College ROI: How To Calculate If It Is Worth It

Some of the links included in this article are from our sponsors. Read our Advertiser Disclosure.

Last month in a post titled “Education Cost” I ask the questions should a metric like ROI be used when picking a career path, well the folks over at PayScale have helped answer that question with their recently released College ROI report. In order to calculate the return on investment on a college degree, PayScale first determined the actual cost of attending college, (including tuition, room, food, books, etc.) then the gained income received by obtaining a college degree over a high school diploma. However, a high school graduate has a 4-year career head start. So an earning differential is also calculated into capture the 4-year head start. This is then looked over a 20 year period. For example, a school with a $1,000,000 Earnings Differential for graduates and $200,000 in Costs would have an $800,000 20 Year Return on Investment or an average $40K per yearly salary. Get it? Good, because it took me a little while to digest it all but once I did this report seems super valuable in helping college-bound students make better-educated decisions on school and major choices. Much better than picking a major and a college and not understand the cost or the possible ROI on that investment.

Real World Examples

I have two soon to be sixteen-year-olds in my house and the topic of college is starting to come up. My son is leaning right now to a focus in computer science and my daughter in the arts (drawing, painting computer graphics) so let’s use them as examples and see how this report might be helpful.

Computer Science Guy

For my computer science guy I sorted the report by the total 4-year cost to find the cheapest tuition. BYU ranked among the cheapest with one of the top ROIs.

 

college roi

Next, I found a number of in-state schools (out of state for us) with low over cost and high ROIs.

college roi

The Top in-state school for us in New York was Stony Brook.

college roi

Art School Girl

For my art school girl, I sorted the report again by the total 4-year cost to find the cheapest tuition. BYU ranked among the cheapest with the top ROIs.

college roi

Next, I found a number of in-state schools (out-of-state for us) with low over cost and high ROIs. A much smaller list for an Art major and a big difference in the ROI numbers.

college roi

The Top in-state school for us in New York was FIT.

college roi

It’s pretty clear there’s a big difference between a computer major and an art major, but I already knew that, but these data points really help illustrate it. It clear we need to pay more attention to the school of choice for my daughter if she pursues art as a major, because of the ROI on that major, we’d be wise to steer our son to a mid-tier school or an in-state school like Stony Brook where he’s getting earnings values for the cost of his degree.

Have you every evaluated college and a degree using data like this? Do you find the data in this report useful?

21 thoughts on “College ROI: How To Calculate If It Is Worth It”

  1. I write about higher ed for a living and a lot of my work requires me to analyze the ROI of different college degrees. The disparities are crazy! With certain associate degrees, you can expect a median annual wage in the 60-70K area. At the same time, certain doctoral degrees lead to earnings in the 40-50K range. It’s insane. Do your research, people!

  2. I was just having this conversation with someone else on Facebook about whether a college education was necessary anymore. For my career (software engineer), my employer requires a 4 year degree….so yeah, for me it’s worth it!

    • I guess it depends on your career choice. My company made it mandatory to have a degree or comparable military experience.

  3. I think with the ever growing cost of a 4-year degree in the US, this type of research is highly relevant and should be looked into before making any college decision. When I was choosing a college, I thought SUNY schools were the worst choice you can make, now when I look at the returns, I actually think state schools give you the most bang for your buck. Plus, they give you great networking opportunities after college, especially if you plan to live in the state where you went to school. There are probably more SUNY grads in NY than Harvard grads.

    • Agreed Shannon. This report is really great and I’m sure we’ll seem more of these type in the future. Great plans tools.

  4. That’s a very interesting way to look at your college costs. I’ll have to try that out. Though my kids have 6 years left to go, I’d be interested to see where they fall at as far as the majors they are leaning towards.

  5. Wow, never thought of doing that. Very canny.

    Granted, students don’t necessarily end up in the majors they initially lean toward. But I guess this is the closest to an informed decision parents (and students) can make.

  6. This is awesome! Are you Mormon? Because if so, BYUs tuition is even cheaper, which I’m sure you know if you are. Still affordable if you’re not, but I have to dayy their campuses are pretty rough to live on if you’re not. Not so much because of the moral standards, but the lack of cultural diversity and acceptance.

      • A major reason BYU is able to keep their tuition so low is that it receives a decent amount of its funding through member’s tithes. From my understanding they’re also excellently run, and the Provo campus is great for academics, but I don’t know if it’s a model other schools could replicate as far as costs.

  7. It’s not only important to look at only degrees, but intended careers. For example, I also got a computer science degree, but my end goal was to be a web developer. That puts my salary in the midwest at $40k. If I wanted to do one of the more high-end careers in computer science, my salary could be as high as $70-$90k entry level. To me, my ROI with a comp sci degree was really bad, I ended up with double the student loan debt as my yearly salary.

    I think it’s a lot more helpful to look at a career choice, and then think of the most effective higher education required for said career. Looking back, I should have gotten a related bachelor’s at a far cheaper price, just gotten an associates, or even continued on being self employed or at least self taught and finding a job. Increasingly more, degrees aren’t even required for my field — they just want to make sure you know how to code!

    • Good point Kayla. No point spending time and money if the degree in a certain major is not really what you need to land the career you want.

  8. If I had to do it over again I would go to a CUNY school instead of a private university. I was a finance major so my job prospects after graduation were pretty good in NYC.

Comments are closed.