does a college education pay off? assessing the payback from a college degree robert haveman la...
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Does a College Education Pay Off?
Assessing the Payback from a College Degree
Robert HavemanLa Follette School of Public Affairs
Department of EconomicsUniversity of Wisconsin-Madison
Affordability and College Attainment in Wisconsin Public Higher Education
Sponsored by Wisconsin Scholars Longitudinal Study
July 7-8 2011July 7-8 2011
Why worry about ‘pay off’?
Basic facts: Low rates of college enrollment and persistence
among lower/middle income studentsA falling share of middle/low income students
America’s colleges and universities. WHY?
Demand: College/university striving for selectivity rank—
students from lower income families less prepared.
Supply: Lower income students:
Discouraged from applying because of high and rising tuitions
Reluctant to borrow to finance costs Lack information regarding the costs of
attending and the availability of financial aid Lack knowledge regarding the ‘pay off’ from a
college degree
Hence, the need for an instrument to demonstrate the financial implications of college-going
The UW-Madison Payback Calculator
Rationale for a Payback Website?A financial literacy instrument—to alert
prospective students and their parents of the magnitude of costs and gains of attending college.
A guide to assessing the value of investing in education—to illuminate the debate regarding whether college is worthwhile.
A guide for how to cover up front costs.
The Basic Payoff Question
To what extent does the investment by a student in obtaining a college degree ‘pay off’ for the student and his/her family?
The Components of ‘Payoff”Gaining a college degree:
Creates Private Gains: Increased earnings over the entire
post-college working life Financial aid while in college
Imposes Private Costs: ‘Foregone earnings’ while in college Tuition and fees
If the private gains exceed the private costs, gaining a college pays off.
In addition, there are private nonfinancial gains; they are also relevant.
Mean Annual Earnings by Educational Attainment for Persons 18 Years Old and Older, 1975–2003 (Inflation-Adjusted to 2003 Dollars)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,0001
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Not a high school graduate
High school graduate
Some college/associate's degree
Bachelor's degree
Advanced degree
The UW-Madison Calculator
What are the private returns—the payback—from getting a degree from the UW-Madison, rather than stopping schooling at high school?To answer this question, it is necessary to have information regarding the characteristics of the individual student, such as GenderRaceFamily incomeDid parents attend collegeHigh school gradesACT score
The UW-Madison Payback Calculator
http://payback.wisc.edu/
We are now in the process of updating this site, and making it “generalizable” for use by any four year school.