Return on Investment

“Leaders must understand that ROI isn’t a magic number or a moral judgment. It’s a disciplined way to understand what they’re getting for what is being spent by individuals, organizations, and society. When ROI is used precisely and transparently, it sharpens strategic decision-making and improves outcomes.”

Adapted and updated from the original Bellwether publication, “Education Reformers Using Bad Language: Return on Investment,” January 2026.

In education (and the nonprofit ecosystem more broadly), we have a bad habit of using jargon that creates more confusion than clarity. One problematic term is “return on investment” (ROI).

Demand for ROI-based decision-making, in both program and policy decisions, is accelerating. But all too often, when someone discusses ROI, I have to ask which type they’re referring to because there are at least six common variations of ROI used interchangeably. All have utility, but each one is different. Some focus on individual financial value and others are grounded in non-financial sources of value. It’s important for organizations and their stakeholders to have a common language on ROI and know which definition(s) they will measure and hold themselves accountable for. When a measure like ROI is thrown around conceptually without any quantification, it quickly loses credibility.

So, how should education reformers consistently think about, measure, and communicate ROI?

Even at its most basic level, there is not consistency on the basic ROI calculation. From a technical definition, ROI is calculated as follows:

However, in a great many instances, nonprofit and education organizations are using a different calculation that is simpler and more generous, which they call ROI but which is technically a ratio of value to costs.

I have learned to prefer the technical calculation, though I have used the value-to-cost ratio as well.

ROI gets even more complicated when organizations begin to think about what goes into value and cost. Take, for example, the national conversation around the value of postsecondary pathways. There is a dizzying array of considerations that go into determining the “true cost” of a college degree or non-degree credential – the figure that becomes the denominator of a postsecondary ROI calculation. It requires first assembling all the costs that should be considered, including tuition, fees, books, housing, food, and technology (though people of good conscience disagree about which costs to include). From there, each cost must be accurately determined, parsing out the maze of list prices versus net actual costs while navigating confusing language about financial aid.

In this postsecondary example, time to degree or credential completion must be factored into the cost because when it comes to education, time is money. Does an ROI calculation assume that a two-year associate degree is completed in two years, or does it account for the reality that the actual average time to degree completion is often north of three years? Should the opportunity cost of lost earnings while in school also be considered? At the program level, should we include the costs incurred by those who start but don’t complete a program?

For the numerator, over what timeframe should earnings be considered? And what should be the comparison group in evaluating these changes in earnings?

Furthermore, ROI should be examined alongside the absolute increase in value. Because ROI is the relationship between value and investment, a college student can have high earnings and a negative ROI if they spent more than they gained, or a high ROI but low absolute earnings if the cost was minimal. Both matter for a balanced understanding of value.

As with any unit of measurement, ROI’s meaning and credibility only become clear when the assumptions (sometimes many) behind it are transparent.

That’s why individuals and organizations in the education sector, including nonprofits, for-profits, public systems, and government institutions, should be explicit about which of the following six types of ROI they intend to quantify, share, and use to demonstrate value and make decisions:

#1: Individual Financial ROI

This refers to the increase in earnings an individual achieves relative to the cost they paid for their educational investment. It commonly applies to pursuing a postsecondary pathway (see above), but it can also apply to other education-related purchases individuals make in hopes of improving earnings, including in K-12.

#2: Societal Financial ROI

This is the financial value of an education intervention to society, and it falls into two categories.

• The first is the increase in tax revenues from a positive change in a population’s earnings over their working lifetime.
• The second is how this economic success enables these people, and society, to avoid costs associated with poverty such as unemployment, food insecurity, housing insecurity, health care insecurity, costs related to incarceration, etc.

A 2012 analysis by Northeastern University’s Center for Labor Market Studies, using 2008 data, estimated that the net fiscal contribution to society of someone without a high school diploma over the course of their lifetime from ages 18 to 64 was negative $71,000 (i.e., they impose a net cost on society). In contrast, someone with a high school diploma had a net positive financial societal contribution of $236,000 in tax revenue and cost avoidance in their lifetime; for someone with a bachelor’s degree, it is a positive $885,000.

Another valuable resource for quantifying societal cost avoidance is a 2015 report funded by Lumina, using 2012 data, titled “It’s Not Just Money: The Benefits of College Education to Individuals and Society,” authored by Philip Trostel. It contains estimates of cost avoidance related to spending in areas like Medicaid, SNAP benefits, housing benefits, incarceration, and unemployment insurance. It also explores quantifying the benefits of educational attainment to other measures of value such as financial savvy, marriage, happiness, health insurance, retirement, civic participation, social capital, and philanthropy.

I am in the process of using Trostel’s methods to update elements of his analysis with 2023 data. Check back soon.

#3: Organizational Financial ROI

This is the financial ROI that an organization achieves from its investment. In the education sector, it involves an investment in individuals who, through their success, enable an organization to increase its own financial success (e.g., employers bringing on apprentices).

In education, there is often a real reluctance, bordering on a stigma, to embrace the idea that employers should get financial benefit through investment in education efforts. However, for companies to participate significantly in a social venture, such as through apprenticeships, these ventures must meet a compelling need and create economic value for employers. “Altruism does not scale.”

Organizational financial ROI does not just apply to companies; it can also include nonprofits, K-12 school systems, or postsecondary pathway providers that, through an investment, achieve economic returns. For example:

• Pay-for-performance policies are expanding across education. Texas’ 2023 House Bill 8 shifts community college funding from credit hours taught to student completion of “credentials of value” (particularly in high-demand fields), successful student transfer to four-year postsecondary programs, and completion of dual credit courses while in high school.
• K-12 attendance initiatives can be measured in terms of ROI based on their ability to raise revenue through higher Average Daily Attendance, which is how some districts determine revenue to schools.
• Postsecondary pathway providers may invest in student recruitment or persistence strategies (such as robust student advising), whose ROI is measured based on the increase in revenue that comes from higher enrollment and retention.

#4: Organizational Social ROI

This quantifies the non-financial value that an organization gets from an investment. Organizational social ROI is a unit of value other than dollars: not a dollar gained per dollar spent, but some unit of non-financial value gained per dollar spent (e.g., Does an investment create a social good? Does it improve internal morale or improve an organization’s brand?).

One challenge with organizational social ROI is the temptation to convert it into organizational financial ROI. Does an investment raise employee morale, resulting in reduced turnover, which then reduces hiring costs and improves productivity, leading to more profitability? Does a stronger public brand translate into increased sales? There is a risk that everything in organizational social ROI gets thrown into organizational financial ROI, which can undermine it as a credible measure.

This does not mean organizational social ROI has no value: just the opposite. In the case of a cause like the environment, an organization can look at its organizational social ROI of tons of carbon captured and removed from the atmosphere per dollar invested. This can also be used to understand the negative social ROI of an investment resulting in more carbon emissions. On their own, both are valuable measures to drive decision-making.

However, if carbon tax credits exist, and therefore there is a market for carbon sequestration or avoidance, it can then additionally be quantified as an organizational financial ROI. Money isn’t everything, but it turns out to be a useful way to quantify value and keep score.

#5: Individual Social ROI

Not everything an individual invests in will have a financial return. For example, individuals who care about the environment may decide to take actions that have a negative financial ROI but a positive social ROI via recycling, paying congestion charges, or choosing how they source energy.

This also underscores why policy is so important: it can determine the incentives in a market, which can be used to bring individual (and organizational) social and financial ROI into alignment.

#6: Education ROI

This quantifies the additional level of education achievement (e.g., growth in math scores) and/or education attainment (e.g., graduating high school and/or matriculating and graduating from a postsecondary pathway) for each dollar invested.

Because education achievement and attainment are quantifiable, it’s possible to track the level of value created from spending on different interventions and compare them against each other.

In 2017, I analyzed the education ROI of parent organizing. A parent organizing nonprofit spent $477,000 on an issue campaign that built grassroots power to influence a school board to authorize 1,544 new charter seats. Over 10 years (assuming charters grew a grade per year and applying a 10% compound discount rate), this would redirect $85 million from district schools to charter schools. Some education reformers might stop there and call this a victory: $178 redirected for every $1 invested.

However, if the goal is higher student achievement, moving money from school system A to school system B isn’t a sufficient measure of value. What matters is whether students learn more. In the first two years of operation, these charter schools increased proficiency rates for economically disadvantaged students by 25 percentage points, averaged across math and English language arts, compared with the existing district schools. As a thought experiment, discounting the $85 million by the 25-percentage-point incremental improvement (the numerator) and then dividing that amount by the original spending on a campaign (the denominator) would result in $44 of educational value created for every $1 spent on organizing in this example.

This is not a perfect methodology (investment bankers don’t like the absence of profit), but it can be a powerful way to understand the education ROI value from an investment, and to compare trade-offs among different potential education investments (either as this example of a dollar education ROI measure, or by comparing the incremental education improvement across different investment options).

Education ROI in parent organizing also speaks to the potential return on investing not just in education programs, but in influencing the systems that govern them. As discussed in a recent publication on Systemic Impact, social problems are owned by social systems that control the vast majority of decisions on policy and where policy directs funding.

These various versions of ROI can also interact and require trade-offs among them. For example, “free community college” will hopefully increase the financial ROI for individuals, but it also places an additional cost on societal financial ROI. Some undergraduate majors, like nursing, cost more than others for colleges to deliver, yet colleges charge and receive the same tuition regardless. Majoring in early childhood costs the same as majoring in nursing, even though the earning outcomes for individuals are radically different (which is information students should know to inform their degree decision-making process).

Last, sometimes investments require trade-offs between ROI and equity. The highest financial ROI (individual or societal) may come from serving the most advantaged, easiest-to-serve communities, and not the most disadvantaged ones. ROI is about creating and measuring value, but sometimes measuring absolute value masks disparity in who is receiving that value. Many social justice organizations are focused on creating value for specific communities. However, even in this circumstance, ROI can still be invaluable in making comparisons between different options that are all focused on a given community or cause.

Conclusion. More organizations need a clear, rigorous understanding of ROI, across a common set of definitions, to respond to opportunities and competitive pressures and ultimately make decisions about the investment of scarce resources.

Leaders must understand that ROI isn’t a magic number or a moral judgment. It’s a disciplined way to understand what they’re getting for what is being spent by individuals, organizations, and society. When ROI is used precisely and transparently, it sharpens strategic decision-making and improves outcomes.

In an education and nonprofit field with limited resources relative to social needs, that clarity is worth the investment.