Best Colleges for Return on Investment

Jacqui Kenyon
Posted

college roiIf you have student loans—or have children who do—you know the cost of college is nothing to sneeze at. For the 2012-2013 academic year, tuition and fees cost $8,655 for in-state public school attendants. The cost for those enrolled at private universities? $29,056 for the year, according to the College Board.

People attend college in hopes that it will give them the skills they need to get great jobs, which will allow them to more than make back the money spent on education. However, current unemployment statistics show that this isn’t always the outcome. According to consulting firm Accenture, 11% of grads from the past two years are unemployed, and 41% are working jobs that don’t require a college degree.

The gobs of money people spend on education may be one of the most significant investments they ever make. So a good investor should try to calculate the return on investment for money spent on college just like he or she would for a stock or bond, right?

Calculating College ROI

Many studies have set out to find the ROI of a college education, and the findings are far from uniform. For example, a study by Georgetown University’s Center on Education and the Workforce found that the median value for a college degree is about $2.3 million, which is the average amount of money earned by someone with a bachelor’s degree who is employed full time from age 25-64.

Compensation data company Payscale, working with Bloomberg Businessweek, used a more complex equation to calculate the ROI for a college education. They took the total earnings over a 30-year period, subtracted the average earnings for someone with only a high-school degree, and adjusted for graduation rate (since if you don’t actually get a degree, education won’t do you much good) and how many years it took to get a degree.

The result? An average ROI of $353,182. Those writing a big check to Sallie Mae every month may prefer to look at Georgetown’s findings.

Colleges With the Most Bang for Your Buck

There is also variation in ROI from school to school. CNN Money used the Payscale calculus to determine the top five schools for return on investment:

1. Harvey Mudd College
2. California Institute of Technology
3. Massachusetts Institute of Technology
4. Polytechnic Institute
5. SUNY – Maritime College

Is a College Degree Worth What It Used to Be?

Despite allegations to the contrary, a college degree is still worth the investment: In 2011, the median income for a high school grad was $33,176, while the median income for a college grad was $54,756. Additionally, companies hiring for jobs that did not traditionally require a college degree are now seeking only candidates with a diploma.

So if you’re a recent grad, you shouldn’t regret the chunk of change you put toward college. And if you’re a parent, you’re better off keeping your cash in a 529 college savings plan rather than booking two weeks in Tahiti.

  • JBug

    I think your figure of “For the 2012-2013 academic year, tuition, room and board, and fees cost $8,655 for in-state public school attendants” is incorrect. I believe that figure is for tuition and fees alone, but does not include room and board. From CollegeBoard.org:

    Average published tuition and fees for in‑state

    students at public four

    year colleges and

    universities increased from $8,256 in 2011‑12

    to $8,655 in 2012‑13. The 4.8% ($399) increase

    in tuition and fees WAS ACCOMPANIED BY [caps added] a

    $325 (3.7%) increase in room and board charges

    for students living on campus. At $9,205, room

    and board charges account for more than half of

    the total charges for these students.

    • LearnVestJacqui

      Hello,

      Thank you for your comment. Both figures—for in-state public colleges and private universities—represent the cost of tuition and fees only. The text has been changed to reflect that.

      Thank you!