Toplines From the 2024 Price-to-Earnings Premium

This summer marks Third Way’s third edition of the Price-to-Earnings Premium (PEP) for the median student and the PEP for low-income students. These metrics tell us how many years it will take students to recoup their educational investment at a given institution. A low PEP value reflects a faster return on investment (ROI), while a higher one means that the institution fails to deliver a strong return on tuition. The calculation for each metric is shown below.

Our past PEP reports showed encouraging data points for students at public and private non-profit institutions nationwide. Many of these schools equipped students with affordable tuition and strong earnings, and the 2024 analyses build on this pattern. Both metrics should instill confidence in students who enroll at most public and private non-profits, as our recent data show that many of these schools are preparing students with a strong ROI. However, this year’s analyses also reinforce concerning outcomes for students who enroll at for-profit institutions. 

Public Colleges Dominate the Overall PEP Ranking, While Private Non-Profits Secure Top Spots in the PEP for Low-Income Students

Once again, public institutions dominate the top 10 performing institutions on the PEP for the median student. Seven of the top 10 performing schools on this metric are public colleges and universities, as seen in Table 1. Baruch College triumphs in first place for the second year in a row, equipping students with an affordable education and strong post-college earnings that allow them to recoup their investment in less than half a year. Baruch is accompanied by three other CUNY institutions in the top 10—City, Hunter, and Brooklyn Colleges, which were also top performing institutions in last year’s PEP for the median student.  

Stanford University appears in the top 10 for a third year, and Princeton University returns to the top 10 for a second year. The United States Merchant Marine Academy, New Mexico Institute of Mining and Technology, Yeshiva Shaarei Torah of Rockland, and the University of Florida—Online make their first appearances in the top 10 performing schools on the PEP for the median student. Notably, each of these top-performing institutions prepares students to recoup their tuition in less than a year—an extremely impressive ROI benchmark. 

Private non-profit institutions make up the majority of the top 10 colleges on the PEP for low-income students this year. Eight of the top institutions, shown in Table 2, are private non-profits, with Stanford University leading with a PEP of -0.07 years, followed close behind by Washington and Lee University with a PEP of -0.04 years. These colleges’ negative PEP values indicate a negative average net price for students whose family income is less than or equal to $30,000 a year, meaning that they provide financial aid for their lowest-income students that covers, on average, more than the cost of their tuition.  

The average PEP for the top 10 performing schools on the PEP for low-income students is 0.05 years—that’s less than a month for students to recoup their investment. Among these institutions, we see that two—Princeton University, and Stanford University—made the top 10 lists for both PEP metrics this year. Additionally, there are three institutions that have made it to the top 10 on the PEP for low-income students for the first time. Washington and Lee University, Washington University in St. Louis, Shepherd University, and Northern Kentucky University were previously ranked lower on this metric or were not included due to data limitations. These institutions’ rise in the PEP reflects an investment in affordable education for low-income students, a commitment to helping them secure stronger earnings after graduation, or both. 

80% of Institutions Prepare Low-Income Students to Recoup Tuition in Fewer Than 10 Years

Eighty percent of institutions in the PEP analysis for the median student equip attendees to see a return on their tuition in fewer than 10 years (the length of the Federal Direct Loan standard repayment plan), including 93% and 77%, respectively, of public and private non-profit colleges. This analysis marks another year of strong PEP performances from these sectors, as last year’s report showed comparable returns on tuition for public and private non-profit colleges.

Moreover, a majority of public institutions (72%) prepare students to recoup their tuition in fewer than five years, with 42% of private non-profits doing the same. And 15 public and 6 private non-profit colleges set the bar even higher by preparing students to recoup their investment in less than a year. These institutions help their students achieve strong, competitive returns on their tuition dollars.

Private for-profit institutions are a riskier bet for a student’s ROI. According to this year’s analysis, 66% of for-profit institutions deliver an ROI of more than 26 years or no return at all. In the 2023 PEP analysis, 61% of for-profits delivered a return of more than 26 years or no ROI, indicating a decline in ROI outcomes in this sector. Even if some for-profit institutions deliver a return on tuition, it is not a guarantee that it will be a strong one. Table 3 shows that only eight for-profit institutions equipped students to recoup their tuition in less than five years, while 12 left students without a return for 26 years or more, and 29 fail to provide any return. 

ROI Gaps by Income

There are important differences in returns to note between an institution’s median student and their low-income students. Of all colleges included in the analysis, 75% equip low-income students to see a return on their tuition in fewer than 10 years. This is a strong benchmark, and most public and private non-profit colleges meet it. For-profit institutions, in comparison, struggle to equip low-income students with strong returns, as they do for the median student. Only 10 for-profit colleges—20%—deliver a PEP of less than 10 years for low-income students.

Despite the strong outcomes in the public and non-profit sectors, there is an ROI gap between outcomes for low-income students in comparison to the median student. Combined, 83% of public and private non-profits prepare the median student to recoup their investment in fewer than 10 years, while 77% do for low-income students. That marks a five percentage-point difference in ROI outcomes by economic status, indicating the need for continued focus on improving outcomes for underserved, high-need students.

Interestingly, we also found that more public and non-profit institutions provide low-income students with the quickest return—less than a year. While 15 publics provide this ROI for the median student, 52 do for low-income students. Six private non-profits equip the median student with that ROI, but 45 do for low-income students. These schools are meeting their high-need students where they are and going the extra mile to support them with low or no tuition costs, excellent earnings, or both. However, the number of institutions providing this ROI has also not budged since last year’s PEP analysis for low-income students. Institutions that performed well then continue to do so without many other schools joining the ranks. 

Conclusion

The 2024 PEP analyses build on evidence that enrolling in many public and private non-profit institutions is a good investment for a student’s financial future. Top-performing institutions on both metrics boast returns on tuition for attendees in less than a year, and most public and private non-profits help meet students’ financial need and prepare them for careers with strong earnings. But the PEP analyses are also a reminder for the continued need to improve outcomes for low-income students and ensure accountability measures for colleges that fail to deliver a timely ROI or fail to deliver any ROI whatsoever. Investing in resources to boost students’ return is an investment in their long-term economic success.