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How Financial Aid Affects College Cost and ROI By Household Income

This weekend, President Obama rolled out new Department of Education initiatives aimed at increasing the number of students who attend college and graduate without unmanageable student loan debt. Among them: College Scorecard, an assessment tool that allows students and their families to choose potential colleges based on factors like average annual cost, graduation rate, and salary after attending. PayScale is using this data to add another layer to our College ROI Report, showing how income level affects college ROI.

This weekend, President Obama rolled out new Department of Education initiatives aimed at increasing the number of students who attend college and graduate without unmanageable student loan debt. Among them: College Scorecard, an assessment tool that allows students and their families to choose potential colleges based on factors like average annual cost, graduation rate, and salary after attending. PayScale is using this data to add another layer to our College ROI Report, showing how income level affects college ROI.

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(Photo Credit: stevendepolo/Flickr)

James Kvaal, the White House’s deputy director of domestic policy, explained in a press call that the scorecard offers an alternative to static rankings based on low admissions rates and high spending.

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“The current system is one where we reward colleges based on what they spend, for turning away students instead of enrolling more of them,” Kvaal said. “These are the wrong incentives to be giving our colleges, and the wrong message to send our students.”

What’s Included in College Scorecard – and What’s Not

The College Scorecard is based on data representing students who receive Title IV aid, which includes 95 percent of all types of federal aid. It does not include students who don’t receive aid, or those who receive it from private sources, such as school endowments or private scholarships.

Still, even with those caveats, the data include a huge number of students: according to The National Center for Education Statistics, the percentage of first-time, full-time students at four-year universities receiving Title IV aid increased from 80 percent in 2007-8 to 85 percent in 2012-3.

How Income Affects ROI

PayScale received early access to College Scorecard data, and used it to show how return on investment changes, depending on the income level of the student. The data visualization below, which is a teaser of the full data set that will appear in PayScale’s full College ROI report in March, highlights a variety of schools to provide insight into how cost can vary for students at different income levels, even at the same school.

It’s important to note that the percentage of students who receive financial aid varies widely by school, so even these data do not provide a full picture of a school’s actual price. Also, the data reflect students who graduated, cut by income level, but do not yet include household income prior to admission. Earnings data for students who dropped out of a school before earning a degree were not included.

The takeaway, however, is clear: students’ return on investment after graduation depends on their income level, as well as each school’s track record of high-earning alumni. The best school for you can’t be plucked off a static list; it has to be narrowed from a field of potentials. Let data be your guide, and you’ll be much more likely to graduate to a job with a salary that allows you to pay back your student loans.

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Jen Hubley Luckwaldt
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