Higher education value metrics that indicate how well institutions across the U.S. are delivering economic returns to their students. Developed by Third Way, the Price-to-Earnings Premium (PEP) and Economic Mobility Index metrics assess the extent to which institutions are preparing students to recoup their educational costs quickly—or leaving them worse off than if they had never attended.

The PEP measures the value that higher education institutions provide their students by looking at the net price the average student pays out-of-pocket to obtain an academic credential relative to the additional amount they earn by attending that institution in the first place. A PEP value is also constructed for low-income students, which identifies the time it takes students whose household income was $30,000 or less to recoup their educational costs. This provides information about how this population is faring in higher education.

Using data from the College Scorecard, the  PEP calculates the ratio of the institution’s total average net price to the graduate’s expected earnings premium from attending that institution. The total average net price of the bachelor’s degree (assuming 4 years of tuition) is computed for the difference between the median earnings of a former student from that college 10 years after initial enrollment and the median earnings of a high school diploma holder in the same state as the institution.

A low PEP value indicates it takes students fewer years to recoup the net cost of the degree. A  higher PEP indicates the institution saddles students with high tuition, fails to deliver a strong earnings premium, or both.

The PEP for low-income students is calculated using the same formula with adjusted College Scorecard variables for students in the lowest income tercile. Low-income students are defined as those whose families make $30,000 or less when they enroll in college.