Enlisting ROI to Better Align Academic Credentials and Workforce Needs

Enlisting ROI to Better Align Academic Credentials and Workforce Needs

With tuition costs rising, lawmakers hope to attract students with higher ed programs that offer a strong return on investment.

When developing ROI formulas, states must consider that certain majors, such as teaching, nursing or child care, while important fields, may not yield financial returns until the later stages of graduates' careers. (FatCamera/Getty Images)

As higher education struggles with declining enrollment, states are using return on investment reviews to merge education and workforce systems and enhance economic outcomes.

Incorporating ROI metrics has become common practice, with at least 46 states reporting college success outcomes and 35 states reporting workforce outcomes, according to Britebound, a nonprofit that helps students identify academic and career opportunities. ROI measures try to capture the amount of time it takes for a college graduate to break even on the cost of their postsecondary education and begin to earn more than a high school graduate. ROI formulas that estimate a program's break-even point provide more nuance than those looking solely at earnings data.

Some ROI formulas include opportunity costs, demographics and student characteristics, while others focus on the earnings boost from a degree. States must also consider that certain majors, such as teaching, nursing or child care, while important fields, may not yield financial returns until the later stages of graduates' careers.

Credentials of Value

Organizations including Education Strategy Group and Advance Career and Technical Education, as well as philanthropies such as the Lumina Foundation and the Strada Foundation, develop frameworks to address ROI measures. Reporting ROI data is beneficial for multiple stakeholders, including policymakers, higher education institutions, and students and their families. Policymakers can use ROI data to make more informed investments, secure measurable returns and ensure that public funds are being used efficiently, ultimately developing a workforce that fosters economic growth.

Postsecondary institutions can use ROI data to improve the value of higher education and gain public trust, enabling them to attract more students and secure increased funding. By clearly demonstrating program effectiveness, colleges and universities can reinforce their role as leaders in delivering accessible, high-value education.

To help students evaluate an institution's effectiveness, the Student Access and Earnings Classification, developed by Carnegie Classifications, collects data based on the types of students served and economic the outcomes they experience. The tool identifies the extent to which institutions serve students from lower socioeconomic and underrepresented racial/ethnic backgrounds, and it analyzes the competitive wages students might obtain in certain fields based on their geographic location. The data can help students choose the best financial aid offer and career fit based on economic return. The workforce benefits as students develop skills that match market demands.

State Actions

Below are recent examples of how states are enacting career education programs and ROI methodology:

To improved workforce alignment, Alabama matches student credentials and employment wage records to identify which programs lead to the strongest employment outcomes. The new Pathways to Progress initiative uses wage premium data to demonstrate how higher education levels correspond to higher earnings and to identify regions in the state lacking strong education pathways for developing high-demand workforce skills. Those regions were then eligible for scholarships of up to $3,000 per semester for adults to return to college and increase the educational attainment level of their communities.

Arkansas will integrate ROI metrics into its productivity-based funding model starting in the 2026-27 academic year. The ACCESS Act (HB 1512; 2025) expands the funding model for higher education institutions to include metrics for high-value industry credentials such as graduate employment rates, postgraduate earnings and workforce alignment.

Recent Colorado legislation appropriates $9.5 million for the Career Development Success Program to help students to complete industry-recognized credentials and coursework. In 2018, Colorado enacted a law (HB 1226) requiring the Department of Higher Education to publish an annual ROI report for undergraduate and certificate programs. The department also provides a postsecondary degree earnings outcomes tool that includes the annual median earnings for Colorado graduates one, five and 10 years following the completion of a credential, as well as median earnings based on type of postsecondary institution, degree level and program of study.

Iowa continues to develop a list of industry-recognized credentials of value that enable residents to stack multiple credentials and upskill for career advancement. The state also plans to incorporate ROI data into its existing wage and employment outcomes dashboard using a break-even threshold calculation to measure whether a college graduate can, over time, earn more than a high school graduate while taking into account the full cost of college attendance, including interest on debt. A 2024 law (HF 2625) requires school districts to provide 11th and 12th graders with information from community colleges and regent universities on graduates' average income and student debt.

Louisiana is working to merge postsecondary education with workforce needs by aligning the Louisiana Board of Regents, Louisiana Workforce Commission and institutions of higher education. A new law (HB 373; 2025) requires the State Workforce Commission to conduct an annual return on investment analysis for industry-based credentials earned in high school.

Texas enacted legislation to create a classification for credentials that includes a positive ROI for students. Graduates must be able to recoup the full cost of attendance at a public junior college, including opportunity cost, which is the difference between a high school graduate's earnings and median earnings for students while enrolled in a certificate or degree program. State law also requires a biennial assessment of regional labor demand to allow public institutions of higher education to better coordinate programs with workforce needs.

Virginia's FastForward program at local community colleges provides short-term training in high-demand industries such as health care, information technology, and skilled trades and infrastructure. FastForward provides annual ROI evaluations that include wage gains relative to program costs, helping the state focus its resources on credentials with evidence of value.

Implementing ROI

To implement ROI measures and strengthen coordination between education and workforce needs, lawmakers might consider the proven formulas other states have used. States have incentivized high-value programs, improved ROI of existing programs with public reporting, and used formula funding and special purpose funding to enhance the value of their higher education programs.

States looking to create ROI formulas or refine existing ones should take care when defining credential parameters. Challenges including unavailable wage records and students relocating out of state, enlisting in the military or declining to report personal data can complicate accurate measurements. Addressing these limitations helps to ensure that ROI measures improve transparency and hold institutions accountable for delivering high-value credentials and evaluating student outcomes.

For more on recently proposed and enacted measures, visit NCSL's Postsecondary Legislation Database.

Morgan Osburn is an intern in NCSL's Education Program.