Why the Right ROI Matters
In the Light of New Federal Accountability Rules
Starting July 1, 2026, new federal accountability rules will introduce a major test for higher education programs: are their graduates earning more than the typical high school graduate in the same state or nationwide?
This initiative, formally known as "Ineligibility based on low earning outcomes" (Section 84001 of H.R. 1), is part of Title VIII, Subtitle E of the Higher Education Act amendments. If a program’s graduates earn less than the median high school graduate, that program could lose access to federal funding—a potentially existential blow for some colleges.
While the rule’s benchmark is simple—comparing graduate earnings to a high school baseline—its implications for students are considerably more complicated. For students and families making decisions about college, the key question is not just whether their earnings clear a minimum threshold, but how long it takes for the benefits of their education to outweigh the costs. Equally important is the intensity of that interval from investment to return. (Note: there is a similar threshold for graduate programs)
Three Phases of Career Takeoff
When it comes to life after college, most people picture a single turning point—graduation—when everything changes. But in reality, starting a career is more like a flight.
Some graduates are still sitting on the runway. They’ve invested in their education, but their earnings haven’t yet lifted above their pre-college trajectory. It’s a waiting game. In some cases, it’s also a survival game. Every month of delay — waiting on the runway — adds to the cost and the uncertainty.
Others have taken off. Their careers are underway, earnings are rising, and they’re beginning to see the payoff from their investment. This is the moment when the extra income from college starts to feel real.
A third group is mid-flight. They’ve not only taken off, but have reached a stable cruising altitude—enough earnings and career momentum to support long-term plans like starting a family, buying a home, or saving for the future.
In this analysis, my focus will be on the time students spend sitting on the runway—a period of maximum risk and uncertainty. I will quantify ROI as time spent on the runway, where plans are deferred and the future is still a dream. The intuition is simple: the more time you spend on the runway, the greater the risk of failure. Conversely, the sooner you take off, the greater your odds of success.
Comparing Two Colleges: Baseline ROI
To see how “time on the runway” can be measured, let’s look at two hypothetical colleges—Coastal Valley College (public) and MetroTech Institute (private, for-profit). These are based on real data but with names changed to protect the institutions.
Key Terms
Median Earnings (10-Year): The median annual earnings of graduates 10 years after enrollment from the two colleges.
Total Net Price (2 Years): The average total cost for completing a two-year program.
High School Median Earnings: The median earnings of high school graduates in the same state.
Earnings Premium: The difference between a program’s median earnings and the state’s high school median earnings.
C-ROI (Current ROI): The simplest measure of payback time—how many years it takes for the earnings premium to equal the cost of the program. I’m labeling this as “Current ROI” because the proposed federal formula would use this measure.
At first glance, both programs appear to pay for themselves quickly according to C-ROI—just over four months for Coastal Valley College and just under a year for MetroTech Institute. That’s the surface story.
But if our goal is to understand how long graduates are “sitting on the runway” before their careers truly take off, C-ROI alone is likely to be too crude. It ignores the fact, for example, that local labor markets matter—a lot. A dollar of extra earnings in one region may be much harder to achieve in another, even for the same program.
As Phil Hill, one of the most widely respected analysts of higher education technology and policy, has suggested, moving from a statewide to a regional calculation can paint a very different picture of how programs perform for the students they actually serve. That’s where we turn next: looking at regional ROI metrics that might better reflect labor market reality.
Moving from Statewide to Regional ROI (H-ROI)
C-ROI gives us a quick, back-of-the-envelope view of payback time, but it assumes that graduates earn the same premium no matter where they work. That’s rarely true. Graduates from the same program often end up in local or regional labor markets that differ sharply from the statewide average.
H-ROI—a “home-market ROI” calculation—adjusts for this by comparing graduate earnings to the median high school graduate in the same county or region where the college is located. This provides a closer match to the job market most graduates will actually face. Again, the calculations below are based on real data from the same two institutions above, but the names have been changed. (Note: I am using Public Use MicroData Areas (PUMAs) to develop the H-ROI metric).
Regional Reality Check
Now the difference in “runway time” becomes stark. In their actual local job markets:
Coastal Valley graduates reach payback in about 1.8 months
MetroTech graduates take over a year
Both programs might pass the federal “earnings premium” test, but from a student’s perspective, the time on the runway is much longer for MetroTech—about seven times longer than for Coastal Valley. And that extra time represents the period of maximum risk and uncertainty, when a graduate’s financial position is most vulnerable to market shocks and life disruptions.
We should note also that Earnings Premium for Coastal Valley College has increased from $9,548 (statewide metric) to $22,687 (regional metric). This is an important confirmation of Phil Hill’s hypothesis. While I am only showing one institution here, the same logic (gains and losses) applies to the wider dataset of community colleges in California.
In the next step, we’ll build on this H-ROI baseline with more realistic assumptions that account for financing patterns and the timing of when earnings actually arrive, giving us a truer picture of how long it takes to get airborne.
Translating H-ROI into “Real Years” on the Runway
H-ROI is a technical measurement: it tells us how many years of extra earnings (above a local high school graduate) it would take for a graduate to recoup the cost of their education. It’s a clean, comparable number—but in reality, graduates don’t get that premium all at once.
Recall that the median earnings for graduates used in the estimate is ten years after graduation. Raises happen over time, some months have gaps in earnings, and early-career wages can be volatile.
If we adjust for these real-world factors, the actual time a graduate spends on the runway before their investment “breaks even” stretches considerably.
Using a conservative adjustment, the H-ROI for:
Coastal Valley College:
H-ROI (technical) = 0.15 years (~1.8 months)
Estimated “real years” H-ROI (real) runway time ≈ 0.46 years (~5.5 months)
MetroTech Institute:
H-ROI (technical) = 1.04 years (~12.5 months)
Estimated “real years” H-ROI (real) runway time ≈ 3.22 years (~38.5 months)
The chart below shows how these times might change under conservative, moderate, and severe real-world adjustments, where career payback for some graduates can extend easily beyond six years.
Why the Length of the Runway Matters for Policy
Even these “real years” estimates understate the complexity of post-college financial realities. Payback times vary sharply by sex—men, on average, tend to earn more than women early in their careers, shortening their runway time. Women often face longer payback periods and greater exposure to career interruptions, compounding financial vulnerability.
Borrowing patterns add another layer. Students at higher-cost private institutions typically borrow more, and heavier borrowing stretches the runway further. For these graduates, debt repayment can push takeoff far beyond the simple earnings-based calculations shown here.
From a student’s perspective, the difference between spending six months on the runway and six years can be catastrophic. Those stalled on the runway face much greater exposure to market shocks, recessions, and personal setbacks—events that can derail their ability to ever “take off” financially. The cost isn’t just lost time; it’s compounded risk, stress, and the possibility of never realizing the return they invested in.
From a policy perspective, this is exactly the kind of hidden hazard that must be made visible. The proposed Earnings Premium Regulation will set a bright-line eligibility threshold for institutions, but that alone doesn’t capture the whole story. The more subtle—and arguably more important—question is how long students remain in this high-risk, pre-takeoff phase, where the margin for error is razor-thin.
Six months on the post-graduation runway is a momentary delay; six years is a recipe for disaster.
That is why focusing on time on the runway matters. It reframes the conversation from a narrow compliance question—“Does this program clear the high school earnings bar?”—to a broader, student-centered one: “How long before graduates can truly launch their careers?”
Credit to Phil Hill for calling attention to the need for a more nuanced, student-focused view of ROI metrics. In the coming weeks, I’ll be launching a new research website with data, interactive tools, and analysis on this topic—beginning with a detailed look at every community college in California. My goal will not be to advocate for any particular policy perspective, but to provide clear, objective information that policymakers, institutions, and researchers can all trust to inform their decisions.