How We Estimate Payback and Earnings Premium

The College Scorecard reports median graduate earnings — the middle earnings of former students who received federal aid, measured about ten years after they first enrolled. On its own that number ignores what the education cost and what the person would likely have earned anyway.

Earnings premium

earnings_premium = median_earnings − 30000

$30,000 is an approximate median for U.S. workers aged 25+ whose highest qualification is a high-school diploma. It is the "what you might have earned instead" baseline the Scorecard itself uses for comparison. The premium is how much more the college's typical graduate earns.

Payback years

payback_years = (net_price × 4) ÷ earnings_premium

Four years of net price divided by the annual earnings premium: roughly how many years of that extra pay it takes to cover the cost of the degree. A payback of 2 means the cost is recovered in about two years of the earnings boost; a payback of 12 means it takes over a decade.

Earnings premium per dollar is the same idea as a ratio: earnings_premium ÷ net_price. Higher means more lifetime earning power bought per dollar of cost.

What it leaves out

• It uses one school-wide earnings figure. Earnings vary enormously by major — see each college's program pages for field-level numbers.
• Earnings are for students who took federal aid, roughly ten years out. They are not starting salaries and not a promise.
• The $30,000 baseline is national and static; a graduate's real alternative depends on their field, region and circumstances.
• Colleges with a net price below $3,000, or with missing earnings, are excluded — the maths becomes meaningless when cost is near zero.
• It counts only money. A degree's value is not only financial.

Sources: U.S. Department of Education College Scorecard; high-school-graduate earnings baseline from U.S. Census Bureau tabulations. Back to Rankings.