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Who Wins? Who Pays? The Economic Returns and Costs of a Bachelor’s Degree finds clear winners: Bachelor’s degree holders get a good return on their investment. But taxpayers can be losers, the report concludes. Including public subsidies, tax breaks and government aid to students, taxpayers spend more than they get back for bachelor’s degrees earned at public and private nonprofit institutions; only for-profit colleges turn a profit for the taxpayers.
The study was done by by Nexus Research & Policy Center and the American Institutes for Research. Nexus is funded by foundations set up by the for-profit University of Phoenix. The report was framed to highlight the benefits of for-profit higher education, reports Inside Higher Ed.
College pays for graduates, researchers conclude. The lifetime earnings premium ranges from $230,000 for graduates of the least selective four-year colleges and universities to more than $550,000 for graduates of the most selective institutions. Graduates of for-profit colleges, all of which are in the least selective category, average a $284,000 lifetime earnings premium.
“A bachelor’s degree, whether from a public, a not-for-profit, or a for-profit institution, pays a handsome net financial reward in comparison to a high school diploma,” (Jorge) Klor de Alva and (Mark) Schneider wrote.
But taxpayers’ costs — subsidies to public institutions and tax exemptions to private nonprofits — don’t always equal the gains as higher-earning college graduates pay higher taxes.
Taxpayers subsidize bachelor’s degrees in nearly all not-for-profit institutions at around $8,000 per degree. In public institutions, the taxpayer investment is more than $60,000.
Taxpayer subsidies increase dramatically among the most selective institutions, from almost $60,000 in the most selective not-for-profit institutions to well over $100,000 in the most selective public institutions.
For-profit colleges and universities get money from Pell Grants and other federal aid to students, but don’t receive state subsidies and pay hefty taxes. As a result, taxpayers benefit by around $6,000 per bachelor’s degree.
Overall, “the lowest levels of taxpayer support go to the institutions that enroll the highest percentage of students from low-income families, nontraditional students, and minority students,” the report finds. State and federal resources should focus on improving completion rates for the neediest students by investing in high-quality for-profit and private nonproft colleges.
In addition, the federal data system must be updated to monitor the progress of “nontraditional” students, who now make up the majority of college students.
“It’s a reasonable study,” Dennis Jones, president of the National Center for Higher Education Management Systems, told Inside Higher Ed.
Still, the study has flaws, Jones said. It does not take into account the cost of not completing a degree, which would weigh against for-profit institutions, which cost more than public institutions and have higher dropout rates than expensive private colleges. (Schneider and Klor de Alva said a forthcoming study will examine the cost of dropping out.)
Several critics said the report double-counted by creditin for-profits for paying taxes while hitting nonprofits for their tax exemptions.
“You can count one of those, but you can’t count both,” said David Longanecker, president of the Western Interstate Commission for Higher Education, who reviewed the study and said it was sound and important over all.
The report looks only at undergraduate education, ignoring the value of graduate education and research at high-cost, highly selective universities.
Critics also say the report looks only at dollars and cents, not at students’ social and cultural experiences, notes the Chronicle of Higher Education. For-profit colleges don’t offer sports teams, extracurriculars, clubs, fraternities, etc.
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