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Must read: The economic impact of access to higher ed

July 23, 2020

At a time when higher education is facing some of its greatest challenges, its value both for individuals and for states is reinforced through the findings of a recent working paper from the National Bureau of Economic Research. In “The Economic Impact of Access to Public Four-Year Colleges,” Jonathan Smith et al. show through an examination of the University System of Georgia that access to public higher education leads to “substantial economic benefits for the marginal student,” and that the state roughly breaks even on its initial investment after 10 years. Although other studies have provided descriptive evidence that identify colleges as catalysts for economic mobility, the authors looked for causal evidence of the linkage and employ a novel approach through credit bureau data.

They studied the University System of Georgia (USG), which encompasses the state’s 17 public four-year universities. The authors link the universe of Georgia SAT takers to later credit bureau data on these individuals. The credit bureau data contains various measure of economic and financial well-being that had not previously been measured in the literature on the economic returns to college, and the authors contend this allows them to “paint a fairly comprehensive picture of the economic returns from attending public four-year colleges.”

The authors replicated earlier findings that access to and enrollment in the public four-year sector boosts bachelor’s completion rates. They also show that enrollment in these universities increases household income measured at age 30, which is driven almost entirely by students from low-income high schools.

Among other findings, the authors also show positive private and public returns, noting that after 10 years the state roughly breaks even on its initial investment and after 30 years the net present value of the investment on increased expenditures on college subsidies for an additional student against the increased state income tax revenue from increased earnings is close to $10,000. “The large increase in income tax revenue generated by additional B.A. completion more than offsets the cost of subsidizing one additional student at a four-year campus.”

higher ed