials rather than traditional four-year degrees.

Seeing whether a college’s former students are earning “reasonable” incomes, said Michael Itzkowitz, HEA Group’s founder and president, can help people weigh whether they want to cross some institutions off their list. Someone deciding between similar colleges, for example, can see the institution that has produced students with significantly higher incomes.

While income isn’t necessarily the only criteria to consider when comparing schools, Itzkowitz said, “it’s a very good starting point.”

The report used data from the Education Department’s College Scorecard to assess the earnings of about 5 million former students who had attended about 3,900 institutions of higher education, 10 years after they first enrolled. (The analysis includes data for people who didn’t complete their degree.) The report includes public colleges as well as private nonprofit and for-profit schools; the schools may offer nondegree certificates, associate’s degrees and bachelor’s degrees.

The analysis found that schools where students earned less than their peers who never attended college were generally those offering nondegree certificates, which can often be completed in 18 months or less, as well as for-profit institutions, although the list also includes some public and private nonprofit schools. At 71% of for-profit schools, a majority of students were earning less than high school graduates 10 years after enrolling, compared with 14% of public institutions and 9% of private nonprofit schools, Itzkowitz said.

“College is, indeed, worth it,” Itzkowitz said, but paying for it can be “substantially riskier,” depending on the type of school you attend or the credential you seek.

(Another report found that former students of for-profit colleges tend to experience more financial risk than those who attended similarly selective public colleges. Those risks include having to take on more debt for higher education, a greater likelihood of defaulting on student loans and a lower likelihood of finding a job.)

Jason Altmire, president and CEO of Career Education Colleges and Universities, a trade group representing for-profit career colleges, said lumping together schools offering mainly short-term certificate programs with colleges offering four-year degrees didn’t make sense. People who want to work in certain careers — hairdressing, for instance — generally can’t work in the field unless they earn a certificate, he said.

Altmire also said income data from for-profit certificate schools might be skewed by “gender bias” because the programs had a higher proportion of women, who were more likely than men to work part-time while raising families, lowering a school’s reported median income.

The HEA report also compared colleges’ performance with other bench marks, like the federal poverty line ($15,000 annual income for an individual), which is used to determine eligibility for benefits for government programs like subsidized health insurance and Medicaid. Incomes at the “vast majority” of colleges exceeded this cutoff, the report found, although 18 — nearly all of them for-profit schools offering nondegree certificate programs in beauty or hairstyling — had students with median incomes below that threshold.

Majors also matter, since those in science, technology, engineering and nursing typically lead to significantly higher salaries than majors in the arts or humanities.

When comparing the earnings after college, students and families shouldn’t look at the data in a vacuum, said Kristina Dooley, a certified educational planner in Hudson, Ohio. Many schools where former students go on to be top earners have programs focusing on health sciences, technology or business, but that may not be what you want to study.

“Use it as one piece of information,” Dooley said.

She said students shouldn’t rule out a college just because it wasn’t at the pinnacle of the income list. Do ask questions, though — like whether its career services office helps with setting up internships and making alumni connections to assist you in finding a good-paying job.