Since a college degree is the baseline for most middle-class jobs for people not yet old enough to have equivalent experience, and getting that experience in the first place would be difficult without a college degree, it always surprises me that people question the value of getting a college degree at all. While it’s true that the group of degree-holders is not as exclusive a club as it once was, that’s just a reason to strive for even more education. From a societal viewpoint, it’s clear that college degrees aren’t for everyone because the world relies on work that does not require that level of education.
In the financial world, people are often looking for a return on investment. This is a filtered lens for viewing society, and it’s limited. When you’re the proverbial hammer, everything looks like a nail. As I’ve been writing for Consumerism Commentary since 2003, finance is only a small part of the world I live in, and I try not to limit my worldview to just this one lens. While finances are certainly an important aspect of someone’s life — and with limited finances, the importance is even greater — money does not form 100% of every decision one makes in one’s life.
There’s more to an education than just the income it will provide over time, over and above the income you would earn without that education. Whenever I think about this topic, I remember the time I spent working with a drum and bugle corps, touring the country for eight weeks over the summer. Our caravan consisted of four buses, three vans, two eighteen-wheel tractor-trailers, and one box truck. I don’t remember the context as this was many years ago, but one of the truck drivers said to me he doesn’t understand why people would go to college when they could easily make a living earning $40,000 a year driving a truck.
While I’m sure truck driving has its moments that test any brave soul, it may not be the right challenge for everyone. Depending on skills and interests, someone could go to college, spend money to earn a degree, and not reach an annual salary of $40,000 for many years, if ever. They may recover their tuition costs over time, and if student loan debt is involved, that could be a long time. Even if they make their way up the latter to become the CEO of a non-profit organization, they may be financially worse off in the end than if they skipped college and got a job driving a truck across the country.
Each year, there is a new report ranking colleges — and ranking colleges is such a popular topic in the media — in terms of the best return on investment. The methodology of the popular survey by PayScale is interesting in that it completely ignores those who have continued their education to earn a degree beyond a Bachelor’s degree. Only those who have completed their education with a standard four-year degree are considered. The survey also neglects to include self-employed individuals, small-business owners, and contractors. Keep in mind, also, that these are actual data based on people who have been working for thirty years — so this reflects what graduate degrees were worth in the 1970s and early 1980s, while using today’s tuition costs. This basically keeps all values as 2011 dollars, but ignores changes in each college’s reputation over the past thirty years.
The California Institute of Technology tops the list of colleges ranked by best ROI over thirty years with thirty-year net return of $1,713,000. Princeton University is the first Ivy League school on the list with a net ROI of $1,494,000, and is fourth overall. Here are the top ten:
- California Institute of Technology (Caltech)
- Harvey Mudd College
- Massachusetts Institute of Technology (MIT)
- Princeton University
- Stanford University
- Dartmouth College
- Duke University
- Harvard University
- University of Notre Dame
- University of Pennsylvania
As Zac Bissonnette, author of Debt-Free U and recent guest on the Consumerism Commentary Podcast, points out, the data and methodologies are questionable. Regardless of the quality of data, beyond determining whether you can afford college or not, it’s mostly pointless to consider return on investment as a point in favor in one school over another. If a student’s two legitimate choices are Princeton and Stanford, figures like these are meaningless. Additionally, a student who is considering the school with the lowest ROI on this list won’t necessarily be also considering Caltech.
Updated May 5, 2014 and originally published April 15, 2011.