Why South Dakota Has The Nation's Best Public Colleges
Most students go to college to improve their economic prospects, but whether college pays off often depends on the state you live in. A new ranking of state higher education systems by the Foundation for Research on Equal Opportunity (FREOPP) concludes that, measured by value for money, South Dakota has the nation’s best public colleges. Colleges and universities in the Mount Rushmore State have the highest average return on investment (ROI), a measure of how much the financial benefits of a higher education exceed its cost.
High school graduates who enroll in one of South Dakota’s public colleges can expect a typical lifetime return of $217,000 on their education. In other words, the median South Dakota undergraduate increases her lifetime earnings by $217,000 after subtracting the cost of tuition and time spent out of the labor force while pursuing her degree. That return is nearly twice the national median of $118,000.
At the heart of South Dakota’s educational strength is its well-developed technical college system. Lake Area Technical College in Watertown, for instance, offers several high-value associate degrees in fields such as agricultural business and management. That program increases net lifetime earnings by $276,000, according to FREOPP’s estimates. Four-year schools such as the South Dakota School of Mines and Technology in Rapid City also offer bachelor’s degrees in high-value fields like mechanical engineering, which has an ROI of $619,000.
Overall, 83 percent of undergraduate programs in South Dakota have a positive return, compared to just 73 percent in the nation as a whole. South Dakota has succeeded more than most other states at ensuring that students who enter one of its colleges realize a return on their investment of time and money.
Unlike traditional college rankings such as U.S. News and World Report, FREOPP’s analysis of return on investment does not consider admissions rates, alumni giving, or peer assessment surveys. Instead, it simply calculates whether a higher education program leaves its students financially better off, and by how much.
A shocking number of college degrees, including many at prestigious institutions, do not meet that very simple standard. Many schools charge too much and deliver too little. As a result, college sometimes leaves students worse off — with dire consequences, as evidenced by the current student debt crisis.
Schools which want to have a meaningful impact on the students’ lives should be less concerned with prestige and more focused on what they are teaching. Bachelor’s degree programs in engineering, computer science, business, and nursing are far more likely to pay off than degrees in art, music, or psychology. At community colleges, credentials in health care and automotive technologies yield a positive return much more often than fields like cosmetology and liberal arts.
South Dakota’s public colleges have not invented any magic formula to generate economic returns for students. Instead, South Dakota schools have identified pressing labor market needs and provided the education to meet them. The result: students learn the skills they need for good jobs, which enable them to reach the middle class and quickly pay off their student loans.
In fact, students have figured out faster than colleges that some fields of study have a sounder financial return than others. The number of bachelor’s degrees conferred in the high-paying fields of engineering and computer science rose 68 percent and 125 percent respectively over the last decade, even as overall bachelor’s degree attainment rose just 18 percent.
State governments can do more to encourage this trend. One option is to link state funding for higher education to student earnings outcomes. This creates a direct financial incentive for colleges and universities to invest in high-return programs. States can also press their public universities to remove artificial barriers to enrollment in lucrative majors, enabling more students to access high-return courses of study. Targeted investments in expanding high-return fields may also be worthwhile. For instance, nursing is one of the highest-return bachelor’s degrees, but nursing schools turn away 80,000 qualified applicants per year.
States are the laboratories of democracy, and they should also be the laboratories of higher education policy. America’s state-led system of higher education has allowed states like South Dakota to establish colleges that pay off for more students. Other states should follow South Dakota’s example to ensure that their public colleges actually deliver on the economic mobility they promise.
Preston Cooper is a senior fellow at the Foundation for Research on Equal Opportunity.
