Benefit-cost analyses place a monetary value on program benefits, enabling a comparison of costs and benefits to determine whether an intervention is worth the investment from a societal or agency perspective. In higher education, the costs of programs that produce more college graduates might be compared to the resulting benefits, such as higher incomes, increased tax revenue, reduced government transfers, and improved health.

Benefit-cost analyses typically involve three major steps:

1. Calculate intervention costs. Cost analyses identify and quantify all resources required to implement the intervention, including personnel, materials, and overhead.
2. Estimate effects on outcomes. Use experimental data to estimate the intervention’s impact on key outcomes, such as degree completion.
3. Monetize outcomes and forecast benefits. Assign dollar values to the measured outcomes and forecast the monetary value of impacts on those outcomes to estimate the total benefits attributable to the intervention.

There are multiple approaches to monetizing outcomes and forecasting benefits. One approach is to transport estimates of the returns of a degree from the literature to your study (for an example of estimates of the returns of a degree, see “Is College a Worthwhile Investment?”).^[1] Another approach is to use observational data (for example, the American Community Survey), to estimate localized differences in earnings between degree completers and noncompleters and apply those differences to the estimated impact on degree completion from your study. Each approach involves strong assumptions, and healthy skepticism is recommended when considering the results of most benefit-cost analyses.