REPORT: Is College Worth the Cost?

Evaluating the return on investment of the myriad possibilities available
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Whether it be an increased salary, social pressures, or the hope of new friends and memories, the allure of college remains constant. Less appealing, during one’s collegiate years, many costs arise; between tuition, books, boarding, and other fees, the price tag of college quickly skyrockets over one hundred thousand dollars over a student’s expected four years of studies.

Since the turn of the millennium, the annual growth rate of the cost of college has increased by close to seven percent. Meanwhile, the national rate of inflation was just above two percent. Such a disparity raises the question of whether a college’s return on investment is equal to what it was even ten years ago. Furthermore, one must also account for the lost revenues in the time a person spent within academia rather than going straight into the workforce after graduating from high school.

Over the course of their lives, a university graduate typically earns approximately one million dollars more than the average high school graduate. Even as college costs have climbed, the economic rewards have remained favorable. Yet, it is difficult to envision that the premium offered to college-educated workers would be sufficient to balance tuition hikes.

Determining the return on investment of a bachelor’s degree is far more complex than what first meets the eye as there are a great number of variables to consider. The decision to enter college is less essential than the subsequent decisions: which institution to go to and which discipline to study. Yet more factors are at play: explicit costs, implicit gains, occupational opportunities, and even geographic differences must be considered.

The Foundation for Research on Equal Opportunity was able to calculate the return on investment for almost thirty thousand majors across almost two thousand colleges. This gargantuan undertaking estimates lifetime earnings by tracking the median earnings of individuals throughout their lifetime, thus accounting for discrepancies in earnings over one’s career. After deciphering this value, this was contrasted against both the explicit costs of college and the opportunity costs, the counterfactual earnings that could have been received with a high school diploma.

Results of the Cost-Benefit Analysis

As previously mentioned, two critical components have a great degree of influence on the return on investment of a bachelor’s degree: the institution and the major. Although both of these may seem self-evident, the magnitude of these differences can be astronomical. For example, when looking at the return rate for an economics degree at the Massachusetts Institute of Technology, the lifetime return is $3,599,652.25. Meanwhile, the same course of study at the University of Denver has a lifetime return of an abysmal -$253,135.38. 

Though this difference represents the extremes, it highlights the magnitude that going to a prestigious university can have on this cost-benefit analysis. Even when using the average return of an economics degree, which is $542,309.86, MIT’s return is over six-and-a-half times greater than that of the average. Unsurprisingly, similar outcomes can be found when looking at majors within the same university. 

To illustrate this concept, one only has to look at what is widely considered to be the most prestigious college in America: Harvard University. While the thought of having the word “Harvard” on one’s resume may seem to virtually guarantee success, nineteen majors of the Cambridge institution were analyzed and less than half of them had a return greater than one million dollars, and only one, computer science, was greater than three million. Meanwhile, over ten percent of majors had a negative return rate. Among these, anthropology was by far the worst investment, having a return of -$150,532.25, with ethnic studies coming in second worse with a net value of -$35,910.17.

Institutional Differences

When accounting for differences in colleges, the return on investment has been averaged between the different degrees available within the aforementioned data set if the student takes four years to complete their major, thus giving the major the best chance to be ROI positive.

With this approach, Northwestern Michigan College decimates its competition of 1,674 other colleges. Specifically, when looking at the return if the student only spends four years at the university, the average ROI is over $3.5 million; this figure is over $300,000 greater than the second-best school in terms of return on investment, California Institute of Technology. Yet, it should be noted that Northwestern Michigan College only has a single degree within the data set: marine transportation. 

On the other end of the spectrum, the worst college in America for average lifetime return on investment is Talmudical Seminary of Bobov, which is in Brooklyn, New York, with a loss just shy of $1 million. Interestingly, the six greatest losses regarding return on investments are all Jewish seminaries, which all lay north of a deficit of $800,000. Of course, the reasoning to go to a seminary is certainly not for monetary gain. 

Looking at the 1,761 colleges overall, 248 of the institutions had a negative return on investment and 631 additional institutions had a return of less than $250,000, which make up approximately fifty-five percent of the colleges within the data set. Within the middle of the list, 543 colleges have a return between $250,000 and $500,000. From there, 144 institutions fall between the $500,000 and $750,000 range. Meanwhile, at the top end of the data set, 54 colleges have a return exceeding $750,000 and 54 universities surpass the seven-figure threshold.

Comparing One Hundred of the Largest Universities in America.

Throughout the entire data set, numerous minuscule colleges help to create a distribution with an extremely high level of variance. For example, the aforementioned California Institute of Technology has less than one thousand students, yet boasts the second-highest return on investment. Conversely, when looking at only the largest universities in America, a similar, yet also far closer to an ideal normal distribution emerges to give a better picture of the true impact one’s choice in college can have on their return on investment.

Specifically, only two of these universities are in the red — the University of Pittsburgh and Montclair State University. This figure is in stark contrast to the overall percentage of colleges with a negative return on investment, which stood at almost fifteen percent. 

Yet, going to the other end of the spectrum, there are no colleges that have a return of greater than one million; Colorado State University barely misses the threshold with a return of $979,202.99. Meanwhile, in much of this excerpt, sixty-two institutions to be precise, have a return between $250,000 and $500,000. Once again, this is quite different from the overall data set, which has only had approximately thirty percent of the institutions in this hexad format. Likewise, this noticeable alteration had the sample’s plurality range of $250,000 and $500,000 become the predominant outcome in contrast to the population’s plurality being between $0 and $250,000.

Differences by Major

A student’s degree selection is likely to be the most crucial economic commitment they will ultimately undertake. Even after deducting college fees, most bachelor’s degree studies in STEM fields and medical enhance lifetime income by over $500,000. However, numerous programs in disciplines such as those within the humanities leave students worse off financially than if they would have not attended college at all. Consequently, disparities across degrees can total millions of dollars. 

For example, the computer science degree at the California Institute of Technology is the most economical in the country as graduates within this study average a return on investment of more than $4.4 million. On the other outermost point, the Talmudical Seminary of Bobov once again ranks worst as the institution’s sole degree, religious studies, has an average loss just shy of $1 million. Although this may seem to be a horrendous outlier, this is surely not the case. Of the 296 majors within the dataset, fifty-three have a negative return-on-investment. Furthermore, five of these majors have an average loss of over a quarter of a million dollars: cosmetology, somatic bodywork, folk art, dance, and social and philosophical foundations of education. 

Meanwhile, much like that of the complete distribution of institutions, the largest classification occurs between $0 and $250,000 for college majors, of which there are eighty-nine. This conglomerate, which comprises thirty percent of the distribution, includes many popular majors such as communications, history, political science, and some of the lesser lucrative STEM majors such as psychology and biology. Meanwhile, there are thirty-eight majors between $250,000 and $500,000, one of those being the most popular major in America: business administration. 

Subsequently, economics, finance, physics, and thirty-seven other majors comprise the range between $500,000 and $750,000. Right below the seven-figure threshold, there are thirty-six majors, with almost one-third of those being engineering-related. Finally, forty majors exceed an average return on investment of $1,000,000 and one exceeds $2,000,000: marine transportation.

Comparing Fifty of the Most Popular Majors in America

There is a high level of variance throughout the distribution of all 296 majors, and so another sample was created with only fifty of the most popular majors. It is quite concerning to see that eleven of the majors, thus comprising twenty-two percent of the distribution, have a negative return on investment. Of these eleven programs, four of them have a net loss of greater than $100,000: performing arts, religious studies, film and photography, and fine arts. Although this may seem somewhat positive to note that thirty-nine of the majors have a positive return, over forty percent of the remaining degrees fall inside the $0 to $250,000 confine.

While few majors fall into the $250,000-$500,000 range, this number jumps again within the next category of $500,000 to $750,000. This sector includes majors such as math, accounting, and architecture. From here, there is a stark contrast in the nature of the majors which have a return on investment of greater than $750,000, as six out of the remaining eight majors are STEM majors. Also, one of these eight surpasses the seven-figure threshold: electrical engineering.

Concluding Thoughts: Should Students Go to College?

In short, whether college is worth it depends entirely on the major and the institution. Many students go into college with the thought that college is always a net positive but this could not be further from the truth. Numerous popular majors see students’ potential returns diminished. Additionally, this analysis concentrated on an ideal condition in which students graduate in four years, yet undergraduates are increasingly taking longer than four years to earn a bachelor’s degree with the median time currently standing at fifty-two months

There are more accurate messages we can send than blanket statements to attend college. For one, college should not be advertised as a “one-size-fits-all” solution. Indubitably, those who would benefit from a bachelor’s degree the most, particularly those in STEM fields, should still strive to go to a four-year institution. However, for those just barely breaking even or not sure of their intended major, perhaps attending a two-year institution before transitioning to a university would be monetarily optimal. For those who do not perform well in a classroom environment but still want to pursue secondary education, specializing in a specific profession via a trade school might be not only appealing but also lucrative. Finally, students must consider not just tuition costs but also expected earnings.

In sum, the marketing of universities as a necessity to be successful in modern life is mistaken at best. The spiraling costs of college are unsustainable and majors are at risk of transitioning into negative territory since wages have not kept up with inflation. Therefore, students should be urged to pursue majors which fall within the upper echelons of expected returns or engage in a different form of postsecondary education, be it trade schools, apprenticeships, or community colleges. 

Want to explore the data yourself? Click here.

Daniel Elmore
Daniel Elmore is the Data & Analytics Coordinator at the Chalkboard Review.