The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
F.A. Hayek
The previous chapter examined the Georgetown University Center on Education and the Workforce’s College Payoff report and found four methodological omissions that, taken together, overstated the financial return on a college degree by more than a million dollars. In 2019, the CEW published a response of sorts, “A First Try At ROI: Ranking 4500 Colleges,” which was updated with new data in 2022.1
The title is honest. It is a first try. The CEW fixed two of the four problems and introduced two new ones.
What the CEW Fixed
The 2022 ROI report is a genuine improvement over the College Payoff. The CEW now factors in the cost of a degree and attempts to account for the time value of money. Both were absent from the original analysis.
The new report calculates a Net Present Value (NPV) of earnings after costs for each institution, which is the right method. The median NPV across all institutions is $723,000 at a 40-year horizon and $107,000 at a 10-year horizon.
The CEW uses the same College Scorecard earnings data this book uses. The approach to projecting synthetic lifetime earnings, assuming flat earnings beyond four years after graduation, may understate lifetime NPV modestly, but the assumption is applied consistently across institutions. That is a reasonable simplification.
Real progress, then. The question is what remains.
What the CEW Still Gets Wrong
The first problem is inconsistent time periods. The College Payoff tracked earnings from age 24 to 64. The ROI report shifts to ages 18 to 58.
Starting at enrollment rather than at age 24 is the right move. It captures the opportunity cost of the years spent in college. But stopping at 58 instead of 65 truncates the comparison at the wrong end. College graduates’ earnings often peak in their late career, particularly in high-earning fields like engineering and medicine. Extending to 65 would increase the NPV for those fields. The ROI report understates the lifetime value of college’s best cases while overstating it across the full distribution. The truncation introduces an error in both directions simultaneously.
The second problem is flat costs. The CEW assumes tuition does not increase over the enrollment period.
Their own notes acknowledge this: “We also assume no increases in the cost of postsecondary investment, including tuition. This assumption matters less at long horizons but would overestimate the economic value in the short term if costs are actually increasing.”1
College costs have outpaced inflation by 90% to 150% since 1990. The assumption overstates short-term ROI for the students for whom the calculation matters most.
The third problem is taxes. The CEW calculates NPV using pre-tax earnings.
The federal tax system is progressive. In this book’s model, a high school graduate pays approximately $400,000 in federal taxes over a lifetime. A college graduate pays approximately $600,000. That $200,000 differential reduces the after-tax NPV advantage of college by roughly 20 to 25%, narrowing the gap across the CEW’s rankings, particularly for mid-tier institutions. Measuring returns before taxes is measuring something other than what a graduate actually keeps.
The fourth problem is the discount rate. The CEW uses 2%, down from the 2.5% they suggested in the College Payoff.2 3
In a report meant to correct the earlier methodology, the discount rate moved in the wrong direction. The CEW explains the choice: they assume the investor is risk-averse and compare returns to a safe asset like Treasury securities. But a college education is not a Treasury security.
Every relevant benchmark is well above the CEW’s 2%.
The government’s own funding rate stood at 5.4% at the time of writing. Parent PLUS loans ran as high as 9.08% as of writing. The New York Federal Reserve used 5% in its own college ROI work.4 The San Francisco Fed used 6.67%, the average AAA bond rate from 1990 to 2011.5 The Congressional Budget Office projects undergraduate loan rates at 5.91% and PLUS loan rates at 8.46%.6
That range runs from 5% to over 8%. The CEW chose 2%. That choice makes college look like a safer investment than any rigorous comparison of capital costs would support.
A higher discount rate reduces the present value of future earnings more steeply, which favors lower-cost institutions and produces a more complete picture of risk-adjusted return.
The Benchmark Problem
The fifth problem is the most consequential.
When comparing colleges to each other, the relevant question is not just which college returns more than another college. It is which colleges return more than the alternative of not attending college at all. The CEW acknowledges this directly in its notes: they purposely exclude from their rankings the benchmark of going directly to work after high school.
In place of their own prior research, the CEW uses a synthetic high-school earnings figure of $15,000 per year, close to the federal minimum wage. The 40-year NPV of that earnings stream, at their 2% discount rate, is $397,000.
But the CEW’s own College Payoff report calculated the lifetime earnings of a high school graduate as $1.6 million in undiscounted dollars in the 2021 report.3 When discounted at their own 2.5% rate from that report, the implied NPV of a high school graduate’s lifetime earnings is approximately $924,000. Working from the CEW’s own arithmetic: discounted Bachelor’s NPV of $1.71 million minus the discounted high school-to-Bachelor’s gap of $786,000 leaves a high school NPV of $924,000.
These are not compatible figures. In one report, the CEW uses $924,000 as the implicit high school graduate baseline. In the ROI ranking report, they replace it with $397,000, less than half as large. The lower benchmark makes more colleges look like good investments. The higher benchmark, derived from the CEW’s own prior work, tells a different story. The relevant benchmark is not the minimum wage floor. It is what a student could realistically earn by going directly into the workforce instead of attending college. The CEW calculated that number in their own prior research. Then they set it aside.
The $924,000 benchmark applied to the CEW’s own 2022 ROI rankings tells a specific story. The online table covers 4,526 institutions, with 40-year NPVs ranging from $240,000 to $2,722,000.7 Only 873 (19%) produce a NPV at or above the high school baseline. The other 81% deliver a return below what a high school graduate earns by going directly to work.
That figure comes from the CEW’s own data, applied with the CEW’s own methodology, against the CEW’s own prior research on high school graduate earnings. The conclusion the CEW reached, that college is a worthwhile investment, cannot survive contact with the CEW’s own numbers when those numbers are applied consistently.
Where the CEW Went Next
The 2022 report was at least attempting to engage with the time value of money, however imperfectly. The CEW’s 2025 ROI update abandoned the effort entirely.8
Figure B-A · College ranked 874 of 4,526 below the $924k HS NPV threshold
Source · Georgetown CEW ROI rankings · Author’s NPV threshold analysis.
Their explanation: “By doing away with the discount rate, we are attempting to eliminate subjectivity by treating future earnings the same as current earnings.”8
That rationale claims to eliminate subjectivity. What it eliminates is basic financial analysis.
Treating a dollar earned in 40 years as equal to a dollar earned today is not a neutral choice. It is the choice that produces the largest possible premium for college. College graduates’ earnings are backloaded. They accumulate over decades. A zero discount rate maximizes the apparent value of those distant earnings.
The New York Federal Reserve, the San Francisco Federal Reserve, the Congressional Budget Office, and the standard practice of investment analysis all use discount rates above zero. The CEW, in response to criticism that its 2% rate was too low, has moved to 0%.
The methodology has not improved.
It has regressed.
Each choice is defensible alone. Together they tilt the result in the same direction. The methodology produced the conclusion the industry has long believed.
The CEW fixed two methodological problems in 2022. Three years later, the 2025 update introduced new ones. Every choice that biased the result pointed in the same direction.
| Methodology choice | CEW reports, across versions | This book’s treatment | Direction of bias on result |
|---|---|---|---|
| Time period analyzed | Ages 24–64 in the College Payoff (2011, 2021). Shifted to 18–58 in the ROI Rankings (2022) and ROI Update (2025). | Ages 18–65, working life through standard retirement. | Stopping at 58 truncates peak-earnings years in high-return fields. Error in both directions. |
| Cost inflation assumption | Flat costs across all three reports. The CEW’s own notes acknowledge this overstates short-term ROI. | Tuition has outpaced inflation by 90–150% since 1990. Costs treated as rising. | Flat costs overstate ROI for the short-horizon students for whom the calculation matters most. |
| Tax treatment | Pre-tax earnings in all three reports. | After-tax earnings. | Pre-tax overstates the NPV advantage by roughly 20–25%. |
| Discount rate | 2.5% in College Payoff (2011/2021). 2% in ROI Rankings (2022). 0% in ROI Update (2025). | 5.4% to 8%, the range of credible government, market, and Federal Reserve benchmarks. | Each step lower inflates the present value of future earnings further. The 2025 rate maximizes the apparent return. |
| High school baseline benchmark | $924,000 NPV implicit in the College Payoff’s own $1.6M lifetime earnings figure (2021). Replaced with $397,000 in the ROI Rankings, based on a synthetic $15,000 per year at federal minimum wage. | $924,000 NPV, applied consistently from the CEW’s own College Payoff data. | Lowering the baseline from $924K to $397K makes far more colleges look like good investments. At $924K, 81% of colleges fall below. |
Source · CEW ROI Rankings1 · CEW College Payoff2 3 · CEW ROI Update8 · This book’s NPV model in Chapters 29 and 31
What This Means for the Rankings
The CEW’s ROI rankings rest on real data. College Scorecard earnings and institution-specific costs are sound. The methodology converting that data into a national ranking is where the difficulty enters. The discount rate, the benchmark, and the framing each push in one direction. Each choice is defensible alone. Together they tilt the result in the same direction. The methodology produced the conclusion the industry has long believed.
The rankings are not useless. The underlying earnings data, drawn from the College Scorecard, is real and institution-specific. A student comparing two schools using the raw earnings and cost data available at collegescorecard.ed.gov is doing something genuinely valuable.
The problem is the aggregate ranking, the headline NPV, and the conclusion that college is a worthwhile investment, reached by choosing benchmarks and discount rates that make it easier to reach.
The underlying data is available. The methodology for putting it to use is in this book. The CEW’s rankings are not the right tool. The data behind them is.
About this analysis
This critique appears as Appendix B (Georgetown, ROI Rankings) in We Need To Talk About Higher Education by Leon Shivamber.
Get the book → Read the argument in full → Run your own numbers →
Notes
- Carnevale, Anthony P., Cheah, Ban., & Van Der Werf, Martin. (2019). Georgetown University Center on Education and the Workforce, “A First Try at ROI: Ranking 4,500 Colleges, 2019.” And Georgetown University Center on Education and the Workforce. “Ranking 4,500 Colleges by ROI (2022).”
- Carnevale, Anthony P., Cheah, Ban, & Rose, Stephen J. (2011). “The College Payoff.” Georgetown University Center on Education and the Workforce, 2011
- Carnevale, Anthony P., Cheah, Ban, and Wenzinger, Emma. “The College Payoff: More Education Doesn’t Always Mean More Earnings.” Georgetown University Center on Education and the Workforce, 2021.
- Abel, Jason R., and Deitz, Richard. “The Value of a College Degree.” Liberty Street Economics. Federal Reserve Bank of New York, September 2, 2014.
- Daly, Mary C. 2014. “Is It Still Worth Going to College?” FRBSF Economic Letter 2014-13, May 5.
- Congressional Budget Office. “Baseline Projections Federal Student Loan Programs.” Cbo.Gov. Accessed March 2026.
- Georgetown University Center on Education and the Workforce. “Ranking 4,500 Colleges by ROI (2022)” Table lists 4,526 institutions and provides a variety of ROI and other measures calculated or presented by the CEW.
- Cheah, Ban, Van Der Werf, Martin, Morris, Catherine, and Strohl, Jeff. “Ranking 4,600 Colleges by ROI (2025).” Georgetown University Center on Education and the Workforce, 2025.
Related critiques
This is one of four close readings of the major college ROI studies. See the others, then read the audit that weighs all four together and the plain-language case beneath them.