Return on investment has been one of the most important concepts in higher education in recent years as students and families continue to question what they’re getting out of a college degree.
That’s one reason the Georgetown University's Center on Education and the Workforce updated its ROI database last month, ranking 4,600 colleges and universities by the financial value they impart to students.
Researchers found that the ROI for college education is variable over time. Institutions that primarily award associate degrees and certificates offer a higher return ten years out than those that primarily award bachelor’s degrees. But after 40 years, that relationship reverses, with almost all bachelor’s degree-awarding colleges coming out on top.
“People are clearly looking more at ROI as the continued public perception and distrust of postsecondary is taking hold with increasing costs,” said Jeff Strohl, director of the center. “Tools like this get us straight to the punch to show people where value lies.”
Researchers identified factors correlated with positive ROI but noted they weren't universal.
At public and nonprofit institutions that primarily award bachelor’s degrees, higher graduation rates and the proportion of degrees awarded that are in science, technology, engineering and mathematics fields were both strongly tied to a positive return. The correlation was much weaker at for-profit institutions.
Acceptance rates were negatively correlated with ROI, but only modestly. The share of students receiving federal Pell Grants, designated for low-income students, was also negatively correlated with ROI.
Among the top ten colleges offering the best ROI, eight are nursing and healthcare-focused institutions, such as the Albany College of Pharmacy and Health Sciences. The other two are the Massachusetts Institute of Technology and the California Institute of Technology.
At the lower end of the list of institutions are many arts institutions, as well as for-profit institutions that award bachelor’s degrees.
But institutional level data can only tell a prospective student so much about where they might end up.
“Looking at institutional ROI, which is an average of all of the programs an institution is producing, is the start of the conversation,” Strohl said. “But people need to look a little more deeply and take into consideration what field of study that they want to be working in.”
Researchers used data from the U.S. Department of Education’s College Scorecard database, including earnings for students several years after enrolling, average net price at each institution and the type of degree a college most commonly awarded.
To calculate a college's ROI, researchers first multiplied the average cost of attendance by how long they can expect the average student to attend the institution. That’s five years at colleges that primarily award bachelor’s degrees and three at those focused on associate degrees.
They then subtracted that sum from the total earnings students can be expected to make over different time horizons. Because the College Scorecard only supplies earnings ten years after enrollment, researchers assumed no growth in earnings after that time. That means the ROI calculations are fairly conservative, according to an FAQ by the center.
Researchers wanted to update CEW's ROI tool in part so policymakers and other people in higher education could look at institutions across time.
So far, researchers said it’s not clear that students are using available data tools on ROI, earnings and debt to help make decisions about where to attend college. For that to happen, the U.S. might need to grow its career and education counseling services for high school students.
“This is breaking the surface,” Strohl said. “It's not necessarily meant to be the end of the conversation.”
