Report Suggests Middle-Class Income as Standard for Measuring Value of College

• By Dian Schaffhauser
• 05/15/18

A new report from the Georgetown University Center on Education and the Workforce and the Century Foundation offers a simple standard by which to determine the worthiness of a college education. The basic idea: to measure college programs and determine whether they'd allow degree-holders to attain middle-class earnings and recoup their education costs within 10 years of graduating. Armed with that kind of data, the report argued, people would be able to make better decisions about which schools and degrees would pay off in the long term. And state and local government could make better education funding decisions leading to the outcomes they want to see in their populations. If an insufficient number of people earn a middle income, so the idea goes, perhaps it's time for greater educational investment.

"Educational adequacy," as it's referred to by researchers Anthony Carnevale, Artem Gulish and Jeff Strohl, assumes that the mission of education is to "provide knowledge and skills sufficient to allow people to live fully, according to the standards of their time." That means an education program that ensures self-sufficiency and, more specifically, an average annual income of at least $35,000 for full-time work per year 10 years after the schooling has ended. If graduates can't manage that, the report asserted, it "raises serious questions about education's role and value in a democratic capitalist society."

The report pointed out that the $35,000 income is a floor, not a ceiling, and that it would vary based on what living costs are for a given locale. Why that amount? According to the researchers, that income is about three times the poverty level for one person, easily covering monthly rent of $800 and food costs of $350. Currently, two-thirds of workers with associate degrees and 85 percent with bachelor's degrees exceed those earnings after 10 years.

The researchers also stipulated that over the 10-year period following college, graduates need to gain an earnings "premium" — what they would receive for having more than a high school education — in order to cover the costs of pursuing postsecondary education. The costs would include both the net expense of college and the amount for lost opportunity — what wasn't earned while attending college.

On average, the researchers calculated, the premium for somebody with an associate's degree over a high school graduate is $9,000 per year, totaling $90,000 over 10 years. The average net price for a community college is $7,000, which, over two years, adds up to direct costs of $14,000. In addition, the foregone annual earnings, based on median wages of high school graduates, are $24,000 per year, for a total of $48,000. That translates to a total cost for an associate's degree of $62,000.

For a four-year school, the annual net price is $17,700, adding up to $70,800 over four years. The lost-opportunity costs during that same period would be $96,000. Those two costs total $166,800. However, the earning premium during the post-graduation decade is $240,000 for people with a bachelor's degree.

In other words, typically, both the associate's degree and the bachelor's degree hit the mark for both parts of the economic self-sufficiency test.

The report spends a great deal of attention acknowledging the limitations of its approach and the many complexities of trying to use this yardstick to measure the effectiveness of college programs. An obvious point: The higher the net price for a program, the greater the earnings required in order to attain economic self-sufficiency. Also, earnings vary widely depending on the student's major and current market demands. And incomes vary by local economic conditions. Likewise, the simplicity of the formula doesn't take into account social inequities that exist in the labor market.

"So, the question remains, is college worth it?" the researchers asked. "The answer is generally yes, but that will vary for every student considering going to college. Students and families need program-level data to assess whether their degrees will pay off."

This report is the second in a series by a Century Foundation working group on community college financial resources. It can be found online at the Century Foundation website.

Next up from the same organization is a report offering recommendations on how to estimate the level of investment required to meet the goals described in the newest publication.