Measuring College ROI

Parents Forum
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I know there have been many discussions about “is college worth it” (with research showing that, financially, it is), but with my D having recently graduated, I’ve been thinking more about how parents and students measure ROI. My sense is that given the price tag, many families are making a strict(er) financial decision, i.e., we paid X and student got a job paying Y, therefore it is/not a strong ROI. It seems like this is driving parents to recommend that their kids major in pre-professional fields (CS, Engineering, business, etc.) and to conclude that majoring in the humanities and liberal arts isn’t “worth it.”

I have a very different view of this grounded in my own experience as a history major (no regrets). I also took out a lot of student loans for a college that provided me a great education and growth experience (again, no regrets) which seems at odds with today’s conventional wisdom to minimize student loan debt at all costs.

Do you think the price tag for college has resulted in a stricter financial ROI criteria or do you think there are larger cultural or economic shifts that are resulting in greater focus on job outcomes? Did you discourage your son/daughter from taking out any debt or do you think some debt is “worth it” for the “right fit” college experience?

Overall, I’m disappointed to observe that more parents seem to focus on job outcomes, not on the other (albeit more subtle) ways that a broad-based liberal arts education enriches your life–even if it isn’t directly monetized. Colleges seem to focus on a specific type of outcome, which seems geared at justifying the price. Curious about the group’s thoughts on this.

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A good career/grad school outcome is a factor (for many families paying for college is a stretch) but it must be recognized that this type of success will be, in large part, dependent on the student (to include: work ethic, motivation, course of study, etc.).

Another huge part of college “success” is the harder to measure non-academic component – eg. friends they make (and keep), personal growth, self-esteem, readiness for the next step in life, overall happiness, involvement in meaningful activities, etc.

IMO the idea is to seek out a college with the right balance – where a student can hope to find success on every front.

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We are pro liberal arts education and don’t worry at all about our children being able to make a living post graduation. We may have messed up with some parenting - too much pressure, nagging, helicoptering too much in middle/high school - but we keep true to saying we didn’t care about major - but we do care about effort. Our kids will agree that we put no pressure on college choice or major.

Both gained internships this past summer, 1 assisted a professor during the school year for a set of episodes for a very well known podcast and they are engaged learners. I will also credit them taking full advantage of their college career services, professor contacts, building their linked in network etc…we set that expectation up front that they must take full advantage of what is offered at their schools.

We do have the luxury to afford their education and they do not have any financial pressure to support us. They have the luxury (and may not really get it) of having parents with professional backgrounds and liberal arts degrees. We have been able to guide them and they have heard us talk about our work for years.

Our one child told us that her friends at her college said she is getting the better and more interesting education with a liberal arts major and access to such amazing professors vs their science and engineering focus. I am sure they are all getting a great education, but hers is just different with the huge amount of courses open to satisfy her major. Our other daughter is at a liberal arts school that has an amazing career center and she has a lot more liberal art peers due to the nature of the school.

I have written so much, I forgot your original question :wink:

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I think that @happy1 pretty much hit it on the head for me. What we budget for a college education is for whatever our kid decides to study. We would not increase the budget for certain majors or decrease the budget for others. As our budget would be sufficient for at least living on-campus at our state flagship, we are opposed to having our kid take out additional loans, though I suppose if the kid got into Harvey Mudd or Middlebury and the difference in price was within federal subsidized loans I don’t think we would necessarily forbid it. (Also acknowledge the likelihood of that situation happening would be extraordinarily minimal.)

Our expectation is that we will support the kid through college (or through whatever remains in 529 funds after college graduation), but that after that, the kid will need to be self-sufficient. So, for instance, I was a foreign language major (and minor) in college who earned a couple of certificates in other liberal arts fields. But, in part because of my mother’s voice in the back of my head about being able to support myself, I also ended up adding on my teacher’s certification. That’s obviously not the only way to get a job nowadays in the humanities/social sciences (and an increasingly rare one, considering the current teacher shortage). But being mindful of using career services, seeking internships and other opportunities is important.

But college is so much more than vocational training or a networking opportunity for career advancement. It’s about getting out of one’s bubble, learning and experiencing new things, broadening one’s mindset etc. That’s in AND out of the classroom. It’s building lifelong friendships and becoming an independent adult in an environment where many others are doing the same. It’s a mostly safe space for figuring out one’s interests, strengths, and passions.

Obviously, not everyone has this kind of experience in college, but this is the kind of experience that we’re willing to pay more for to improve the odds of that experience happening, rather than just having our kid live at home and attend the local public college. Will Hunting (of Good Will Hunting) said, “You wasted $150,000 on an education you coulda got for $1.50 in late fees at the public library.” College is not just about learning information. If college is just about learning information, then Will Hunting is right. But it’s all the rest of college that makes it worth the additional expense beyond some library fees (or commuting costs and local public tuition).

Ah, and I need to answer the question. :slight_smile: If my kid graduates from college with an improved sense of self and skill set (writing/critical thinking, etc), then I think that we will have gotten our return on investment. If the kid has healthy lifelong friendships, a good sense of direction for the future and the skills to get there, and remains (or has improved) as being a good human being, then I will think we’ve hit the jackpot.

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Our S was able to experience all the above and more as a CS major at Stanford. D is currently doing and experiencing the same as a BME major at Johns Hopkins.

Purely liberal arts educations haven’t cornered the market on experiences :stuck_out_tongue_winking_eye:

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Since my kids needed to take out loans, yes they needed to major in subjects that would lead to employment. My oldest is a CPA at a company that’s very understanding about the fact that she also performs 3 - 4 times a week (which she loves). Obviously the music doesn’t pay nearly as well, but she thinks of it like a great hobby that pays her instead of her paying money. Most of my kids don’t have loans that are more than there first year gross income (our PT will have more, but she loves her chosen career, and it was PT instead of medical school). My rising senior will be making the same as her 28 year old sister after graduation.

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I don’t see where I said that. I studied the humanities and social sciences and I’m an ardent fan of them, but if I had to guess, my kid is more likely to do something like CS or engineering than history or English lit.

But if my kid went to Stanford or Johns Hopkins, I’d be just as happy for them to study anthropology or art as to study CS or engineering. For me, it’s the experience of attending college, not the choice of subject matter, as to whether there is value in attending a particular school.

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I viewed college for our son in two parts, one, brute force ROI, and two, what additional experience(s) was I willing to pay for as a gift. It’s a bit like buying a car. You need something that’ll get you from A to B, but you might want heated and cooled leather seats and a nice sound system.

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A generation ago, “a lot of student loans” was probably much less than what “a lot of student loans” is now or recently.

Also, a generation ago, a BA/BS in anything was more distinctive in the labor market than it is now, and employers now have greater expectations of work-readiness with specific skills and knowledge, rather than being willing to hire people who can learn on the job. I.e. a new BA/BS graduate today is probably competing for major-agnostic college graduate jobs against a larger number of others than those a generation ago.

Hence the greater pressure on students to prioritize pre-professional preparation when choosing a college and major today compared to a generation ago.

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I think people see college differently. It’s individualistic.

You see it in poster’s perspectives.

For some it’s job related - if you finish and don’t have a job, then what ? Just because you went Ivy or spent $400k doesn’t guarantee anything.

Heck you could sell cars at 18 and make $200k plus, far more than a college grad. Or become a diesel tech and make similar.

Others it’s growth and maturity.

For others it’s status.

Or it could be all these things and more.

Different people see things differently. It’s individual, in some cases gender or ethnic biased and more.

Is college right for all those who attend - nope !!

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As someone who spent eight and a half years doing a PhD that I have never used and which is not at all a requirement for my current job (missing out on eight and half years of full time income, job promotions, etc)…I actually agree. I have no regrets. The monetary ROI of doing that is actually a net negative, but the non-monetary ROI is immeasurable to me. I loved it. I learned a lot. I grew as a person. I will likely never be able to retire, but who retires anymore anyway? :wink:

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we paid X and student got a job paying Y, therefore it is/not a strong ROI

There are several issues to break down. Paying X for college and having a job that pays Y tells you very little about financial ROI. Financial ROI instead depends no how much attending college X improved financial outcome over alternative Y (alternative may be attending a different college, or may be doing something other than college). This can’t be measured well by comparing average earnings at college X vs college Y due to differences in individual student factors at the 2 colleges, as well as differences in major distribution.

Rather than compare average/median students at the 2 colleges, a better method is to compare outcomes between similar students who choose different colleges. For example, suppose you have a group of students with similar stats who applied to similar colleges. For a particular college, some of those students were accepted from waitlist and some were rejected from waitlist. How do outcomes differ among students who are accepted from waitlist vs students who are rejected from waitlist?

“Outcomes” usually emphasizes first activity after college – salary at first job, accepted to grad/professional school, etc. However, as you note, “outcome” can me other less objective measures of success such as having a quality education or growth experience.

In recent years, there has been a shift more towards pre-professional and STEM majors and less towards humanities majors. This isn’t the same as financial ROI. For example, in another thread, I looked up the most common bachelor’s degree fields among 4-years colleges in US. A list is below. The popular fields with the largest increase were all STEM related, but they weren’t all associated with a large income. Biology is associated with a lower salary with only a bachelor’s, yet it is the most popular STEM major (unless you count nursing as STEM). The overwhelming majority of biology majors do not attend med school.

  1. Nursing (large increase)
  2. Business
  3. Biology (large increase)
  4. Psychology
  5. Engineering (large increase)
  6. CS Related (large increase)
  7. Education (decrease)
  8. Visual and Performing Arts

While financial ROI is one factor in this change. I think a bigger one is changes in societal/community/family/peer/… perception of STEM vs humanities. For example, the timing of the especially sharp humanities decline across all US colleges started during the great financial crisis, but the timing also coincided with Obama’s 2009 Education to Innovate program, with stated goals “to increase STEM literacy, enhance teaching quality, and expand educational and career opportunities for America’s youth.” The program included over $1 billon funding for STEM education. During this period I expect students had increasing pressure from parents, friends, teachers, and the general community to favor STEM fields over fields like English and history. This also contributes to why humanities major enrollment kept dropping after the great financial crisis was over and there was largely economic prosperity.

The specific years of change in major distribution doesn’t follow doesn’t follow changes in college sticker price well. If we are talking about highly selective private colleges, it’s often common for the majority of students to not pay sticker price. At many such colleges, inflation adjusted average price paid by students is largely unchanged over previous decades. The difference is a there is wider variability in prices paid, with many students paying >$80k/year, as well as many students having estimated cost to parents of $0. Both free ride students and full pay students overwhelmingly favor STEM fields over liberal arts. At many highly selective colleges, $0 cost to parents students are notably more likely to favor pre-professional majors over liberal arts than kids paying sticker price. ROI focused major distribution doesn’t follow price paid well.

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@Data10 Thank you for the detailed reply. You outline a number of interesting facts and variables. Based on the highlighted quote above, it seems that higher-income students at more selective colleges might be more likely than students with significant financial aid to pick a liberal arts major (although emphasis in STEM has increased across all income levels).

I’m curious about how college attendance and graduation rates are impacted by this shift. When we look at college graduation rates–or even the rate of students who begin with a STEM major (or other pre-professional major) and ultimately change majors–I wonder if part of the reason so many students don’t follow through is because they are mismatched in terms of interests or aptitude. Not everyone enjoys or is good at math and science. Not everyone wants to study finance or business. But with the emphasis on “What are you gonna do with that [fill in the blank…English, History, Sociology, Psychology…] degree?” students become dissuaded from following their interests (and abilities) and are more likely to quit college altogether if they don’t think they can succeed in a “lucrative” major. I recognize that affluent students have much higher rates of college completion, but I think they’re also under pressure to replicate their parents’ success–often by getting into engineering or business.

While you make an interesting point about Obama’s Education to Innovate program, I think even prior to (or absent) that program, more parents have encouraged STEM degrees because it’s always in demand and jobs pay well. I think people perceive greater risk with a liberal arts or humanities degree.

Thanks for the reply and I welcome any more information/data you might have on the topic.

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You’re right, I think the value of a degree and the reasons for obtaining one have changed in the past generation–and this is what I’m really curious about. What is the nature of this shift? Has the income divide resulted in a cultural emphasis on STEM as one of only a few paths to a secure job and good pay? Are there changing beliefs about the primary purpose of college (job preparation over education)? Are employers less willing to invest in training? I could go on. But my sense is that more people don’t see higher education (or even education in general) as valuable unless it can be traced to a more tangible benefit.

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Could this be because those receiving large financial aid at an expensive colleges are more sensitive to pre-professional considerations, such as the more immediate need to earn money (and perhaps pay off student loans) after graduation, compared to students whose parents are comfortably paying for college and who can provide a financial backstop if they (after graduation) need to do an extended job search (with a period of unemployment), spend time in low paid entry level jobs or unpaid internships, or go to graduate or professional school (that is not typically funded) to enter their desired professions (that are not necessarily that high paying)?

But also, note that STEM and liberal arts are not disjoint sets of majors, since majors like math, physics, chemistry, and biology are in both categories. There are also majors which are not in either category, such as business.

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My feeling is you should find a career path that will provide a secure and comfortable lifestyle for you and your family, but then prioritize happiness and fulfillment over adding more wealth beyond that level. See the research into the diminishing marginal utility of wealth.

My further feeling is every year of your life matters as much as any other, and actually you never really know how many years you will get. And four years is a long time, so the value of those four years is not measured solely by the credential you get, but also the extent to which those four years are themselves happy and fulfilling in themselves.

So I think you should make sure you can comfortably afford college without a lot of debt, because people who take on a bunch of debt to pay for college often feel very limited in what college and career choices they can make to justify all that debt.

But I don’t think you should obsess over ROI statistics once you have made sure you can comfortably afford your college. At that point, choose colleges, majors, careers, and so on with an understanding that there is a sharply diminishing marginal utility to wealth past a certain level.

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4-year college attendance has for the most part gradually increased over time. One key exception, was the 2000-10 decade, which had a 42% increase in 4-year college enrollment – far above the gradual increase trend. 2 key factors in the large increase during this decade are young persons are more likely to favor college during periods of economic decline (dot com crash + great financial crisis) when jobs for HS grads may be scarce, and increased government initiatives encouraging all students to attend 4-year college.

More kids attending college can lead to reduced graduation rates, especially if there are an increased portion of students who are not well academically qualified for college. However, in this case it did not. Among students who entered in 2000, 58% graduated in 6 years. Among students who entered in 2010, 60% graduated in 6 years. Grade inflation may contribute.

The 2010 to current period had increased STEM enrollment without as sharp an increase in college enrollment as the 2000-2010 decade, so it’s a better measure of how increased STEM may influence graduation rate. This period had an even sharper rate of graduation rate increase, going from 60% graduating in 6 years among students entering in 2010 to 65% graduating in 6 years among students entering in 2015. Again grade inflation may contribute.

Rather than STEM vs non-STEM or % STEM degree, the graduation rate is well correlated with selectivity of college (and likely academic qualifications of enrolling student + ability to pay). Among students who entered selective colleges (defined as <25% acceptance rate), 93% graduated in 6 years compared to 30% graduating in 6 years at open admission 4-year colleges.

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I think a pre professional degree has an assigned job type or field. Law. Journalism. Teaching. Accounting. Engineering.

Chemistry, Classics, Religion don’t.

Colleges with budget issues are following the trends. The market, by virtue of major, has spoken. Just look at the programs being cut. That shows you where the customers don’t see an ROI.

Too many go to college because it’s expected.

Mine will graduate - hopefully - in May. She learned from being in DC last year with the protests and a lack of safe feeling, she won’t move there. I thought the education was great with protests and loving two blocks from the Capitol but she thinks otherwise.

Anyway her boyfriend is in Denver so that’s where she’ll be.

Doesn’t want a desk job she knows after two internships. Isn’t quant oriented enough and I challenged her on this. So where will she go with a Poli sci and intl studies degree. No clue

If she was a teaching or accounting major - I’d know.

Is there a solid ROI anyway - even if sue works retail or waits on tables ? I dunno. She could have done that the last 3 years but she has growth and exposure to a state job, think tank and abroad in Asia. But she’s also got some issues to work on - and maybe have gotten worse. Handling pressure.

I’m probably spending $70k over 4 years thanks to merit. Maybe $80k But b4 we found out about the two endowed scholarships it would have been $180k. Does that change the ROI?

She’s had small classes, a lot of enrichment, an included summer trip.

To me, it’s worth it - warts and all - with the warts often being self created.

Would I feel the same at another $100k without the endowed money which came late or at $250k more W&L?

I doubt it.

But I do know she’s become a better writer, more disciplined at times and more confident.

Maybe it’s 3 or 6 or 10 years as to whether to know it’s worth it or not.

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Two major factors have changed over the past 20/30 years. First the COA for full/near full pay students at private universities has vastly outpaced expected starting salaries. When I graduated in the early 80’s, it would take about a year and a half of salary with a liberal arts degree to cover 4 years of attendance ($34k COA vs $20-25k starting salary). For my kids, it was more like 6 or more years unless they were CS, engineering or certain firms in finance or consulting ($300k COA vs $40-60k). The stakes are just greater and the “luxury” of learning something you are interested in without creating a specific job skill has become more expensive.

Second, the nature of many entry level jobs has changed. Data and analytics have become more important. Fewer businesses and job slots go to “the best available athlete” when there are trained applicants available with immediately useable skills. The “Philosophy” major (absent some some background in CS/quant) has less job opportunities available.

The combination of these 2 changes has increased the stakes for many families both on the cost and opportunity sides.

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Due to the soaring costs associated with higher education, one needs to have a plan. For many non-quantitative liberal arts majors, the long term educational plan includes professional school (law, business, dentistry, medical, physical therapist, etc.).

It’s okay to attend a highly ranked college or university for a degree in the non-STEM humanities because many large employers hire for brain power and work ethic rather than just for skills or work experience. But, most colleges and universities are not “highly ranked” tickets to major employer interviews and hiring.

Education is shifting its focus away from non-STEM subjects into STEM related majors. Even MBA programs are becoming STEM certified in an effort to remain relevant to employers.

STEM certificate programs are valued by many employers. Low cost along with a relatively short investment of one’s time make certificates valuable in a rapidly changing work environment which relies increasingly on technology.

The value of a non-stem college degree is in teaching individuals how to become good students, how to approach problems, and in how to teach themselves while honing communications skills such as analytical writing.

Regardless, the costs of higher education require one to assess employability as the most significant ROI factor.

Education is an entrenched industry due, in large part, to the tenure system. The tenure system handicaps change–in fact, it is the antithesis of change.

Those seeking employment need to be willing to continue to develop. The need is so great for technical skills that some major companies–such as Microsoft–offer free certificate programs focused on urgently needed technical skills / knowledge. Keep learning & keep growing or become non-relevant.

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