Why college return-on-investment matters

The University of North Carolina system enrolled more students this fall — about 248,000 — than ever before. But continued growth is far from ordained. Indeed, as America’s college-age population levels off and then begins to decline over the next decade, many institutions will see enrollment declines. Some will be forced by shaky finances to merge or shut down.

Because North Carolina’s population growth is higher than average, our colleges and universities will have a bit longer of a grace period. We’re a net importer of American families and young people looking for good jobs and a lower cost of living. And our state’s climate and amenities make us an attractive destination for foreign-born students.

Mind you, it’s only a grace period. UNC campuses, community colleges, and private institutions will still face robust competition not only from higher-education institutions elsewhere but also from non-campus alternatives such as firms, nonprofits, and employers providing certification, apprenticeships, and on-the-job training.

That is to say, the enrollment challenge isn’t just about demography. It’s about changes in the market for post-secondary education and training.

Over the years, I’ve written many times about return-on-investment (ROI) in higher education. Exploiting an ever-deepening well of federal data, scholars can estimate the income gains from completing specified degrees at specified campuses. By factoring in the total cost of obtaining these degrees — including the wages students don’t earn while they’re in school — analysts can construct an ROI in percentage or dollar terms.

For example, the associate degree conferred by Wake Technical Community College in industrial production technology has an average return-on-investment of $884,991 — higher than that of many four-year degrees conferred by nearby North Carolina State University. Similarly, the ROI for a biology degree from UNC-Asheville is $315,269. In Asheville-Buncombe Tech’s allied health program, an associate degree in diagnostic, intervention, or treatment has an ROI of $668,817.

When I write about such studies, I invariably get complaints along these lines: “Why do you insist on reducing education to a statistic? The university experience should be about more than job training. What about truth, beauty, discovery, civic virtue, and the life of the mind?”

As it happens, I greatly value these non-vocational benefits of higher learning. While pursuing my undergraduate degree in journalism at UNC-Chapel Hill back in the 1980s, I nearly completed another major in philosophy because I found the subject so fascinating. And when I returned to school decades later for a master’s degree in liberal studies, I did so for a deeper study of history and political science, not because I needed a credential.

For students on the margin, however — ones deciding whether to attend college in the first place, or to return to complete a degree previously abandoned — their primary motivation is to enter or move up in a profession. And for most college-bound kids and their parents, their choice of campus is strongly influenced by estimates of the likely financial payoff, even though they’ll appreciate other experiences and amenities along the way.

The public and intrinsic benefits of education are very real. But to say that effective self-government requires an educated citizenry, which is true, is not to say that everyone ought to go to college. Fostering the knowledge, wisdom, and judgment to be responsible parents, voters, and citizens is the job of universal institutions, of elementary and secondary schools.

The public function of colleges and universities is to prepare their students for leadership— whether that be in business, government, religion, philanthropy, education, or other sectors — while also producing valuable research and applying their expertise to community service.

As for the intrinsic benefits of studying great works of art, exploring great questions, and grappling with great ideas, physical campuses are certainly among the places future generations will pursue them. But there will be many lower-cost alternatives.

Faced with enrollment pressure, savvy university leaders will raise and market their programs’ ROI. It’s not all they’ll do, to be sure, but if they don’t do it their institutions will shrink.

John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history.