News: Data, Research & Evaluation

New Study Shows Strong Evidence of Benefits of 4-Year Institutions

Thursday, May 28, 2020  
Posted by: Bill DeBaun, Director of Data and Evaluation
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Many NCAN members put a premium on enrollment in and graduation from a four-year postsecondary institution because of the benefits a bachelor’s degree confers relative to other credentials. But a new study from Jonathan Smith, Joshua Goodman, and Michael Hurwitz offers more, and stronger, evidence of those benefits, especially for students from low-income backgrounds.

The authors’ findings are made possible by the University System of Georgia’s (USG) minimum SAT requirement for admission to its 17 four-year universities (USGU). Having a minimum threshold like this is ripe for using a regression discontinuity design, and new research using data from Georgia shows causal evidence of the benefits.

Jump to the bottom of this article for a quick refresher on terminology.

The authors find many impacts of four-year enrollment:

  • Students who were just above the SAT threshold were both more likely to attend an institution in the University System of Georgia and to complete a bachelor’s degree. Students above the threshold were 17% (5 percentage points) more likely to attend a four-year university than students below the threshold, who mostly enrolled in community college or did not enroll anywhere. Benefits to bachelor’s completion were even higher, unsurprisingly. Students above the threshold were 38 percentage points more likely to obtain a bachelor’s degree, "nearly quintupling the 10% B.A. completion rate among those denied access to a USGU."
  • Students admitted to a four-year institution saw increases of about 20% (~$11,000) to their annual household income at age 30 compared to those who weren’t. Notably, this was “driven almost entirely by students from low income high schools. … The increase in income is almost 40 percent for students from low income high schools.”
  • The researchers connected student-level data to credit bureau data to get a better understanding of financial health (e.g., estimated household income, credit scores, outstanding debt, student loans, mortgages, and residential location). Enrollment in a four-year institution had “little clear impact on student loan balances at age 30” compared to those students just below the threshold. Students from middle- and high-income high schools who went to a four-year university had “some evidence” of “higher student loan balance.” However, overall by age 30, there was no negative change to the financial health of students who went to a four-university versus the comparison group. Their rates of home ownership were also similar.
  • Finally, the authors find “enrollment in the public four-year sector has positive private and public returns.”
    • For students (“private returns”), the increased cost of attending a four-year institution quickly pays off. A typical student breaks even after 10 years. After 20 and 30 years, respectively, their enrollment will be worth $100,000 and over $150,000 in today’s terms.
    • For the public (i.e., state governments and taxpayers), there’s also good news. The authors find that the state of Georgia breaks even on the cost to enroll each additional student, and after 30 years, the benefit per student is worth nearly $10,000 in today’s dollars. There are also gains to the federal government through tax revenue amounting to $15,000, $34,000, or $53,000 (in present-day dollars) in the 10, 20, and 30 year time frames.

The paper’s authors examined the outcomes of students who were just above and just below the SAT minimum for four-year admission to understand the impact of attending a four-year institution. The authors show that the students on either side of that threshold are essentially similar (a prerequisite for their research design), so the differences observed in the outcomes of students above the minimum threshold are attributed to their enrollment in a four-year institution. (This is where the causality comes in.)

This research has implications for both practice and policy. Programs looking to improve the evidence base for their emphasis on four-year enrollment can move this study to the top of their list. Policymakers should also consider this paper’s conclusion, even in the midst of severe budget constraints:

Many states explicitly ration access to the public four-year sector through required academic qualifications such as minimum SAT scores and GPAs. Others implicitly ration such access through processes that rely on the judgment of individual colleges’ admissions officers. Our estimates suggest that, though such rationing is understandable given short-run budget constraints, allocating state tax dollars to increase the number of college enrollees might improve states’ budget outlooks in the long run.

Overall, this research is something that should be on NCAN members’ radars. To find high-quality causal research, with a sample this large, across this many institutions, which also seems likely to be externally valid to other states, is not something that happens every day. Give it a read at your leisure.

A quick refresher on terminology:

  • Causality means that A (a cause) both occurs before B (an effect) and, taking into account other variables, also is the impetus for B.
  • Quasi-experimental design differs from experimental design because it uses “natural experiments” and statistical methods to compare control essentially similar control and treatment groups.
  • By contrast, randomized controlled trials are experimental designs where subjects are assigned to control and treatment groups randomly, but RCTs don’t work as well with interventions like college enrollment or FAFSA completion. (It turns out students and families aren’t keen on having their postsecondary pathways turned into experiments, not to mention that depending on the design of the study, it can violate research ethics.)
  • Regression discontinuity is a quasi-experimental research design compares the outcomes of subjects immediately on either side of a threshold to receive an intervention in order to measure the impact of receiving that intervention.