2024 Price-to-Earnings Premium

The Price-to-Earnings Premium (PEP) measures the value that higher education institutions provide their students by looking at the net price the average student pays out-of-pocket to obtain an academic credential relative to the additional amount they earn by attending that institution in the first place. 

We also construct a PEP value for low-income students, which identifies the time it takes students whose household income was $30,000 or less to recoup their educational costs. This helps us understand how this key population is faring in higher education. 
 

Using data from the College Scorecard, we calculate the PEP from the ratio of the institution’s total average net price to the graduate’s expected earnings premium from attending that institution. We divide the total average net price of the bachelor’s degree (assuming four years of tuition) by the difference between the median earnings of a former student from that college ten years after initial enrollment and the median earnings of a high school diploma holder in the same state as the institution.

A low PEP value indicates it takes students fewer years to recoup the net cost of the degree, while a higher PEP means that the institution saddles students with high tuition, fails to deliver a strong earnings premium, or both. 

The PEP for low-income students is calculated using the same formula as the overall PEP, but with adjusted College Scorecard variables for students in the lowest income tercile. Low-income students are defined as those whose families make $30,000 or less when they enroll in college.