The Earnings Premium Bandwagon is Getting Crowded
In US, you may not be interested in EP, but EP is interested in you
Phil Hill
August 12, 2025
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But Phil, you’re being a little harsh on a report that was just meant to explore the issues.
In last week’s “Illustrating the Absurdity” I called out how HEA Group’s Price to Earnings Premium report showed the harm to be done by ignoring regional earnings differences within states.
In that report’s usage of Earnings Premium (EP), the earnings are aggregated at the college level but the comparison is still at the state level. And yet the entire premise of the report is that there are stark differences within the state depending on where students live. Yet everything is compared to a statewide metric.
Hot take - location affects both college graduate earnings and high school graduate earnings.
I shared in a simple county-level view how California’s baseline high school graduate but no college median earnings (the comparison point to determine the Earnings Premium) had significant variation across the state that is ignored by the report.
Trust me, this issue will become more apparent as people start to think through the implications
Accreditor Action
I should not be surprised, but this HEA Group report for the College Futures Foundation was really a coming out party for a new strategy. The strategy is to take the Earnings Premium concept originated by The Third Way and other Coalition members as part of Gainful Employment regulations and to expand it in multiple venues. The OBBBA reconciliation bill is now law, and Earnings Premium is going to hit by next summer for all colleges and universities in the US.
ACCJC
Today we saw that this is but one part of the strategy. From Inside Higher Ed:
The Accrediting Commission for Community and Junior Colleges is launching new tools to give members of the public more insights into student outcomes at the institutions under its purview.
Those tools include dashboards with different student achievement data points as well as a new metric to gauge return on investment. Like the Western Association of Schools and Colleges Senior College and University Commission, ACCJC is planning to measure ROI using price–to–earnings premium. Developed in part by Third Way and the College Futures Foundation, the earnings premium tracks how long it takes for graduates from different programs to recover educational costs.
The accreditor wrote in a white paper on different value metrics that the earnings premium is an “approachable and understandable way for students and their families to discuss the value education adds to earnings potential. It also allows for institutions, reviewers, and policy makers to contemplate a measurable target and drive improvement.”
Problem Acknowledged
The ACCJC white paper is quite useful, by the way, in its compilation of The Post-Completion Metric Landscape. It summarizes the various forms of the Earnings Premium metric from the College Scorecard, the Postsecondary Value Commission, Georgetown CEW, Third Way / College Futures (the subject of the report above), and AACC. Furthermore, the ACCJC white paper directly acknowledges the problem [annotation added].
The white paper lays out the ACCJC recommendations. Note that this would dramatically expand the scope of how Earnings Premium impacts colleges and universities. Not only would they need to “pass” the upcoming federal regulations, but they will be impacted across the board in the accreditation process.
Ideally, there would be a one-stop clearinghouse to connect these metrics in a public-facing, easy-to-understand presentation. Until then, ACCJC member institutions can benefit from review of their respective post-enrollment outcomes measures, and the Commission can support institutions by incorporating a recommended metric into its accreditation processes. As the analysis in this paper reveals, no single metric is perfect for this application. However, Third Way and College Futures Foundations’ Price-to-Earnings Premium value metrics provide a reasonable starting point.
Again, to ACCJC’s credit and unlike the HEA Group report, there is direct emphasis on needing to fix this weakness.
Another opportunity for improvement could be regionalizing the baseline high school wage data because the use of a single state-level high school earnings metric could disproportionately impact rural schools by setting a higher high school completer earnings bar than what is present in the local communities.
Impact on Local Schools
Think about the nature of the problem in California (again, leveraging the scope of the HEA Group report). It won’t be the UCLAs or Stanfords or Berkeleys of the world that get hit. They are highly selective - drawing students across the state, country, and globe - and are not place-based in nature.
It will be regional public universities, community colleges, and smaller private institutions (nonprofit and for-profit) that focus on workforce programs that get hit the hardest. And ACCJC as an accreditor focuses squarely on community colleges.
A Researcher Chimes In
Al Essa, a long-term academic researcher who worked for several university systems as well as EdTech vendors, chimed in on LinkedIn based on last week’s post. I am sharing his post in full, as it backs up this point and adds his own analysis.
Phil Hill has called into question the new Earnings Premium (EP) Regulation, suggesting that it is seriously flawed. My initial data analysis backs up his argument 100%.
What is the EP Regulation?
The Earnings Premium Regulation, finalized by the U.S. Department of Education in October 2023, requires colleges and career schools that receive federal funding (Title IV programs) to show that their graduates earn more than the typical high school graduate in their state. It has since been written into law through the One Big Beautiful Bill Act (OBBBA) and the Senate’s Do No Harm provisions.
The rule’s core metric compares the median annual earnings of program graduates (measured several years after completion) to the median annual earnings of individuals aged 25–34 with only a high school diploma or equivalent.
Why the Baseline Matters
Following Phil’s lead, I ran a quick analysis comparing two baselines:
Current statewide baseline – used in the regulation.
Regional baseline – based on local high-school earnings in the same county.
Consider two California colleges (real data, placeholder names until I finalize the analysis):
Bayview College – Located in the prosperous Bay Area, graduates earn about $55,700 ten years after enrolling. Against the statewide high-school baseline of ~$32,500, that’s a $23,200 earnings premium.
Desert Valley College – In a rural Southern California county, graduates earn $34,500. Against the statewide baseline, the premium is barely $2,000, placing it near the bottom of the statewide ROI ranking.
When we switch to a regional baseline — comparing each college’s graduates to local high-school graduates — the results change dramatically:
Bayview College – Premium rises modestly to $25,700 (local high-school grads earn about $30,000). Its ROI ranking stays the same.
Desert Valley College – Premium leaps to $22,700 (local high-school grads earn just under $11,800). ROI shortens drastically from 1.7 years to 0.1 years, and its ranking jumps from #68 to #11.
The current statewide-only measure hides success in lower-income regions. A regional comparison is not only fairer — it rewrites the scoreboard.
What’s to come
I’m extending this analysis to all California public colleges, looking at:
- Which institutions rise or fall under the regional baseline.
- Patterns by sector (public vs private).
- Public release of the code, dataset, and interactive visualizations.
I look forward to Al’s further analysis (nice name-based branding, by the way, for his AI coverage).
Stay Tuned
To be clear, I am not railing against any usage of economic returns metrics in the evaluation of postsecondary program returns for students. With OBBBA, it is the law of the land. But I am calling out the poor design of the Earnings Premium metrics that have been used to date and that are gaining in momentum.
You can read this as Get involved, go comment during the Department of Education’s public comment period (through August 28th) and comment to ACCJC. Request changes to the chosen metrics. Or you can read this as Get prepared, this new economics-first world of program accountability is starting to hit all colleges and universities, and it could be painful.
As for myself, I am working on further evaluation of the chosen baseline metrics on high school graduate (but no college) earnings and seeing more in the regional impact. And I’m going to add analysis for graduate programs that do a similar comparison but to Bachelor’s holders as the baseline group.
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