Posted by: Gregory Linton | 11/22/2019

New report identifies return on investment at 4,500 colleges and universities

Last week, the Center on Education and the Workforce of Georgetown University published a report titled “A first try at ROI: Ranking 4,500 colleges.” Using data from the College Scorecard, the report focuses on “net present value” of a college degree, which weighs future earnings against the total cost of the degree. See the document for a more complete (but complicated) explanation of the calculation. Here are some of the interesting findings in the report:

  • Community colleges and many certificate programs have the highest ROI in the short term (10 years), but colleges that award primarily bachelor’s degrees have the highest ROI in the long term (40 years). This is primarily because bachelor’s degrees take longer to complete, resulting in more expense and debt.
  • Public colleges have higher ROI than private colleges in the short term, but degrees from private colleges generally have a higher ROI in the long term. This is because of higher expense at private colleges, which eventually results in higher earnings.
  • The median net present value for all colleges is $723,000 in the long term, but only $107,000 in the short term.

Although this report recognizes that college provides non-monetary benefits, it focuses only on the monetary benefits. It also ranks colleges and universities regardless of their mission or their programs. Therefore, colleges with more higher-paying majors will generally rank higher in the standings.

Another flaw in this study is that it feeds the misconception that where one studies automatically results in higher or lower earnings. In the past couple of years, various studies and publications have shown that the major a student takes often matters more than where they take it. For example, a business major at a less expensive institution can have the same or better earnings than a business major at a more expensive institution.

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