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The HEA Group analyzed the earnings of graduates in a new report, comparing those to a $15 minimum wage and three other benchmarks.
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Students who graduated from nearly one-fourth of America’s colleges and universities earned less than a $15 minimum wage 10 years later, a new report released Tuesday found.
The analysis of federal data from the HEA Group, a research and consulting agency focused on college access and success, compared the earnings of about five million graduates of 3,887 institutions. It used four metrics—including whether the graduates earned more than the federal poverty line or more than a typical person whose highest level of education is a high school degree—to gauge the return on investment for students. Nearly all of the institutions cleared the poverty-line metric, but more than 1,000 failed the high school earnings test.
“The low ROI of some of these schools begs the question of whether students should be burdened with federal loan debt after they attend,” said Michael Itzkowitz, co-founder of the HEA Group and author of the report. “Many of these schools failed to provide students with a living wage, which makes the ability to pay down their educational debt nearly impossible.”
For the analysis, Itzkowitz looked at whether the majority of students at an institution, 10 years after graduation, earned more than the federal poverty line ($14,580), 150 percent of the federal poverty line ($21,870), a $15 minimum wage ($30,000) or the average adult with only a high school diploma ($32,000). Itzkowitz said those metrics represent “the most generous measure that we can use to evaluate institutions of higher education.”
Nevertheless, about 71 percent of for-profit colleges failed to pass the high school earnings threshold, compared with 14 percent of public institutions and 9 percent of private nonprofits. The majority of institutions that failed to lift graduates’ earnings to 150 percent of the poverty line were for-profits that offer certificate programs.
“When short-term programs work well, they offer one of the fastest paths to socioeconomic mobility, as they cost less over all and they allow their students to enter the workforce immediately,” Itzkowitz said. “However, they still remain some of the riskiest types of programs, as a disproportionate amount failed to show students earning a decent living after they attend.”
The four thresholds tracked in the study are used by the federal government to determine eligibility for programs such as food assistance and to calculate student loan payments. They are also part of policy conversations at the federal level over how to hold institutions accountable for student outcomes. Congressional Republicans’ plan to overhaul higher education uses 150 percent of the federal poverty line in a new metric known as value-added earnings, which would be incorporated into a formula to determine colleges’ liability for unpaid student loans.
Meanwhile, the Education Department’s new accountability regulations for career education rely in part on a high school earnings test to determine whether graduates of those programs are gainfully employed. Programs that fail the test in two consecutive years could lose access to federal financial aid.
The study’s findings are largely in line with other research into the economic benefits of a postsecondary education. “It reiterates a lot of the information that we already know,” Itzkowitz said. “The majority of institutions still allow their students to earn a reasonable salary, and it’s important that students leave better off and with more confidence after they attend.”
Americans are increasingly skeptical of whether higher education is worth the price tag, according to recent public polling. Itzkowitz said he wanted to find out whether that skepticism is merited. The findings, he said, indicate that “the concern is justified” for some subsets of institutions.
“The cost of college has been rising for a few decades, and the question is whether or not the earnings premium is keeping up with the increasing costs,” he said. “This helps answer … that question.”
Nicole Smith, chief economist at Georgetown University’s Center on Education and the Workforce, said the analysis is another cog in the ongoing discussion about the earnings boost associated with a college education.
The results weren’t a surprise, Smith said, but the analysis raises other questions for her—the answers to which could guide potential policy solutions. More granular data would help, she said, including which institutions didn’t pass the different thresholds, what programs they offer and whom their students are.
“Education is still worth it; a college degree is still worth it,” she said. “At the end of the day, most people will have to decide on where they’re going to school and what they’re going to do and what they’re going to complete.”
