Skip to comments.College: Big Investment, Paltry Return (Research shows value is far less than previously thought)
Posted on 06/28/2010 12:29:50 PM PDT by SeekAndFind
If there's one truism that goes virtually unchallenged these days, it's that a college degree has great value. Beyond the great books, beyond the critical reasoning skills, and beyond the experience itself, there's another way that a college degree has value: Over the course of a working life, college graduates earn more than high school graduates. Over the past decade, research estimates have pegged that figure at $900,00, $1.2 million, and $1.6 million.
But new research suggests that the monetary value of a college degree may be vastly overblown. According to a study conducted by PayScale for Bloomberg Businessweek, the value of a college degree may be a lot closer to $400,000 over 30 years and varies wildly from school to school. According to the PayScale study, the number of schools that actually make good on the estimates of the earlier research is vanishingly small. There are only 17 schools in the study whose graduates can expect to recoup the cost of their education and out-earn a high school graduate by $1.2 million, including four where they can do so to the tune of $1.6 million. At more than 500 other schools, the return on investment, or ROI, is lesssometimes far less. College, says Al Lee, director of quantitative analysis at PayScale, "is not the million-dollar slam dunk people talk about."
The top of the list was dominated by elite private universities, with the Massachusetts Institute of Technology taking the top spot. Its net 30-year ROI of nearly $1.7 million makes it the most valuable undergraduate degree in the nation. The large number of MIT students who enter such high-paying fields as engineering and computer science certainly helped, but the school's advantages go well beyond that, says Melanie Parker, executive director for global education and career development at MIT.
(Excerpt) Read more at businessweek.com ...
The new research is based on self-reported compensation data collected through PayScale’s online pay comparison tools. PayScale examined pay reports from 1.4 million graduates of U.S. colleges and universities with no advanced degrees to calculate the ROI of each school. One reason the PayScale study resulted in a far lower estimate of the ROI on a college education is the way it calculated college costs. Instead of assuming everyone graduates in four years, as some do, PayScale used the actual number of years it takes students to graduate from each institution4, 5, or 6 years. Another reason for PayScale’s far lower ROI estimate is that it accounts for the fact that many students never graduateand go on to earn little more than a high school graduate. For them, the ROI on their college education is effectively zero.
Of the two, graduation rates had a far bigger impact on ROI. Of the 554 schools in the study, the net ROIfor graduates onlywas $627,239. But once adjusted for the average six-year graduation rate of 58 percent, the average overall net ROI shrank by 37 percent, to $393,574. Schools with the worst graduation ratesat some schools, fewer than 20 percent of students graduated in six years fared even worse in the PayScale analysis.
Also, While private schools dominated the top of the list, public schools proved to be far better value overall, at least for in-state students. Because of the lower costs paid by in-state students$82,301 compared with $126,933 for out-of-state students at public institutions and $170,219 for students at private schoolsthey enjoyed the best net annualized ROI: 9.7 percent. The worst deal: paying out-of-state tuition at a public university. Doing so results in an average annualized net ROI of 8.4 percent. Private schools yielded a net annualized return of 9.1
One big conclusion that can be drawn from the PayScale data is that collegeand college alonemay not be the great investment it was once thought to be
At least half of the college students I meet shouldn’t be there. They should be working or taking technical training courses.
The USA (and the FEDS) have over-invested in 4 year universities. That needs to end, and the higher-education bubble should be popped.
Rather, local communities (not the FEDS) should put money into 2 year technical/apprenticeship schools.
It’s great for colleges - they get all that gummint grant money.
Ah, not so much anymore.
My daughter is half-way through her MBA. Great time to find this out!
Hey, I paid for my own degrees, and now teach college history. I am paid well (even being paid to not teach this summer to complete a couple of writing projects), and am paid to study my area of interest since childhood, World War Two.
Be envious? Yes, you may. My hobby is my job.
Once your nation is gutted, it’s true. An education doesn’t garner you what it used to. It sill expands your odds on finding employment and keeping it. It makes the jobless periods shorter. It elevates the types of jobs you are qualified to hold.
Anything you can do to increase your worth, is a positive.
Look, making the case that a high school education is the best road to travel these days, is a severely flawed argument IMO.
looks like this study is focused upon undergrad degrees only
the value of MBAs may also be overblown but in many specific cases there is a lot of personal financial and professional benefit (speaking from anecdotes about family and friends I have observed through the years)
generally I’d far rather see young people obtain a lot of “real world” effective working experience before even thinking about an MBA (and many do work first for a few years)..... when I’ve dealt in business with freshly-minted MBAs who don’t have serious and credible working experience, their attitudes and egos tend to overwhelm common sense..... but I’ll hope that would not be the case with YOUR daughter...... :^)
The absolute iratating thing I see is college grads that can’t write a complete sentence. These are kids from private colleges that charge in excess of $50k/year tuition. Four years at $50k and you can’t write a complete sentence is troubling. All of them have the right opinions though.
‘Academics’ are dummied down beyond all recognition.
It all depends on what sort of degree you get and what you want to do with it. The market pays more for some degrees than for others. That’s reality.
A degree in philosophy may be a fine education, but the market doesn’t demand philosophers the way it demands other professions.
Many students pick a program they like knowing full well it doesn’t pay as well as others. It’s a choice they are free to make.
4. Harvey Mudd
9. Notre Dame
There's a big clue that income is more correlated with brains than education. Most people accepted into MIT would make far above average incomes even if they didn't go to college.
They neglected to include the opportunity costs in their investment calculations. Every hour studying for a degree could instead be spent earning money and gaining valuable experience. In the case of Bill Gates, the opportunity cost for finishing college turned out to be $53 billion.
How’d you make it past the Marxist goal-tenders on the dissertation committee?
Sorry to offend, but that's part of the problem:
Students and taxpayers are paying for your hobby while you punch the "publish or perish" ticket.
Meanwhile, every year we get more law school grads who will find work as buyers and office managers, more engineers who will toil as technicians, and more teaching school grads who know ideology better than their subject matter.
Higher education is now an industry that feeds off the public rather than serving to improve citizenship and the economy.
(Besides, we actually need technicians and buyers, we sometimes need office managers, and you know what they say about lawyers.)
I'll bet she did. For some reason, I have a feeling that job wouldn't be nearly as profitable for a forty year old with some sags.
This article hammers around the primary point. Some college degrees are profitable; some aren't. As to the value of the degree by institution, tried to get into Harvard or MIT lately? Students graduating from these top schools usually have IQs bordering on the genius level AND they're highly motivated and competitive. A person doesn't slack through high school, wake up two days before term starts and go register for classes at MIT.
It's popular now to think everyone is equally capable when it's not true. MIT runs a hard core curriculum for the same reason an NFL training camp runs drills that would just about kill the average person. If you aren't already in top form, you aren't getting on the field or in the classroom. Part of it's preparation and part of it's genetics.
Steve Jobs, Bill Gates, and Michael Dell are all billionaires and all dropped out of college. The lesson is NOT that dropping out of college will put you on the road to being a billionaire. The lesson is that those three guys are probably smarter than you, had drive, and developed a plan that worked.
If they redid this study and normalized by IQ level rather than by college, they would find somewhat different results. Students with the IQ of the standard MIT student would probably perform as well, even if they went to a less prestigious college. MIT doesn't just teach well. They select people that are already prepared for success.
While it would be far more difficult, a more revealing study would be to do comparisons of students from similar backgrounds and IQs, and compare their income levels based on whether or not they graduated from college and what major they studied. This would allow an apples and apples comparison, rather than taking the 150 IQ son of a politically connected millionaire who went to MIT and comparing him with the 105 IQ son of a warehouse worker who went to Philadelphia University.
I feel the same way about people who can't spell irritating.
I love it when Freepers who don’t know me make assumptions.
A private foundation pays my salary. I won my position through a process of interviews and reviews of my publications—that took almost two friggin’ years. That’s why I get to play at being a historian.
Let’s restate: the money that pays my mortgage was voluntarily handed to my school by a wealthy individual long ago, and then it was handed to me, because of my school’s reputation, and then MY reputation. (If it weren’t for creepy internet stalkers, I’d get more specific.)
Since we’re considered an “elite” school, the students in my classes have to earn their way in, and work to stay. In my pre-history college career, though, about half or so of my fellow students should have put in another year of high school, if you know what I mean.
I think my daughter is very level-headed. She worked part-time during undergrad in the university office, then was a bookkeeper for a year. She just started a new customer service job. Not what she was hoping for, but it will do for now. More work experience never hurts. The pay is decent and the benefits are excellent, especially for these days. Of course, eventually she has to start paying back student loans. She went to a private Christian university, which I am happy about. However, she could have done much better financially at an in-state university. Time will tell, I guess.
It might surprise you to note that graduate school educators pretty much mirror the general population: 20% on the right, 20% on the left, and the rest don’t care. At least at my school.
I several advantages going into jury:
1. I had lots of numbers concerning my dissertation topic—historians loathe numbers and it made me look smarter than I am;
2. My training was thorough and I knew my subject;
3. God gifted me with writing talent;
4. I was older than most candidates, and could communicate with the jurists one-to-one.
I’d never go through the process again...
Did you make the decision to enter a PhD program ‘late’ in life?
You did the same. Good for you. I have a nephew in the Corps of Cadets at Texas A&M who is majoring in history. He's visiting the European WWII battlefields this summer. Revision of history is a terrible thing. Good people who do their best to make sure the true stories of valor, cowardice, compassion and cruelty are remembered accurately are of great value.
If you have a farm, make sure that while you're not teaching, you're also not farming.
That way you can make even more! ;-)
I guess I really messed up when I approached college as an opportunity to learn...
Yeah, I had fought my way to lower-middle management in Big Pharma, and was losing my way in the midst of the corruption and general nastiness (although I am pretty good at corporate political warfare). My wife, noting the 1000 or so military books on my shelves recommended I do something I might enjoy, like study military history professionally. And I listen to She Who Knows All.
I had to start over, and retained my position to pay the bills until near the end, but it was worth it. I was awarded my PhD when in my 40’s. (My daddy earned his MA in history at 57. His specialty is the Banana Wars—he’s a career Marine.)
What’s best, if that if I can get these last two books finished before the end of the year, I’m finally on tenure track! Yipee!
That’s academic heaven, let me tell you.
But you HAVE to go to college right out of high school! Oh, and back in 2006 you HAD to buy a house before it becomes completely out of reach.
Woe to those idiots who recently bought their children a condo to live in while going to college, expecting the increase in equity to pay for tuition.
Underwater twice over!
My friend’s son just passed his firefighter’s exams in Kentucky. I respect you guys, but don’t envy you.
And I’ll bet the trajectory of your photographer’s career roughly matches mine as a writer. The beginning is full of some long, lonely years, wouldn’t you say?
I’m a computer scientist and am grateful to hold a degree which has value. There’s no doubt that I earn A LOT more money as a computer scientist than I otherwise would. So in my case, the college degree has been unquestionably worth the investment.
P.S. I take a bit of exception to categorizing computer science as under the IT umbrella. It’s a bit like referring to an EE major as an EET major.
The company I recently retired from pays its freshly minted petroleum engineers $80k per annum.
That degree is an absolute waste without experience.
Your screen name does not coincide with that comment.
College ceased to be valuable when they started adding remedial courses.
They convey negative knowledge...They suck good sense out of your head.
She has some experience and is working now.
MIT educations are so valuable that they give a ton of their course materials away for free online. Seriously.
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