A new era of accountability has arrived in California higher education, and it comes down to a single question: How quickly can students recoup the cost of their education?

The Price-to-Earnings Premium (PEP) is a dominant measure of institutional value. This metric, prominently featured in the U.S. Department of Education's College Scorecard data, calculates the number of years it takes for a graduate's increased wages to offset the cost of their education. Divide a student's total net cost by their annual "earnings premium" compared to high school graduates, and you get a simple number that policymakers, accreditors, and funders increasingly use to judge which institutions offer the best return on investment (ROI). 

The recent Golden Returns report from the College Futures Foundation revealed stark disparities: 38% of Bay Area institutions allow students to recoup costs within a year, while only 6% of colleges in the Inland Empire achieve the same result. These numbers have captured headlines and shaped public perception. But this approach is profoundly flawed for several reasons.

First, the calculation is highly unstable. Compton College's payback period, for example, jumped from 4.2 to 13.0 years in one reporting cycle, not because the college failed, but because California's median high school graduate wage rose faster than the earnings of its graduates. Second, the metric uses a statewide wage benchmark that ignores regional economic realities. California’s regional economies vary dramatically. Colleges in high-cost regions, such as San Francisco, may appear to outperform those in the Central Valley, even when students in both regions experience similar relative wage gains in their local economies.

Additionally, the data leaves out most community college students.  It only includes full-time, first-time students who receive federal financial aid, excluding the majority who actually attend part-time.  Undocumented students who complete the California Dream Act Application but don't receive federal aid are also excluded entirely. Thus, the published ROI reflects a narrow subset, not the norm.

Furthermore, aggregate institutional data masks critical program-level differences. The metric combines outcomes from short certificates, transfer-focused degrees, and career-technical programs into one number. Yet students who transfer to four-year universities, often those with the strongest long-term earnings, are largely invisible if they don't complete a degree first.

This matters because when programs are cut based solely on earnings, we lose essential fields that serve the public good, including early childhood education, social services, the arts, humanities, and public health. Students from underserved communities, who rely on community colleges for affordable pathways to mobility, bear the brunt of this shift.

The truth is that California's community colleges deliver exceptional value. Research commissioned by the Chancellor's Office shows that for every dollar students invest, they receive $13.10 in higher future earnings. Taxpayers see $1.60 returned for every dollar invested. Society receives $14.00 in benefits, including reduced crime rates, improved public health, and increased civic engagement.

While the PEP offers a metric, it systematically excludes the majority of students, misrepresents regional economies, and aggregates diverse programs into misleading averages.

FACCC blog posts are written independently by FACCC members and encompass their experiences and recommendations. FACCC neither condemns nor endorses the recommendations herein.