College ROI

FREOPP has updated their return on investment analysis for thousands of college majors.  You can check out their tool, here. And here’s their key takeaways on undergraduate degrees:

Key Points

• This report estimates return on investment (ROI) — how much college increases lifetime earnings, minus the costs of college — for 53,000 different degree and certificate programs.
• Bachelor’s degree programs have a median ROI of $160,000, but the payoff varies by field of study. Engineering, computer science, nursing, and economics degrees have the highest ROI.
• Associate degree and certificate programs have variable ROI, depending on the field of study. Two-year degrees in liberal arts have no ROI, while certificates in the technical trades have a higher payoff than the typical bachelor’s degree.
• Nearly half of master’s degree programs leave students financially worse off. However, professional degrees in law, medicine, and dentistry are extremely lucrative.
• Around a third of federal Pell Grant and student loan funding pays for programs that do not provide students with a return on investment.

Executive Summary

In recent years, young Americans have expressed more skepticism about the financial value of higher education. While prospective students often ask themselves if college is worth it, this report shows the more important question is when college is worth it.

This report presents estimates of return on investment (ROI) for 53,000 degree and certificate programs ranging from trade schools to medical schools and everything in between. I define ROI as the increase in lifetime earnings that a student can expect when they enroll in a certain degree program, minus the costs of tuition and fees, books and supplies, and lost earnings while enrolled. My preferred measure of ROI accounts for the risk that some students will not finish their programs.

This report updates FREOPP’s previous research on ROI, utilizing new data from the U.S. Department of Education’s College Scorecard.

The findings show that college is worth it more often than not, but there are key exceptions. ROI for the median bachelor’s degree is $160,000, but that median belies a wide range of outcomes for individual programs. Bachelor’s degrees in engineering, computer science, nursing, and economics tend to have a payoff of $500,000 or more. Other majors, including fine arts, education, English, and psychology, usually have a smaller payoff — or none at all.

Alternatives to the traditional four-year degree produce varied results. Undergraduate certificates in the technical trades tend to have a stronger ROI than the median bachelor’s degree. However, many other subbaccalaureate credentials — including associate degrees in liberal arts or general education — have no payoff at all. Field of study is the paramount consideration at both the baccalaureate and subbaccalaureate levels.

Unsurprisingly, STEM and Engineering kick butt, but check out political science here:

I did not read the whole methodology as carefully as I could have, but what I do think it largely ignores is selection bias into different majors and universities.  I’m also very curious how gender might be affecting these calculations.  E.g., a Computer Science major is likely to be a man who takes off little time from the workplace and maximizes earnings, whereas a Psychology or English major is much more likely to be a woman and therefore more likely to let career and earnings take a backseat to family for considerable portions of an adult lifespan.  

Anyway, as my 18-year old son will be starting Engineering at NC State in the Fall, I was pretty damn curious about this.  I sorted all NCSU bachelor’s degrees on earnings 10 years out from degree.  

I think he’s going to do alright.  His top interests are Chemical, Industrial, Biomedical, and Nuclear (the last one does not show up– too few majors?– but based on other schools, right in that mix). 

Meanwhile, you can also just sort by state, so I did all degrees in North Carolina.  The lesson here, I think, is that it is good to go do Duke and if not, Computers.  

Anyway, not perfect, but a pretty damn interesting tool.  And if the stock market crashes, my son can look after me in my retirement :-).