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Associate Degrees Offer Return on Investment

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October 9, 2013

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Associate Degrees Offer Return on Investment

Associate degree holders earn an annual rate of return of four percent on their college investment, in comparison to workers with a high school diploma as their highest credential, according to new research from the Nexus Research and Policy Center and the American Institutes for Research. This return on investment (ROI) can be even higher given certain institutional characteristics and educational choices, including majoring in health and other CTE fields.  

Using data from the U.S. Department of Education and PayScale, Inc., which aggregates and analyzes salary and career data from individuals and employers, authors Jorge Klor de Alva and Mark Schneider find that an associate degree holder in the U.S. will realize a net gain during a 40-year career of more than $259,000.This is the median-the return can be as low as $100,000 or as high as $400,000.

When it comes to taxpayer benefits, however, the news is not as rosy. The researchers calculate an annual ROI to taxpayers of -0.8 percent. This applies only to direct benefits to taxpayers from taxes paid by these community college graduates. The researchers acknowledge that there are also many indirect benefits to taxpayers from education, which were beyond the scope of this study, including avoided costs of incarceration, social services and taxpayer-supported health care, as well as income from college staff payrolls and more activity in the local economy.

As you might expect, major factors that influence ROI include school location, gender and ethnicity, field of study and institutional resources. For instance, this study finds a high ROI for associate degree graduates in health-related fields, which has been supported by previous research.

The researchers finish with several recommendations:

  1. Promote progression, retention and completion through performance funding formulas
  2. Distribute resources in a way that encourages student success
  3. Foster technical training and linkages between institutions and the local labor market
  4. Promote improved data collection and make data accessible to the public

Another recent study from the Office of Community College Research and Leadership at the University of Illinois at Urbana-Champaign was conducted as part of the Credit When It's Due initiative, which supports policies that award associate degrees to students after they have moved to a four-year institution. Results of the study suggest that 27,000 students in the 12 states surveyed would have been eligible to receive an associate degree after transferring to a four-year college, had policies that supported this been in place at the time they transferred (primarily in fall 2008). Very few did eventually earn the associate credential.

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