What colleges do for local economies: A direct measure based on consumption

Source: Jonathan Rothwell, Brookings Institution, November 17, 2015

Most economists and policymakers know that people who complete a college degree tend to earn more than people who have not attended college. Yet they often overlook the fact that these benefits extend beyond individual workers. The college earnings advantage also leads to greater economic activity, fueling prosperity at the regional and national levels.

With these benefits in mind, this brief finds the following:
– The average bachelor’s degree holder contributes $278,000 more to local economies than the average high school graduate through direct spending over the course of his or her lifetime; an associate degree holder contributes $81,000 more than a high school graduate.
– The quality of colleges greatly affects the size of these benefits. High value-added four-year colleges contribute $265,000 more per student to local economies than low-value added four-year colleges. The contribution is $184,000 for high value-added two-year colleges.
– Sixty-eight percent of alumni from two-year colleges remain in the area of their college after attending, compared to 42 percent of alumni from four-year colleges. High-value added colleges are no more or less likely to retain students in their metropolitan area.
– State and local governments, as well as their taxpayers, have a very strong incentive to boost college attendance and completion, especially at higher quality institutions. Risk-sharing of federal student loans—based on value-added principles—is one promising approach to promoting greater economic returns for students and taxpayers…..