New report shows state’s investment in Kentucky higher education offers strong financial returns

February 10, 2025

A new report by the Center for Business and Economic Research (CBER) at the University of Kentucky examines Kentucky’s return on investment for funding allocated to public colleges and universities and state financial aid programs. Chief among its findings – the tax revenue generated from Kentucky college graduates is four-and-a-half times greater than the state’s initial investment in their degrees. Additionally, consumer spending generated by college graduates is 17 times greater, which supports local businesses across the Commonwealth.

These returns are conservative estimates, since they don’t account for the financial benefits associated with higher degree attainment. These include lower unemployment rates, less chronic disease, lower crime rates and less reliance on public assistance.

“To put it simply, every dollar the Kentucky General Assembly spends on postsecondary education returns $4.50 to state and local governments through income, sales and property taxes,” said Michael Childress, a CBER research associate and report author. “That dollar also generates $17 for local businesses, which means more jobs and stronger local economies.”

The report, commissioned by the Kentucky Council on Postsecondary Education (CPE), found that college graduates in Kentucky earn twice as much high school graduates over a lifetime - $1.2 million compared to $600,000, even considering out-of-pocket postsecondary costs and lost wages during college. The wage premium for bachelor’s degree holders is 1.9 times higher than for high school graduates; for graduate degree holders, it is 2.4 times higher. 

These higher wages mean more tax revenue and higher levels of consumer spending. “This report validates that higher education pays – not only for individuals, but for our state and local communities,” said Aaron Thompson, CPE president. “When we invest in higher education, we reduce spending on Medicaid, prisons, and public assistance and create economic opportunity that ripples through our local communities, bettering the lives of all Kentuckians, not just college graduates.”

CBER arrived at the wage premiums for postsecondary degrees by comparing the earnings of Kentuckians who graduated high school in 2015 and were working in the state eight years later. CBER used the Institute on Taxation and Economic Policy’s tax microsimulation model to estimate the tax revenue associate with college graduates, and the U.S. Bureau of Labor Statistics Consumer Expenditure Survey for average consumer spending by education level.