Beware Of Higher Ed Programs That Don’t Pay Off, New Report Warns

Some kinds of postsecondary education institutions and credentials are far more likely to result in students failing to achieve even minimal economic benchmarks, a new HEA group analysis finds.

The institutions most likely to yield disappointing economic outcomes are concentrated in the for-profit sector, and short-term certificates are also overrepresented among the types of programs leading to relatively low earnings.

The HEA group research relied on data from the U.S. Department of Education’s College Scorecard to assess the earnings outcomes of approximately five million students attending 3,887 higher education institutions across the United States.

Specifically, the researchers compared the median earnings of students 10 years after they had initially enrolled in an institution against four standards:

1. The federal poverty line, measured at $14,580 per year;

2. 150% of the federal poverty line, measured at $21,870 per year;

3. A $15 minimum wage for 50 work weeks, measured at $30,000 per year; and

4. The earnings of a typical high school graduate, measured at $32,000 per year.

The data include students who completed their programs of study as well as those who dropped out before earning a credential.

Federal Poverty Level

Of the 18 institutions whose attendees had median annual earnings below the federal poverty line of $14,580, 17 were for-profit institutions offering short-term certificates of various kinds.

150% of The Federal Poverty Line

For a single individual, 150% of the federal poverty line is $21,870 in annual income. Individuals earning less than that become eligible for several government assistance programs, including a reduction on their federal student loan payments issued through the U.S. Department of Education.

A substantial 305 institutions (8%) had the majority of students failing to earn more than $21,870 10 years after they had initially enrolled. Of that number, 86% were for-profit schools, 9% were private nonprofits, and 5% were publics. More than 90% of the programs falling below this threshold were short-term certificates.

A $15 Minimum Wage

Some states have increased their minimum wage to $15 per hour — much higher than the federally required rate of $7.25. If a person works full-time for 50 weeks the $15 wage results in an annual salary of $30,000.

However, 10 years after students enroll, many colleges show their students failing to earn above this amount. Out of 3,887 institutions, 852 (22%) showed the majority of students earning below a $15 minimum wage. And another 455 colleges had most of their students earning between $30,000 and $35,000 per year.

Of the 852 institutions with median salaries falling below a $15 per-hour minimum wage, 615 (72%) were for-profit sch0ols.

Typical High School Graduate

A typical way to measure the economic value of attending college is to compare the average earnings of those who attended or graduated from college to those workers with only a high school diploma.

According to the HEA analysis, more than a thousand institutions (1,022; 26% of the total) show the majority of their students failing to earn as much as a typical high school graduate 10 years after enrollment ($32,000).

Most of the postsecondary programs where the majority of students earn less than a high school grad are short-term certificates offered by for-profit institutions. About 71% of for-profits fail to meet this threshold, but 248 public institutions (14% of that segment) also show their students failing to meet this minimum economic benchmark.

Most students pursue postsecondary education with the primary motivation of preparing for a good job. Economic returns are not, of course, the only criterion for determining job success or satisfaction. However, being able to earn a reasonable salary – defined as exceeding some minimal baseline – is probably an expectation held by most students, and consumers need to be aware of those institutions and programs that fail to deliver even minimal returns.

“Most people enroll in a postsecondary institution with the primary purpose of bettering themselves financially. It’s important that students leave better off — and with more confidence — after they attend,” Michael Itzkowitz, the former director of the Department of Education’s College Scorecard and the founder of The HEA Group, told me. “And earning a reasonable salary is a starting point to know that college was, indeed, worth it.”