Community colleges are a boon to the economy and to their students, according to Where Value Meets Values, a report by the American Association of Community Colleges (AACC).
In 2012 alone, the net total impact of community colleges on the U.S. economy was $809 billion in added income, equal to 5.4 percent of GDP. Over time, the U.S. economy will see even greater economic benefits, including $285.7 billion dollars in increased tax revenue as students earn higher wages and $19.2 billion in taxpayer savings as students require fewer safety net services, experience better health, and lower rates of crime.
Students also see a significant economic benefit. For every one dollar a student spends on his or her community college education, he or she sees an ROI of $3.80.
Associate-degree holders average $41,900 per year in mid-career, about $10,700 more than someone with just a high-school diploma, the report estimated.
Community colleges deliver a negative return on investment to taxpayers – though a positive return to students –because of the high dropout rate, an October report found. The earlier report focused more narrowly on tuition costs and post-graduation salaries, observes the Chronicle of Higher Education.
An author of that report, Mark S. Schneider, a vice president of the American Institutes for Research and president of College Measures, thinks the AACC report exaggerates the societal benefits. The AACC researchers “didn’t acknowledge that students who attend college are already less likely to pose risks or added costs to society,” he told the Chronicle. “It assumes that if you didn’t graduate from a community college, you’re going to be a fat, smoking criminal, which is just not true.”
Overweight and obese girls earn lower grades and are less likely to go to college, concludes a new study. That’s the primary reason educated adults are slimmer and healthier, the researchers concluded. It’s not that “higher education confers lifelong social, economic, and psychological benefits that help adults” make healtheir choices.
Community colleges “launch” students, “relaunch” workers who need new skills and strengthen local economies, concludes a policy brief by the American Association of Community Colleges. Yet community colleges receive 20 percent of state funding for higher education, despite serving 43 percent of undergraduates.
In the last decade, as states have cut higher education funding, community colleges have cut per-student operating budgets — the only higher ed sector to control costs, the policy brief notes.
Investing in community colleges pays off for students and society, Christopher Mullin, co-author of Community College Contributions, told Community College Times. Graduates with certificates and associate degrees earn more and pay more taxes. “Upskill” training helps workers move up and their employers stay competitive.
Columbus State Community College in Ohio trains workers to become supervisors, the brief notes.
Indian River State College in Florida trains workers for the growing high-tech and energy industries.
In South Carolina, Aiken Technical College trains nuclear technicians for nearby power plants.
A small business development center at Lansing Community College in Michigan provided counseling and job training that resulted in “38 new businesses and $16.5 million in total new capital,” according to AACC. Twenty percent of small business development centers are located on community college campuses.
Some community colleges are developing economic impact studies to show how their contributions to economic growth. Broward College in Florida produces a $1.40 return on every $1 invested by taxpayers, the college’s report claims.
California reaps $4.50 in benefits — higher taxes and less social welfare spending — for every $1 invested in the state’s universities, concludes California’s Economic Payoff: Investing in College Access & Completion, a Berkeley report for The Campaign for College Opportunity. The study did not look at the state’s investment in community colleges.
The return for college graduates is $4.80, twice the return for those who complete some college but don’t earn a degree.
In 20105, relative to those with only a high school degree, those completing at least a Baccalaureate of Arts (BA) can expect to spend an additional seven years working. While working, they will earn more; between the ages of 25 and 64 they can anticipate earning an additional $1.3 million in wages and salary, and receive more than an additional $1.5 million in total personal income, which includes all other income from sources such as rentals, investments, or transfer programs.
These college “completers” will also put fewer demands on the state’s safety net. On average, they are likely to spend two fewer years receiving aid, four fewer years in poverty, and will spend 10 fewer months incarcerated. As might be expected, the recession has widened the gulf between the more highly educated and those with only a high school degree (or less).
Of course, there’s a big difference in academic performance and motivation between people who never enroll in college, those who start but don’t finish and those who earn a bachelor’s degree. If more low-achieving students enrolled in college or more marginal students completed a degree, they wouldn’t be likely to do as well as the high achievers.
To understand whether to borrow for a college education, students should listen to investors in bonds backed by student loans, suggests the Wall Street Journal. It’s a $242 billion market.
Hedge fund manager Daniel Ades of Kawa Capital Management won’t invest in bonds backed by loans made to 2010 and 2011 graduates, “because we can’t quantify the risk,” he told the Journal.
Investors like Mr. Ades have a unique view on the future for America’s job-seekers. Their investments depend on accurately predicting young people’s ability to repay their loans, which means they obsess about everything from employment rates by profession to the long-term earning potential of young graduates.
Historically, investors have assumed 25% to 30% of student loans bundled into their bonds will default. But today they are baking in between 30% and 40% default rates among the current crop of graduates, said Chris Haid, a director in asset backed trading at Barclays Capital. Even those assumptions are a best guess and defaults could ultimately go higher if unemployment rises, Mr. Haid said.
Not surprisingly, failure to graduate sharply raises the likelihood of default. So does the failure to finish on time.
Investors in bonds backed by student loans hate to see perpetual academics in their portfolio, chronically changing majors or stopping and starting school, adding years of tuition to their debt load.
“When you see a guy in a loan made in 2005 that is still in school, you throw that away,” said investor Rubin Bahar, of Eagle Asset Management.
In the current economy, the return on investment can be better for two years at a technical or community college than a four-year degree and three years of law school. A technical degree from a public two-year college delivers relatively high wages for a low cost, according to Mr. Ades. The median annual community college tuition is $2,963 a year the College Board estimates.
“We’re in a skills based economy and what we need is more computer programmers, more [nurses],” he said. “It’s less glamorous but it’s what we need.”
A technical college degree is worth as much as a bachelor’s degree, concludes Thumbtack, which surveyed business people — contractors, photographers, performers and others — who advertise their services on the site. The hourly rate for technical college graduates is $55 an hour. Bachelor’s graduates also average $55 an hour. (“Technical college” includes for-profit career colleges and technical degrees earned at community colleges.)
Electricians, plumbers, auto mechanics and HVAC techs trained at community colleges and technical colleges make good money and can’t be outsourced, notes Glenn Reynolds in Popular Mechanics.
Most people don’t need a college education to do their job, but they need a degree to get hired, writes Daniel Indiviglio in The Atlantic. It’s a very expensive way to identify who’s smart enough to do a job, he writes.
. . . when high school standards declined and college became more popular, some applicants stood out above others as being more educated and potentially smarter than those with only a high school diploma. If the trend keeps up, however, a time will come when a college degree isn’t enough either: masters degrees will be commonly sought, as the value of college degrees fall to be worth as little high school degrees are today, since so many applicants will have them. If this trend keeps up forever, perhaps we’ll one day have locksmiths with PhD’s.
College is the best investment on the market (for those who complete a degree), counters Derek Thompson, also in The Atlantic. Over a working lifetime, “the typical college graduate earns $570,000 more than the average person with only a high school diploma.”
Let’s say you’re deciding where to invest $100,000 at age 18. Maybe you think to put it in gold, corporate bonds, U.S. government debt, or hot company stocks.
The $102,000 investment in a four-year college yields a rate of return of 15.2 percent per year, more than double the average return over the last 60 years experienced in the stock market” and more than five times the return in corporate bonds, gold, long-term government bonds, or housing, according to a report by Michael Greenstone and Adam Looney.
Note that the associate degree’s rate of return is 20 percent, higher than the pay-off for the bachelor’s degree. I’d guess that’s because the costs of attaining the degree are lower and many associate degrees go to nurses, who make good money.
College-shopping students and parents deserve to know how much a college’s graduates earn, writes Ed Sector’s Kevin Carey in the Chronicle of Higher Education.
PayScale, a private company, ranks the return on investment for 1,050 colleges by calculating graduates’ lifetime earnings compared with what a high-school graduate would have earned, then subtracting the tuition and the money students didn’t earn while they were in school.
Cal Tech yields a 30-year net return of $1,713,000 for its graduates, according to Payscale. Berkley, the top public university for return on investment, nets $1,176,000. Shaw University, a private school, nets only $15,480, the lowest college ROI. Next lowest is the University of North Carolina at Pembroke, which nets $22,500 over 30 years. The University of Maine at Orono, smack in the middle of Payscale’s list, return $282,200.
At the moment, only two hard numbers are commonly used to judge college outcomes: graduation rates and student-loan default rates. That’s because everyone agrees that diplomas and loan defaults are important, and because diplomas and loan defaults are easy to count.Everyone agrees that earnings are important, too. Most students go to college so they can get better jobs after they graduate. That’s why many of the most popular majors, like business, teaching, and health professions, are essentially vocational. Colleges do much more than help students become economically productive, of course: In uncountable ways, they help people lead richer, more meaningful lives. But for most colleges and most students, career preparation is the heart of the work.
Illinois community college graduates earn 31 percent more, an extra $541,115 over their working lives, calculates the Illinois Community College Board. Those numbers could be broken down by campus, Carey writes. Or by degree.
Social Security will be tracking earnings to enforce the “gainful employment” rule. Why not use Social Security to track and report earnings for graduates of all college programs? Carey asks. Students and their parents face very expensive decisions. Before they write the first tuition check, they should have some idea about the likely payoffs.
* the degrees are screamingly cheap ($5,000 or so on average)
* associate’s degrees offer immediate, huge benefits over a high school education
* credit sometimes transfers to 4 year institutions
Academically prepared students who can afford the opportunity cost of not working for four years probably should get a bachelor’s degree in a decent-paying field, the article advises.
Given how cheap degrees and loans are, there is no reason to forgo the difference in wages between a BA in Computer Engineering ($100,000 or more) and an AA in Physical Therapy ($33,000) just to save on the cost of the degree.
But don’t borrow $97,000 for a degree in gender and religious studies and expect to make enough to pay back student loans and have money left over for two or three meals a day.
Here’s more on the best-paying careers with an associate degree, a bachelor’s degree and up.
Earning a two-year degree at a community college raises earnings nearly as much as a bachelor’s degree for a lot less money, concludes a University of Connecticut study. From the Connecticut Mirror:
“It is very clear that for a very limited investment, community colleges return pretty high results,” said Steven P. Lanza, editor of UConn’s latest quarterly economic review. “Surprisingly, the returns from a community college education aren’t far off the mark of a four-year degree.”
Earning a degree from a community college increase lifetime earnings by 8.3 percent, according to Lanza’s report in The Connecticut Economy. A four-year degree from the University of Connecticut increases earnings by 9.4 percent. Both estimate takes into account the cost of tuition and the loss of potential income while in school.
State funding for community colleges hasn’t kept up with soaring enrollments, the report warns. “Students and their parents are shouldering a growing share of the burden.”
In 2009, the state’s 55,000 community college students paid for 21 percent of the total cost of their education, the highest rates in the last 20 years.
“We have to keep the price affordable or it could begin to impact students’ ability to attend our schools,” said Mary Anne Cox, assistant chancellor of Connecticut Community Colleges.
Community colleges have been level-funded by the state at $158 million since the 2008-09 school year. In that time, enrollment has exploded and now accounts for almost half of all public college students. UConn, which has about one quarter of the state’s public college students, will receive $332 million from the state this year.
Only 25 percent of community college students earn a degree. But even those with “some college” earn 21 percent more than a worker with only a high school diploma or GED, the report found.
Community college graduates are more likely to stay in the state than graduates with four-year degrees, Lanza added. “Public subsidies to community colleges stand a good chance of being recouped when they stay here,” he said.