Return on Investment for Associate's Degrees Can Be High for Graduates and Benefit Taxpayers, New Study Shows
Washington, D.C. – A national review of community colleges and their graduates’ financial return on investment finds that California and Texas have the most institutions with graduates in the top tier of wage earners. Thirty states have some community colleges whose graduates’ median net lifetime earnings trail those of the state’s high school graduates.
The median earnings of associate’s degree holders during their careers is about $259,000 more than for high school graduates, according to What’s The Value Of An Associate’s Degree? The Return on Investment for Graduates and Taxpayers, written by experts with the Nexus Research and Policy Center and the American Institutes for Research (AIR). The study examined data from 579 institutions representing more than 80 percent of the nation's community college enrollment.
“Even after factoring in the costs that graduates incur when earning the degree, the associate’s degree is a good investment,” wrote authors Jorge Klor de Alva, president of Nexus Research and Policy Center, and Mark Schneider, president of College Measures and an AIR Fellow and vice president.
Key findings include:
- Among the top 20 percent of institutions with graduates enjoying the highest return on investment, California led with 44 community colleges. Texas has16; North Carolina and Alabama, eight; Tennessee, six; Arizona and Illinois, four each; Georgia and New York, three; Kansas, South Carolina, New Jersey, Virginia and Washington, two; and Arkansas, Colorado, Florida, Kentucky, Maryland, Minnesota, Wisconsin and Mississippi, one.
- Leading the 44 California community colleges in the top tier of institutions with the highest financial return for their graduates, is Foothill College, whose earnings are $745,000 greater than those of the state’s high school graduates, followed by Ohlone Community College with $740,292, Golden West College with $711,812 and Evergreen Valley College with $705,787. California has five schools whose graduates earn less than the median earnings of those with only a high school degree: Oxnard College, with $90,166 less; Mendocino College, $71,503 less; Reedley College, $60,554 less; Los Angeles Mission College, $28,345 less, and Cuesta College, $18,284.
- Among states with institutions in the bottom 20 percent, Georgia had 11; Missouri, nine; California, seven; Washington, six; Minnesota and Iowa, five each; Pennsylvania, Colorado, Kentucky, New York, Illinois and Michigan, four; Kansas, New Jersey, Nebraska, Ohio, Wisconsin, Virginia and Texas, three; Utah, Connecticut, Oregon, South Dakota, North Carolina, Maryland, Louisiana, Mississippi, and Maine, two; and Alabama, Arkansas, Florida, Hawaii, Indiana, Massachusetts, Montana, North Dakota, New Mexico and Vermont, one each.
- Females make up 58 percent of the students studied. “Community colleges with larger concentrations of females have graduates with lower starting wages,” the authors found, noting continuing pay inequity by gender. They also found that “compared with men, greater proportions of women major in programs of study that tend to offer low pay.”
- Thirty states have at least one community college with graduates whose median net financial return over a 40-year work-life falls below the lifetime earnings of in-state high school graduates. Missouri has seven such colleges, followed by California with five. States with three colleges are Georgia, Kansas, Kentucky, Nebraska, New Jersey, Ohio, Pennsylvania and Texas. States with two are Colorado, Connecticut, Louisiana, Michigan, Mississippi, Utah, and Washington. Hawaii, Iowa, Maryland, Maine, Minnesota, Montana, North Dakota, New Mexico, New York, Oregon, South Dakota, Virginia, and Wisconsin have one each.
- As graduates earn more, they pay more in taxes – from $27,000 to more than $100,000 compared with high school graduates. The average gain in additional tax revenue from a graduate of a median community college is $67,000.
“On average, students with associate’s degrees earn more income than high school graduates and are less likely to be unemployed, even in harsh economic times,” the authors wrote. They noted that “students and taxpayers should know their return on investment and investigate further what can be done to increase it.”
Klor de Alva and Schneider concluded that community colleges, states, and the nation should: reward progression, retention, and completion through performance funding formulas; distribute resources carefully to promote success; emphasize technical training and close ties between schools and their local labor market; and collect better data, at the student and program levels, and make the data publicly available. The authors analyzed 2010-2012 data from the U.S. Department of Education and PayScale, Inc., to measure the costs and benefits of an associate’s degree.
Klor de Alva is former president of the University of Phoenix and was a professor at Princeton University and the Class of 1940 Professor at University of California, Berkeley. Schneider is former U.S. Commissioner of Education Statistics and Distinguished Professor emeritus of Stony Brook University, the State University of New York.
Established in 1946, with headquarters in Washington, D.C., the American Institutes for Research (AIR) is a nonpartisan, not-for-profit organization that conducts behavioral and social science research and delivers technical assistance both domestically and internationally in the areas of health, education, and workforce productivity. For more information, visit www.air.org.