Are you looking at ‘return-on-investment’ data to help create your college list?

College Search & Lists
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Hey everyone — @Jess_SFChronicle and I are editors with the San Francisco Chronicle’s California College Guide.

(Why are we posting here? The Chronicle has partnered with College Confidential to bring the information from our California College Guide to this platform. We’re looking to hear more about how people are searching for colleges in California, and what kinds of information and tools are the most important to you. And we’re hoping we can help answer some questions on topics ranging from “impacted majors” to the cost of college.)

Today, we’re discussing what can be a tough subject for many families: understanding the true cost — and payoff — of a college degree.

One dataset that we’ve been told many families have found helpful is “return on investment.” Some have said that getting their kids to think about how these costs pay off in the long term can help them envision what kind of outcome they really want from college. But, we’ve also found that people aren’t sure what types of ROI or outcomes data is trustworthy, and how to make sense of it.

In the section of our guide on ROI, we analyze research from Georgetown University’s Center on Education and the Workforce that looks at attendance costs and post-college earnings to estimate a college’s “value.” This research has been cited by several news organizations, and our data journalists vetted it and say it’s a good source for comparing colleges across the country, and across public and private institutions.

We also used this research to do our own analysis of how California’s public colleges perform on “value” versus other public universities and private colleges across the country. The big takeaway: The median 10-year return of attending the University of California or the California State University is estimated to be about twice as much or more as the typical private California college.

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But ROI is also dependent on the timeframe you’re looking at, and the data shows that some UCs and CSUs have a higher ROI 10 years after enrollment, but are not as competitive 20, 30, and 40 years out.

So UCLA 's ROI at the 10-year mark is $211,000; by the 40-year mark, it’s nearly $1.6 million.

At Harvard University, the ROI is $85,000 after 10 years and $1.87 million after 40 years.

Here are some more examples from California schools:

  • University of Southern California: $170,000 (10 years), $1,733,000 (40 years)
  • UC Davis: $196,000 (10 years), $1,503,000 (40 years)
  • UC Irvine: $215,000 (10 years), $1,563,000 (40 years)
  • Cal Poly SLO: $223,000 (10 years), $1,735,000 (40 years)
  • UC Berkeley: $243,000 (10 years), $1,749,000 (40 years)
  • CSU Maritime: $257,000 (10 years), $1,971,000 (40 years)
  • Stanford: $360,000 (10 years), $2,193,000 (40 years)
  • California Institute of Technology: $377,000 (10 years), $2,479,000 (40 years)

(Note on the data: The ROI estimates were calculated using data from the U.S. Department of Education on the earnings of college attendees at six, eight and 10 years after enrollment. To calculate ROI, researchers then subtracted the average cost, accounting for federal financial aid, of attending a college from the 10-year income.)

What do you all think of this data, and is it really useful for your family as part of the school search process? Let us know.

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Data Source: https://www.sfchronicle.com/projects/california-college-admissions/best-colleges-value/

[Note: This page is behind a paywall. If you would like data for specific schools, please tag me and I can share it in the thread!]

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We did not use it at all. The data is too messy to call it data; there are too many variables that are not captured. And the “ROI” we cared about was academic rigor and intensity, none of which is reflected in who gets a job with which investment bank.

One of my kids worked at a startup which went public. The “ROI” would have been off the charts- was a double digit employee with a so-so salary and a bet on a technology which did not exist when choosing a college. Kid had never taken a CS course, and majored in one of the “looked down upon” humanities disciplines. The financial payoff was a surprise to all of us-- but as those options were realized, it became clear that choosing a college based on a bogus calculation would have been a short-sighted plan.

It is VERY hard to predict or game the labor markets- which is what you guys are trying to do.

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This database only includes students who received some type of federal financial aid. One would have to take a view on whether or not the outcomes would be similar for those students who did not receive federal financial aid. Maybe yes, maybe no.

The only thing these types of databases can do is use an average college cost. And many people obviously aren’t paying the ‘average’ COA.

We were a full pay family (not in California) and did not consider college level ROI as part of the college list building or the college decision making process. The data is just not accurate enough to do that. I’ve also worked as a college counselor and had many low income students and I would also not encourage them to use ROI data as part of the process.

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The only ROI we looked for was that our kids got an excellent education. This is why we sent them to college…and paid for it.

Fact is…there are hot jobs now that won’t be in the near future. And there are future jobs that haven’t even been developed or thought of yet.

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And in every economic downturn, there are “sure bet” jobs which turn into lemons. Whether temporary or permanent- when it’s YOUR kid who can’t get a job, it sure feels like you’ve been betrayed by the “data”.

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We looked at ROI in a sense - but not for picking colleges, but rather picking a major. My younger son, a rising college freshman, picked a major because (a) it sounded interesting to him and (b) out of the many things that sounded interesting to him, it has an incredibly high “employed at the time of graduation” rate. To him, that was the ROI that mattered - will I be able to get a job. The major he was looking at (Construction Management) isn’t offered at a lot of schools, and I suspect that ROI the way you’ve defined it for the schools it IS offered at wouldn’t be relevant to him - because the major is small, it would be seriously undervalued in any overall college data set compared to other majors at the school. Instead, and perhaps related to what you’re getting at, we looked at businesses that recruit for his major at the schools to which he applied, the size/strength of those businesses. While not easily quantifiable, this gave him a better feel for what an ROI might be.

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One other point I wanted to make is that some of the schools that have a high ROI on these various lists is because they enroll and graduate a relatively high proportion of low income students. Which is great! Some of the schools on the high ROI lists are similarly highly ranked on social mobility lists. You don’t see many elite schools ranked highly on the social mobility lists because they aren’t enrolling as many low income students proportionally.

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This is why I don’t really understand why some people seem to care so much about these statistics.

Even if they want to think in estimated ROI terms–and I think that is often problematic–the I in ROI is Investment. And in order for an estimated ROI to be meaningful for some individual’s college choice, that must be a measure of YOUR investment. Substituting some other “average” investment amount that is not your investment amount is obviously invalidating.

And I can see people making what look to me like serious mistakes based on that sort of invalid logic. Like, they get a really good aid offer from College A, and not from College B, such that College B would cost them a lot more to attend. But College B has a higher estimated ROI in some publication. So they think maybe that additional cost to attend College B is probably worth it.

Once you really grasp what is going on here, that is dangerously invalid reasoning. It is entirely possible that if they estimated their own ROI for A and B using their own actual costs of attendance, then A would come out well ahead of B.

And that is dangerous because of all the bad things that can happen when you pay a lot more for a good college education than you need to. Of course some families are sufficiently wealthy that doesn’t matter–but then they probably are not thinking in these terms anyway.

If instead you would need to take out a lot of debt or such to pay for College B, this can set you way behind in terms of other family goals, it can put undue pressure on the kid while in college, it can put pressure on the kid to make certain educational and career choices in order to justify all that extra cost, and so on.

All of which is to me ruining the whole point of college. College should be about expanding your options in ways that can make your life happier and more fulfilling. Sometimes that requires some borrowing, and that can be perfectly fine. But if you have to borrow so much it actually really limits your options, that’s not good at all.

And so if you have a college option like College A that would not limit your future options like that–because it would cost you so much less, and it still has the sorts of academic programs you actually need and you think you could do well there–then it in fact is a better choice than College B.

And if some ROI based on not your actual I is suggesting otherwise, that is not helpful.

Yes, the much more valid use I see for statistics like this is to help evaluate the role a college is playing at a societal level. Like private universities are obviously free to do what they want, but there are some potentially reasonable questions we can ask about our expansive definition of tax-exempt educational institutions. And then public universities obviously should have some sort of mandate to serve the relevant jurisdiction, and these statistics might help contribute to evaluations of how well they are performing that mission.

It is just when individuals start making potentially costly decisions for themselves by citing these statistics that I get really concerned.

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No. Apart from the data issues others have mentioned above, I feel (and I realize there is privilege in saying this, but the question was about our individual family decisions) that there is value in education for the sake of education too. (This is why I also spend money, admittedly not a large amount, on Stanford continuing ed courses in subjects like art history, which has zero relevance for my work in asset management.) College is about a lot more than being a jobs mill.

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Our kid is at an expensive private school, on a full tuition scholarship. So we’re not paying much. His major (chem eng) has one of the highest earning potentials possible for an undergrad degree. So his 10-year ROI will be huge.

Another student at his school, who is paying full price and is majoring in something without high earning potential will have a drastically smaller 10-year ROI.

Perhaps comparing ROI information for schools could be broadly informative. But I don’t think it’s very helpful for individual students as the variability between students is huge. It’s certainly not for OOS students for certain publics (including California schools), and schools that offer merit aid will also be skewed.

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The real issue is whether or not future college students and their families are rational consumers.

Who can afford to buy the sizzle and who must only purchase steak is a bit of a cloudy issue due to need based financial aid which often neglects the middle class consumer. State lottery funded merit scholarships have addressed this issue in many states.

https://shef.sheeo.org/wp-content/uploads/2024/04/SHEF-Lottery-Funding_FY22.pdf

From a barrier to entry perspective, most families probably act in a rational manner, but not necessarily with carefully calculated ROI as the primary focus. Why ? Because most believe that a college degree is the minimum qualification for jobs which promise a decent future financially.

However, the concept of a college degree in any academic discipline being sufficient to get a good job in today’s market is changing.

Other families value passion and prestige over making a rational choice based on ROI. These are probably upper middle class and upper class families who assume that a future degree from a graduate school or a professional school will lead to financial success. While financial success is taken for granted in the medical profession, those seeking MBA or JD degrees are less sure about their financial future unless attending a highly ranked program.

Many who consider entering law school or an MBA program engage in a thorough analysis focused on ROI before committing to two to three years of graduate degree education. Such analysis typically involves loss of income for the duration of the graduate degree program and cost-of-attendance as the primary financial factors.

https://gmatclub.com/forum/mba-roi-calculator-443843.html

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Rational consumers maximize their own utility. Utility is subjective. What is rational for one family may not be the same as the next family.

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Typical ROI measures are just a step above useless, as they assume ROI is primarily a function of college name, without considering the individual student.

The numerator portion of ROI depends on the individual student, not just the college name. It varies depending on the individual’s major (this relates to why CSU Maritime is #1 in the pictured table) and the individual student’s planned career path. It also depends on the individual student’s ability, motivation, connections, etc. For example, if you put the average MIT student at the average directional state, the MIT admit don’t suddenly become the average student at the directional state who has a high chance of failing to graduate. Similarly if you put the average directional state kid at MIT, they don’t suddenly become the average student at MIT who is expected to excel in challenging classes, as well as the tech questions/problems portion of job interviews.

When you control for individual student differences, several studies have found no statistically significant influence from college name on median earnings such as Dale & Krueger and the more recent Chetty study (I realize Chetty found a difference in rate of top 1% earnings of >$600k, I said median earnings).

Similarly the denominator portion of ROI is highly dependent on the individual student. For example, Harvard claims that the typical cost for families with the median US household income is “free” (to parents) – $0 tuition, $0 housing costs, $0 books, etc. Harvard claims 25% of families pay $0. Harvard claims $0 tuition for incomes as high as $200k. Harvard claims most families receive FA and do not pay sticker, and average cost for families not paying sticker is $13k. As such Harvard’s ROI depends on whether the family is paying $0/year, $13k/year, or $90k/year . The same principle applies to less selective colleges as well, which often give notable merit aid.

Rather than looking at how a college places in a ROI table, more useful is looking at the available stats and info about the college and considering how it applies to your specific employment goals and your specific financial situation. I was an EE major, so I’ll use EE as an example. Suppose you want to pursue electrical engineering. You might look at typical internship/job placements for electrical engineering majors at that college – which companies attend career fairs, which companies students frequently join after college, and their position (a good portion may not be closely related to engineering)… in addition to earnings in context of college selectivity + location. You might consider the size of the major, how easy it is to switch and maintain major, whether it is ABET, grade inflation/deflation, etc. You might consider whether the college offers/encourages co-ops or co-terms, and how that fits with your desired career plans. A ROI table isn’t a good substitute for this type of information.

Of course you should also consider your individual cost after scholarships and financial aid – not the average cost or sticker price listed in a ROI table.

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To the points above on field of study / major / and career paths impacting “ROI,” this quote in our analysis of the data gets at some of that:

“Martin Van Der Werf, the director of editorial and education policy at the Center on Education and the Workforce, says that institutions offering a narrow set of degrees in fields that lead to lucrative careers, such as institutes of technology, undergraduate marine academies or pharmacy programs, do particularly well on ROI.”

And this quote from a counselor we spoke with in the Bay Area gets at one reason some folks have told us this data can be useful: “Gwen Meyer, a college and career specialist at Alameda High School, was pleasantly surprised to see CSU Stanislaus and Fresno State rank high for ROI, as they are two schools Meyer often encourages her students to consider — CSU Stanislaus for students interested in nursing and Fresno State because of its affordable tuition and housing costs. However, many of her students don’t even consider applying because of the campuses’ undesirable locations.” So, more a systemic and perception benefit than really helping people decide on one school versus another?

We have a lot more coverage of majors (including one page that looks at the data for UC on outcomes based on majors) in our guide, and seems like given the conversation here, we could focus our next post on that topic.

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I’d love to see evidence that a full pay student in the Bay Area is going to take Stanford and Carnegie Mellon off their list in favor of Fresno state because the latter has a higher ROI than the former.

Really, these discussions are just straw man arguments piled up until they look credible just because of their height and volume.

Y’know what would be helpful? An analysis of different career paths and an examination of the gate-keeping/credentialing/time and expense of specialized training. That would be useful for families. I know kids from low income families who use up their Pell getting a Bachelor’s degree in Criminal Justice, and then are stunned to discover that a typical career path for that degree is probation officer (or similar) and that CJ in no way helps in law school admissions.

That would be huge.

Or an analysis showing the educational and work requirements in each state to become a medical examiner/forensic scientist. Same demographic- kid majors in “forensics” or some similarly named field of applied chemistry and discovers after the fact that he or she is qualified for a job as a technician in a state lab. And that autopsies in our state are performed by board certified physicians- and no, your forensic major did not cover off the pre-requisites required by med schools even though you took organic chemistry and bio.

Why not tackle that issue- where your analysis could REALLY help people?

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I have one comment to make here - this site tends to skew disproportionately towards higher-achieving students or those aimed at top (20/50/100/whatever) colleges, and you are not likely to find many people who would be looking at CSUs like Stanislau or Fresno other than maybe as safeties, so the responses you get here may also not be representative of the “average” family’s calculation.

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The problem is…no one has a crystal ball (or a magic wand). There really is no way to predict the future in terms of careers and money to be earned.

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For financial ROI, that depends on some factors not always considered in ROI ratings:

  • R can depend heavily on major, often more than the school.
  • I is individualized based on how financial aid and scholarships affect net price, and whether that net price is affordable at all to the student.

A student considering the financial ROI needs to look at outcomes by major at each school in the context of the net prices that they actually get.

This is not to say that financial ROI should be the only consideration in college choice, although it is at least some consideration for many students.

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I’m relatively sympathetic to the argument that any time a ranking has some “surprising” results, not just all the usual suspects in more or less the usual order from the US News rankings, there is some inherent value in that just because it can open up people to new ways of thinking about college selection.

And again I am fine with broad policy-level conclusions. Like that, say, many CSUs are doing a good job serving their students on average. I am confident that is true, and I am not against showing that to be true in various ways.

But I do think the ULTIMATE conclusion should be that no generic ranking is actually really all that useful when it comes to individual college choice. Used cautiously, some of the data underlying some rankings might be useful. But the process of taking that data and forming a generic ranking is flawed in the conception. Because choosing the right colleges for some individual and their family is just too individualized of a process for generic rankings to ever make sense.

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