1. Does a College Education Pay Off? Assessing the Payback from a College Degree Robert Haveman La Follette School of Public Affairs Department of Economics University of Wisconsin-Madison Affordability and College Attainment in Wisconsin Public Higher Education Sponsored by Wisconsin Scholars Longitudinal Study July 7-8 2011

2. Why worry about ‘pay off’? Basic facts: Low rates of college enrollment and persistence among lower/middle income students A 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

3. Hence, the need for an instrument to demonstrate the financial implications of college-going The UW-Madison Payback Calculator

4. 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.

5. 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?

6. 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.

7. Mean Annual Earnings by Educational Attainment for Persons 18 Years Old and Older, 1975–2003 (Inflation-Adjusted to 2003 Dollars)

8. 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 Gender Race Family income Did parents attend college High school grades ACT score

9. Earnings return over time with a UW-Madison degree (white male, low income family, good high school grades, ACT in the top quartile)

10. 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.

11. A Two College Payback Site Madison College is used as the example. This site has been generalized and is available for use by two year colleges http://paybackcalculator.wceruw.org/