A Regression Analysis of College Tuition and Mean Income

Abstract

Studies spanning the second half of the 20th century have indicated that the more an university costs to attend, the greater return on investment in the form of eventual earnings. However, the current educational market suggests that these previous assumptions may no longer apply, and that cost of a university is no longer a significant indicator of how successful its graduates will be. With several notable shifts in this market in the last decade including an increase in online educational programs, a rising student population incurring student loans, and the suggestion that all public universities charge no tuition, the necessity for empirical testing of the effects of cost on eventual success became apparent. While cost of a university did prove to be an influential factor in determining wages when examined on its own, it fell flat when other education based variables, such as average school expenditures per student and average SAT scores, were added into the equation. It became even more insignificant when other underlying demographic and socioeconomic factors such as race and average family income were taken into consideration. What a series of regressions conclusively shows is that cost is in fact, insignificant compared to a myriad of other relevant variables from several different influential categories. The positive implications of these findings are hopefully that students expecting to enter college within the next several years can avoid making a painful investment, assuming that their investment will pay off just because of the amount of money they have spent suggests a certain outcome. That investment can rather be made based on considerations of more important factors, such as what a university can offer a student in terms of resources, whether that be money or man hours, and how the success of an institution’s graduates reflect its quality.