The Colleges Where Low-Income Students Get the Highest ROI
College typically pays off for low-income students, but not as much as it does for their peers. Low-income students, whose families earn $30,000 or less per year, comprise more than one-third of college students. The Colleges Where Low-Income Students Get the Highest ROI finds that low-income students have a lower return on investment (ROI) than all students, largely because they tend to earn less as adults. This holds true across public and private institutions and certificates, associate’s degrees, and bachelor’s degrees. Among institutions that primarily award bachelor’s degrees, public institutions generally lead to the highest ROI for low-income students during a 40-year timeframe ($951,000), followed by private nonprofit institutions ($863,000) and for-profit colleges ($763,000). The ROI for low-income students follows a similar pattern at colleges that primarily grant associate’s degrees and certificates, with the highest returns from public institutions, followed by private nonprofit and for-profit institutions. However, low-income students’ returns from associate’s degrees can exceed $1 million, and certificates can be just as lucrative, depending on which college a student attends.
Net Present Value
Net present value (NPV) is how much a sum of money in the future is valued today. This metric includes costs, future earnings, and the length of time it would take to invest and earn a certain amount of money over a fixed horizon. In this table, 40-year NPV is used as a measure of students’ return on investment (ROI) for a credential.
This is the average net cost of attendance, which includes tuition, fees, books and supplies, and living expenses, minus aid received from all sources.
We use the share of students who are Pell Grant recipients at a college as a proxy for the number of low-income students at that institution. These two groups are close but not identical, however, because some students from families with annual incomes greater than $30,000 are eligible for Pell Grants.
Pell Graduation Rate
The Pell graduation rate reflects the graduation rate of Pell Grant recipients at an institution.
An institution’s weighted score takes into account three factors: the percentage of students at an institution who receive Pell Grants, the graduation rates of Pell Grant students, and the percentile rank of 40-year earnings of Pell Grant students. For institutions that primarily award bachelor’s degrees, the weighted score gives more credit to those whose enrollments include higher percentages of Pell Grant recipients. The enrollment rate of low-income students received 40 percent of the weight, while low-income students’ graduation rates and earnings each received 30 percent of the weight.
Institutions that predominantly award certificates and associate’s degrees already enroll a large percentage of low-income students, so the CEW score gives low-income students’ graduation rates and their expected 40-year earnings 40 percent of the weight each and the percentage of students who are low-income 20 percent of the weight.
Source: Georgetown University Center on Education and the Workforce analysis of US Department of Education College Scorecard data, 2020.
Note: The “high percent Pell” tabs include only colleges that admit greater than the median percentage of Pell Grant recipients.