Statistics can be so misleading. It is funny, though, how often at the moment you see one team had 60 percent of the ball but still lost.
Neil Warnock
The Institute for Higher Education Policy published a 2023 report claiming to set a minimum standard for college financial value.1 The benchmark is called Threshold 0. Walk through IHEP’s own example using their data and arithmetic. The school they describe passes. Apply complete accounting to the same numbers. It does not.
That gap between IHEP’s conclusion and the underlying data runs through the entire report. By IHEP’s measure, 83% of institutions meet Threshold 0.
They say: “At the majority (83 percent) of institutions—representing 93 percent of undergraduates—students receive at least a minimum economic return on their investment. In other words, students’ typical earnings meet or exceed the Threshold 0 benchmark within 10 years of starting College. In these terms, nearly all public and private nonprofit institutions leave students better off financially in comparison to similar adults who did not pursue postsecondary education.”1
The method behind that number does not support that conclusion.
IHEP has updated its Equitable Value Explorer through 2025 with refreshed Scorecard data and earnings disaggregated by gender and family income. The Threshold 0 methodology itself is unchanged. The five gaps described here apply equally to the updated data.
What Threshold 0 Measures
IHEP designed Threshold 0 to answer a specific question: does a college graduate earn enough to recoup the cost of their education within 10 years, compared with a high school graduate who never attended college?
The mechanics are straightforward. Take the median high school salary in the state where the institution is located. Add the annual repayment cost of the degree, amortized over ten years at a 2.75% interest rate. If the college graduate’s median salary four years after graduation clears that sum, the institution passes.
The example IHEP provides uses California. The state median high school salary is $28,297. A hypothetical institution with a net annual cost of $18,500 generates a repayment burden of $8,472 per year. Threshold 0 is $36,769. A graduate earning $45,750 clears it. Pass.
The method is the right instinct.
Setting a minimum required return before recommending an investment is basic financial discipline.
The methodology collapses entirely due to what the method leaves out.
What Threshold 0 Leaves Out
The first gap is the baseline itself. IHEP uses state-level high school salaries, not the national median. A degree clearing Threshold 0 in Mississippi does not necessarily clear it in Massachusetts. Graduates are not confined to the states where they attended college. They move. Using a national benchmark, the figure this book uses throughout sets a higher, more rigorous bar.
The second gap is cost inflation. IHEP assumes tuition and fees remain flat across the enrollment period. They do not. College costs have risen faster than general inflation for decades. The assumption overstates the economic case in the short term, precisely when it matters most for students who need the math to work.
This point is where the design flaw cuts deepest. The students for whom Threshold 0 was designed, students with limited financial cushion, deciding whether the investment makes sense, are exactly the students who face the largest short-term gap between costs paid now and earnings realized later. A flat-cost assumption does the most damage to the people it most needs to protect.
The third gap is opportunity cost. Threshold 0 measures earnings four years after graduation. For a four-year degree with a median time-to-completion exceeding 48 months, that leaves roughly six years of actual work. During those college years, high school graduates earned a salary while college students did not, creating an opportunity cost that Threshold 0 ignores.
A high school graduate working at the national median earns roughly $148,000 before taxes during the four years a typical college student is enrolled. After federal taxes at the standard rate, that drops to roughly $138,000 in take-home pay. That $138,000 in actual take-home earnings does not appear in the Threshold 0 comparison.
Even if a college graduate meets Threshold 0 within ten years, they may not catch up to the cumulative earnings of a high school graduate who started working immediately. The structure systematically flatters the college outcome.
The fourth gap is taxes. IHEP measures gross earnings against a Threshold 0 designed to screen for economic benefit. But the roughly $200,000 in additional federal taxes a college graduate pays over a lifetime (see Appendix B) never reaches anyone’s bank account. Gross earnings across a progressive tax system are not a defensible proxy for economic benefit. The accounting is inconsistent.
The fifth gap is the time value of money. Threshold 0 treats a dollar earned in year ten as equivalent to a dollar paid in year one. It is not. College costs are front-loaded. The earnings premium arrives later. Not applying a discount rate to those future earnings systematically inflates the apparent return. This design choice is not a subtle technical concern. It is the difference between measuring an investment and flattering it.
What the Numbers Show
The model used throughout this book applies all five corrections: a national high school salary baseline, full opportunity costs starting at age 18, federal taxes at current rates, and a 7.8% discount rate applied to lifetime earnings projected to age 65.
As of March 2026, median four-year-post-graduation salaries stood at $134,794 for Harvard graduates, $60,428 for the median college graduate, and $40,000 for the median high school graduate. Both college groups cleared IHEP’s Threshold 0.
Now look at cumulative after-tax earnings through the first ten years, net of college costs at the median net price. The high school graduate, who has been working since age 18, has accumulated $336,000. The median college graduate has accumulated $214,000. Harvard graduates, earning more than twice the median college salary, have accumulated $529,000.
Figure C-A · Cumulative after-tax earnings net of college costs, first ten years
Source · Author analysis · Earnings from College Scorecard · high-school median from BLS.
The high school graduate has out-earned the median college graduate by over $120,000 on an after-tax basis within the window IHEP calls the relevant comparison period. Harvard’s premium is real in raw cash terms, but it leans entirely on the elite salary.
Net Present Value (NPV) at a lifetime horizon tells the same story. At median net cost, the median college graduate generates $467,000 in after-tax NPV. At full sticker, $402,000. The median high school graduate generates $484,000. A median Harvard graduate generates $1,042,000 at the same median net cost ($802,000 at full sticker). For the median college graduate, the lifetime NPV never recovers.
The ten-year window IHEP uses tells a sharper version of the same story. Figure C-B puts it all together by deducting costs and taxes and calculating the NPV.
Even Harvard, with graduates earning more than double the median college salary and paying a net cost at or below the sector median, only modestly outperforms the high school baseline within the IHEP window once time value enters the calculation.
Figure C-B · Net present value after taxes, costs, and time-value of money
Source · Author NPV model · Same population as Figure C-A
The NPV of the high school graduate’s 10-year earnings is $225,000. The median college graduate sits at $100,000. Harvard reaches $281,000 over that same window, just $56,000 above the high school baseline after a decade of higher earnings.
If Harvard’s elite premium delivers only this slim margin over HS within IHEP’s threshold window, the threshold is not measuring what it claims to measure.
IHEP’s model says 83% of institutions pass. This model says the median institution fails.
Consider what those numbers mean for a student choosing between working after high school and attending a median-cost college.
The high school graduate accumulates $225,000 in after-tax earnings over the first ten years after graduating at 18. The college graduate, starting work four years later, accumulates $100,000 over the same calendar window.
Threshold 0 looks at year ten salaries and sees a pass. A family looking at the bank accounts sees something different.
The Massachusetts Finding
That gap is not unique to this analysis.
In December 2021, College101 released a degree-specific earnings study covering colleges in Massachusetts, one of the strongest higher education systems in the country. The findings were direct: 55% of degree programs allowed graduates to earn more than non-college peers and recover costs within ten years. The other 45% did not. Nineteen percent of graduates, in 26 percent of the programs, are either worse off or require more than 20 years to break even.2
The Massachusetts study used a similar method to IHEP’s. It did not account for taxes or the time value of money. Correcting for those two factors, which this book’s model does, would push more programs into the failure column, not fewer.
IHEP’s national claim: 17% of institutions fail.
Massachusetts, without correcting for taxes or time value: 45% of programs fail. This book’s model, correcting for all five gaps: 79 percent of four-year institutions fail at full sticker. 58 percent fail at median net cost. The CEW ROI: 81% of the institutions in the CEW’s own rankings fail to outperform the high school baseline.
The direction of these findings is consistent. Every study attempting a rigorous measure of college ROI finds a significant share of institutions failing to deliver. The more complete the methodology, the higher the failure rate.
What the Statistic Misses
Warnock was talking about football. A team controlling possession for most of the match can still lose. The final score, not the time-on-ball, is what counts.
IHEP’s Threshold 0 is a possession metric. State-specific baselines rather than national ones. No opportunity cost. No taxes. No discount rate. Under those conditions, 83% of institutions pass. Change the conditions to match how investment returns are actually calculated, and the result shifts by thirty percentage points or more.
That is not a methodological quibble. It is what the data shows when the metric is built to measure rather than to reassure. IHEP chose every one of those parameters. State baselines instead of national ones. Flat costs. Gross earnings. No discount rate. The 83% pass rate is the design working as intended. Strip out the choices that flatter the result and the number changes. The students relying on the headline never see the design choices that produced it.
About this analysis
This critique appears as Appendix C (IHEP, Rising Above the Threshold) in We Need To Talk About Higher Education by Leon Shivamber.
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Notes
- Dancy, Kim, Garcia-Kendrick, Genevieve, and Cheng, Diane. “Rising Above the Threshold.” Ihep.Org. Institute For Higher Education Policy, June 1, 2023. IHEP analysis proposing earnings thresholds for evaluating college program value, recommending programs should enable graduates to earn at least 200% of poverty-level wages.
- Leschly, Stig, Guzman, Yazmin, and Itzkowitz, Michael. “Degree-Specific Earnings Outcomes of Graduates From Colleges in Massachusetts.” College101, December 2021. Massachusetts-specific analysis of degree-level earnings outcomes showing significant variation across programs within institutions.
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.