College: Big Investment, Paltry Return (Research shows value is far less than previously thought)

Business Week ^ | 06/27/2010 | Francesca Di Meglio

[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 less—sometimes 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.

[Richard Kimball]

As a stewardess in the private yachting industry with nothing but a high school diploma, she says she earned triple what she's making now in her administrative support job in Winston-Salem.

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.

[SeekAndFind]

high-paying fields as engineering and computer science

Ah, not so much anymore.

AS someone who is in the IT field, I know for a fact that the average salary of those in this field have remained stagnant for years. And at a time like this when people with comparable skills from overseas can actually come via an H1B visa, the downward pull in the salary scale continues unabated.

In my company for instance, most projects are now hiring temp/contract workers who do the work for several months and then move on ( and when the need is there, the company either maintains the same contractors or hires new ones ).

The only ones in IT who can command a premium are those with very specific combination of technical and business knowledge. Otherwise, it's still tough going at a time like this.

[Richard Kimball]

The absolute iratating thing I see is college grads that can’t write a complete sentence.

I feel the same way about people who can't spell irritating.

[warchild9]

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.

[ilovesarah2012]

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.

[warchild9]

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...

[Oratam]

Did you make the decision to enter a PhD program ‘late’ in life?

[Richard Kimball]

It's not your fault if someone else's life sucks. As a firefighter (talk about a dream job) I frequently run into people that are jealous. In my sideline job as a sports and event (college dance teams) photographer, more people are jealous of me. Nobody came to me and said, "Please, please, please come and apply with our fire department" and nobody begged me to spend several years doing photography for free while I developed my skills to the point someone would pay me. I knew what I wanted to do and did it.

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.

[VegasCowboy]

Another reason for PayScale’s far lower ROI estimate is that it accounts for the fact that many students never graduate—and go on to earn little more than a high school graduate. For them, the ROI on their college education is effectively zero.

Gee, so if you don't graduate, you don't get the value inherent in a college education? Shocking! /s

Your major and your work ethic will ultimately determine whether college works for you. Of course you can't just show up for awhile and think you will magically make more money. But to imply that obtaining a worthwile degree from an accredited University is of nominal value is just flat out wrong.

[who_would_fardels_bear]

"even being paid to not teach this summer"

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! ;-)

[Senator_Blutarski]

Does anyone go to college to get an education? Or are we just there for a job?

I guess I really messed up when I approached college as an opportunity to learn...

[warchild9]

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.)

[warchild9]

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.

[who_would_fardels_bear]

"the rising cost of tuition has grown faster than the total compensation of any given degree"

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!

[warchild9]

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?

[mbs6]

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.

[SVTCobra03]

The company I recently retired from pays its freshly minted petroleum engineers $80k per annum.

[Centurion2000]

My daughter is half-way through her MBA

That degree is an absolute waste without experience.

[Richard Kimball]

I guess I really messed up when I approached college as an opportunity to learn...

Your screen name does not coincide with that comment.

[TASMANIANRED]

College ceased to be valuable when they started adding remedial courses.

They convey negative knowledge...They suck good sense out of your head.