The value of a college degree largely depends on where you go, a new HEA Group study found. And as college tuition continues to increase – more than 30% in the next five years for Cal State University – some are wondering if higher education is worth the investment.
Eloy Ortiz Oakley, president and CEO of College Futures Foundation, set out to answer that question when he commissioned the HEA Group to analyze how long it would take low and moderate income students to recoup the costs of attending colleges — from four-year institutions and community colleges to trade schools.
“We believe that we are in a crisis moment, particularly when it comes to higher education opportunities,” Oakley said. “We all know that the cost of attendance continues to rise. The public is asking questions about the value of a degree. There are a lot of conversations about whether or not your college degree still has the same value that it once promised.”
Oakley, who is the former chancellor of the California Community Colleges, said higher education is one of the largest investments that students and their families will make in their lifetime, so they should see a return on that investment.
The “Golden Opportunities” study by HEA uses data from the U.S. Department of Education’s College Scorecard to determine how long it takes 731,000 low and moderate income students at 292 higher ed institutions in the state to recoup their cost of attendance. Students whose family income is less than $75,000 a year are defined as low and moderate income.
The study calculated the net annual cost of attendance – books, housing, transportation and tuition – after all scholarships and grants are awarded. Then, HEA multiplied that figure by the number of years it would take a student to receive their credential: four years for a bachelor’s, two years for an associate’s and one year for a certificate. The data was based on pre-pandemic years.
HEA’s study measured the median salary of former students 10 years after their enrollment date, and compared it to the salary of a high school graduate with no college experience – $26,073. That salary was then used to calculate how long it would take a student to pay down the cost of earning their degree.
The HEA Group found that generally, students who received associate’s degrees were able to recoup their educational costs quicker than students who received bachelor’s degrees or certificates.
According to the study, San Jose State University costs $47,769 for a low/moderate income student to attend. Graduates made $45,924 more annually than a student with no college experience. Under that scenario, the former student would recoup their costs of attendance in one year.
A student at De Anza Community College in Cupertino paid $9,117 to attend, and would earn $30,766 more on average than a high school grad without a college degree. In that case, the report found, the former student could get back their cost of attendance in less than six months.
But a student who attended Menlo College in Atherton would have to spend nearly four years earning a salary of $56,512 – barely $30,000 more than a high school graduate without a college degree – before they could recoup the $115,852 it cost to attend the private school.
Michael Itzkowitz, founder and president of the HEA Group, said the analysis aimed to get a bird’s eye view on what kind of economic outcomes colleges and universities are providing students.
“The number one reason why students attend higher education today…is for greater employability and to obtain a financially secure future,” Itzkowitz said. “The number one reason why students don’t attend college is because of cost.”
Itzkowitz said the survey found that most higher ed institutions in California (79%) allowed for low and moderate income students to regain the cost of attendance in five years or less, and nearly a third allowed students to recuperate their costs in under a year.
But 24 schools showed that students received no economic benefit from enrolling in college and earned even less than a typical high school graduate. Many of those schools were cosmetology schools or technical colleges.
“I’d argue that they may actually be worse off financially after they attend, being that they’re earning so little and they paid so much to earn their (credential),” Itzkowitz said.
In California and the Bay Area, Stanford University rose to the top of the list, providing students with the most bang for their buck — with graduates earning on average $73,901 more than someone with without a college degree — and essentially no cost of attendance. But Itzkowitz warned that schools like Stanford that provide the quickest return on investment didn’t necessarily enroll a high number of low and moderate income students. In fact, HEA’s study found that only 18% of Stanford students surveyed were recipients of the Pell Grant, which is available to low-income students who are enrolled full time. The grants do not have to be repaid.
Graduates of UC Berkeley, another highly selective Bay Area university, earned $60,440 more than the average high school grad. UC Berkeley also saw nearly a third of its students qualify for the Pell Grant, allowing them to recoup their cost of attendance in less than a year, the report found.
Oakley said that College Futures and the HEA Group hope to dive deeper into how race, ethnicity, gender and areas of study factor into students’ return on investment. The study’s data also doesn’t factor in how the COVID-19 pandemic impacted students.
“California remains one of the best states in terms of providing quality access to post-secondary education in the country,” Oakley said. “That being said, we still have a long way to go.”
