Attending college is a big investment. The cost per year of a college education in 2022-23 is nearly ten times what it was in 1979-80, even after adjusting for inflation. When making such a big financial decision, it’s important to understand the return on your investment. Return on investment (ROI) is a formula which divides the net profits (or loss) from an investment by its cost.
In general, ROI on college investment compares the earnings of college graduates to the costs of their tIn general, ROI on college investment compares the earnings of college graduates to the earnings of those without a degree and adjusts for the cost of tuition and other factors. However, determining the ROI of a college degree is not quite that simple. Many factors influence post-college earnings, including a student’s socioeconomic background, potential alumni network, geographical location, postgraduate location and lifestyle, and financial aid assistance.
Here, we will focus on three ways we can look at ROI for a college education: level of education, type of In addition to these factors, here are three common ways to look at ROI on investment in a college education: college major, level of education, and type of academic institutions.
ROI for Different Majors
Trying to determine the exact ROI on a specific major is very challenging, but many studies show that major is a significant factor. Generally, most data that looks at ROI on majors shows that STEM (science, technology, engineering and mathematics) degrees have the highest returns on investment. Though even within the STEM fields, there are large variances in income and the lowest STEM income could be well below the highest income for a degree program with a lower earning potential. Other factors that make this complicated are aptitude, how well suited someone is for a course of study or future career.
There are several studies that have sought to answer this complex question of the ROI of an individual major or program, outlined below. These studies offer interesting insights and helpful data to prospective students.
ROI on different majors:
- The Economic Value of College Majors
- Does College Pay Off? A Comprehensive Return on Investment Analysis
- Evaluating the Return on Investment in Higher Education
- It’s Time to Change the Conversations on Majors and Income
ROI of an Undergraduate Degree
Generally, getting a college-level degree is considered a good investment. Associate or bachelor’s degree graduates can expect to earn much more over their lifetimes than those with a high school degree, with bachelor’s degree holder earnings being an average of 84% higher than those without any college. Unemployment rates among college graduates are half of their peers with only a high school degree.
ROI on different college degree levels:
- Is College Still Worth the High Price? Weighing Costs and Benefits of Investing in Human Capital
- Is College Worth It? Recent Analysis Says Yes
- College Degree Return on Investment
ROI for Different Types of Institutions
While a college degree overall is often a worthwhile investment, ROI can fluctuate between public and private institutions, as well as between non-profit and for-profit colleges and universities. Generally, degrees from non-profit institutions (which includes both private and public schools) are a safer investment than those from for-profit institutions. A study of over 3,000 institutions found that, on average, public institutions have the best ROI, then private non-profit institutions, while private for-profit institutions sometimes have a low or even negative ROI. When choosing which type of college you may want to attend, it is worth keeping in mind the type of institution and the impact this choice can have on your postgraduate earnings.
ROI on different types of institutions: