The Fiscal Impacts of College Attainment

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The Fiscal Impacts of College Attainment

Author

Philip A. Trostel (BIO)

Professor of Economics and Public Policy, School of Economics and Margaret Chase Smith Center for Public Policy
University of Maine
Faculty Affiliate, WISCAPE
University of Wisconsin-Madison

Summary

This study quantifies the fiscal benefits associated with greater college attainment, one important part of the economic return to public investment in college education. College graduates generally pay much more in taxes than those not going to college, and government expenditures are also generally much less for college graduates than for those without a college education. Indeed, over an average lifetime, total government spending per college degree is negative. That is, direct savings in post-college government expenditures are greater than government expenditures on higher education. Plus, the direct extra tax revenues from college graduates alone are more than six times the gross government cost per college degree. Thus, in addition to the many other benefits from higher education, public financial support of college education pays for itself many times over. The fiscal effects from college attainment are estimated for numerous federal, state, and local taxes and expenditures. The average annual real internal rate of return on government investment in college students is estimated to be 10.3%.

The final version of this paper was published in 2010 in Research in Higher Education.

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