Using Institutional Characteristics to Estimate Return on College Education

Since the 1980s, the college wage-premium in the United States has reached all time highs. As a result, college education is a critical benchmark in securing high paying jobs. While the bachelor’s degree serves as a gateway into more lucrative careers, postsecondary education can be very costly, with some taking on substantial amounts of debt to finance their schooling. Despite the increasing wage-premium, there is an even wider earnings disparity amongst college graduates than between graduates and non-graduates. Research on higher education returns suggests that most individuals – even those ranked as having low ability – benefit financially from their investment in education. At the institutional level; however, some schools produce median returns on investment that are well below zero. This begs the question, why are a considerable number of the nation’s higher education institutions underserving their students? I use OLS to test the hypothesis that schools in rural settings displaced from major cities, and with religious affiliation will be critical variables in explaining college return on investment. My findings confirm that distance to major city, along with several other institutional characteristics are significant in explaining returns to higher education