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CHESLA Economic Impact Study

Sep 28, 2022

Executive Summary of the Report on the Economic Impact of CHESLA on the Connecticut Economy


This report was undertaken at the request of the Connecticut Higher Education Supplemental Loan Authority (CHESLA) to determine the economic impact of its college loan and scholarship program.  CHESLA is a quasi-public entity of the state of Connecticut charged with helping to make college more affordable and attainable for the citizens of the state of Connecticut.  Through CHESLA’s In-School loan program, residents can borrow money to attend any public or private non-profit 2-year or 4-year college or university in the United States.  Need-based scholarships are available to residents as well, but only if the resident is studying at a Connecticut based college or university.  National data indicates that financial considerations are a major impediment to high school graduates being able to attend and/or complete college and students have turned more and more towards loans and scholarships to pay for college.  Currently, total student loan debt in the country is $1.75 trillion up from $330 billion in 2003.

Spending for higher education by the state government in Connecticut has increased substantially since 1993 when it totaled $1.4 billion.  Today it is $3.38 billion.  Furthermore, state support is currently at $14,449 per full time equivalent (FTE) student which is far higher than the national average of $7,566 per FTE student.  Only three states exceed Connecticut’s level of support on an FTE basis.  At the same time, in inflation adjusted dollars, today’s FTE spending in Connecticut is slightly below the value it was in the year 2000; however, this is better than the national rate which currently is 13% below the inflation adjusted FTE from the year 2000.

Connecticut is known as a powerhouse for education, both private and public.  It has several research schools within the state which attract students from all over the world.  Furthermore, the state has a higher percentage of high school students who go to college and a higher percentage of college students who complete college than the nation.  Connecticut high schoolers go to college between 4 to 8 percentage points higher than the national average and college students in Connecticut complete college almost 10 percentage points higher than at the national rate.  It is well known and understood that education has a tendency to raise income levels.  This is true within the state of Connecticut as well which has a population with a high rate of college education—and these educated persons tend to earn more than their national peers.  For example, the median earnings for a person with a bachelor’s degree in Connecticut is $66,131 which is 18% higher than the national average.

To determine the economic impact of CHESLA’s student loan and scholarship program, CHESLA data was combined with Connecticut specific higher education, income, employment, and tax data to build an economic model.  A time frame of 2015 to 2021 was examined.  The model was divided up into two components—a short run model and a long run model.  In the short run, the CHESLA student loan and scholarship program helps to fund university activities and spending.  This short run economic impact is large.  The program has helped to create 597 jobs, increased wage income in the state by more than $72 million, and increased output by almost $129 million while increasing state Gross Domestic Product by $74 million between 2015 and 2021.

The long run model examines the probable outcomes of students who received a CHESLA student loan or scholarship during this same time frame and projects their future income and taxes paid over the rest of their working lives—from age 18 to 65.  Some of the students who received a loan or scholarship will not graduate and their economic impact will be limited.  Others will graduate, but leave the state for employment so that their economic impact in Connecticut becomes in effect non-existent.  However, a large portion of these students will complete college, and even go on to graduate school, and will remain in the state.  These students will earn a combined increase in lifetime incomes of $3.5 billion in net present value terms over a similar sized cohort that graduated from high school only.  This will translate into an additional $406 million in net present value of taxes for the state of Connecticut and $837 million in net present value of taxes for the federal government.

Report Conclusions

The increasing cost of college, as well as people beginning to wonder if college is even ‘worth the cost’, has started to become an impediment to college in recent years for many people.  Although there is anecdotal evidence of people earning a college degree and subsequently earning very little in income, in general the data indicates that for the vast majority of persons college is indeed ‘worth the cost’.  This just leaves the issue of how to pay for college.  CHESLA is able to offer assistance in this regard through loans and scholarships.  Students on a scholarship must attend a Connecticut school, but those with a loan can attend any school in the US.  Once these students graduate from college, they will typically earn higher wages for the remainder of their life.  In this sense, there is both a short run and a long run economic impact occurring thanks to CHESLA loans and scholarships.  Evidence in this report indicates that the impact is large and long lasting.

In the short run, today’s CHESLA loans to students are used by students to fill-the-gap in paying for today’s education.  In this sense they are used by colleges and universities to fund current expenditures for faculty, staff, supplies and equipment, and other educational needs by schools.  By building an Input-Output model of the Connecticut economy, one can determine the size of this short run effect.  The CHESLA program has helped to create 597 jobs, increased wage income in the state by more than $72 million, and increased output by almost $129 million while increasing state Gross Domestic Product by $74 million between 2015 and 2021.

In the long run, this economic impact is even larger.  By going to college, students are increasing their human capital and lifetime earnings potential—even if they never actually complete college.  These students who finish college will earn $1.2 million more than the average high school graduate.  People obtaining advanced degrees will have an even larger earnings differential.  These increased earnings mean higher tax revenues for federal, state, and local governments.

In 2015-2021, these CHESLA loans and scholarships were approximately $148 million in size which helped to create a combined short and long run net present value income effect of more than $3.3 billion for Connecticut.  This translates into a return of more than $22 for every $1 that was lent or given out via loans and scholarships.  There are very few investments where individuals, or society, can make a return of this size.