How to Determine College ROI

How to Determine College ROI

The cost of college continues to rise, and a debate continues over how much is too much to spend on a college degree.

The answer isn’t a straightforward “yes” or “no.” Factors including the school itself, as well as the major you choose to pursue, can impact whether college is worth it.

Before committing to a school, it’s a good idea to consider the options and look at your potential return on investment (ROI).

Here’s what you need to know about determining college ROI — as well as a list of the colleges with the best return on investment.

 

What is ROI in College?

Your return on investment is basically the future value you can expect after putting in your money today. It’s important to note that you’re not only putting in money. You’re also putting in time.

Your college ROI is all about whether you’ll recoup your investment in a way that allows you to not only make money in your first job out of college but also whether you’ll have good earnings throughout your career.

Some of the items to consider as you calculate your college ROI include:

  • Major

Your major is going to make a difference in your long-term ROI, and whether your costs are recovered. For example, STEM majors tend to see higher salaries right out of school, as well as later in their careers. Healthcare fields also often see a solid ROI. On the other hand, humanities majors might not see the same level of return in salary.

  • School

If you attend a school that is recognized as a leader in the field for your chosen major, or if the school is prestigious, you might be able to see a higher ROI, just from the name recognition.

  • Network

Another consideration is the network offered by the school. Does it have strong alumni support? Can you get an “in” when you finish? Sometimes, it’s not always about the alumni network, it’s about the school’s ability to place students in jobs. Does the school have a reputation for helping students get that first job?

  • Involvement:

Your ability to get involved in extracurricular activities, research opportunities, and internships can also matter later. This involvement helps you develop valuable skills and even give you real-life experience. A school that has extensive opportunities to be involved can make a difference in ROI later.

  • Financial aid

The type of financial aid (including federal loans) you receive also impacts ROI. If you can get a better scholarship at a school and pay less out of pocket, it might make more sense to go to that school, even if it doesn’t have the same reputation as a more prestigious (but prohibitively expensive) school.

  • Student loans

In some cases, you might need to get additional funding for your schooling, including private student loans. Lenders like can provide you with affordable loans and flexible repayment terms that can make the cost of college more attainable.

Pay attention to how factors are interconnected

One of the most important aspects of considering college ROI is how the factors are interconnected. It’s not always a straightforward calculation.

For example, a school might be known for a specific engineering program. Your ROI might be higher attending that school for engineering and getting a good internship than it would be if you attended that same school but got a social sciences degree.

Additionally, there are times when you might get a better overall ROI by starting at a lower-cost community college to complete your general education requirements and then transferring to a four-year school. You can save money and still potentially attend a higher-cost school to finish your degree and take advantage of the ROI.

The calculation is going to be a little different for each student, so the important thing is to carefully consider the options and talk about the pros and cons of various options, as well as take a realistic look at costs and potential returns.

 

20 Colleges with the Best Return On Investment

If you’re looking for the colleges with the best return on investment, Georgetown University recently released an ROI ranking of 4,500 public colleges that included a look at return on investment 40 years after enrollment.

Business Insider added its own methodology to include student loan principal and six-year graduation rate.

After crunching these numbers, here’s the Business Insider list of the top 20 colleges with the best ROI:

  1. Albany College of Pharmacy and Health Sciences
  2. St. Louis College of Pharmacy
  3. MCPHS University
  4. Massachusetts Institute of Technology (MIT)
  5. Stanford University
  6. Maine Maritime Academy
  7. Babson College
  8. Harvard University
  9. Georgetown University
  10. United States Merchant Marine Academy
  11. University of the Sciences
  12. St. Paul’s School of Nursing — Queens
  13. Massachusetts Maritime Academy
  14. Harvey Mudd College
  15. Stevens Institute of Technology
  16. University of Pennsylvania
  17. California State University Maritime Academy
  18. California Institute of Technology
  19. Colorado School of Mines
  20. Bentley University

 

Where to Get Information to Calculate Your College ROI

When considering college ROI, there are a few places you can look to help you figure out what might make the most sense for you.

Georgetown’s Center on Education and the Workforce

It’s possible to use the filters provided by Georgetown to see where your school of choice ranks in terms of return on investment. You can also set the filters to see rankings in specific states, by degree, level, and type, and more.

In creating its ranking, Georgetown includes a net present value calculation to determine where a school stands at 10, 15, 20, 30 and 40 years after enrollment.

The ranking also includes a seven-year repayment rate, type of institution, earnings-to-price return and an earnings-to-debt return, among other calculations.

The idea is to lay it out in a way that allows potential students to figure out whether they will see a solid return down the road and help them decide whether student loans are worth it to go to a specific school.

It can also help you compare different choices in a specific state or in several states. It’s one way to get an idea of what to expect.

PayScale

Another good resource for determining college ROI is PayScale. This website offers a look at what you can expect to get paid for different jobs in various locations.

Additionally, PayScale frequently puts out reports about the earnings you might expect, depending on what course of study you choose.

For example, PayScale has a report on the top degrees likely to pay you back. Look at the potential pay associated with your chosen degree or  program your school is particularly known for.

Don’t forget to consider where you might be living. That will make a difference as well, since pay depends, in part, on where you’re located as well as the degree and job you have.

College Scorecard

The Department of Education offers a look at different schools and their results. You can enter a school’s name and get information about:

  • Degree Programs
  • School Type (Public or Private)
  • Average annual cost (tuition and fees, as well as living expenses)
  • Expected salary range after completing
  • Graduation Rate
  • Percentage of students receiving federal loans
  • Typical monthly loan payment
  • Acceptance rate
  • Test scores

This type of detailed information can put things into perspective and help you see what to expect from a specific school. It’s also possible to compare up to 10 schools at a time, so you can look at multiple options at once and compare their stats in a way that can help you see what’s available.

All these resources, when combined, can help you figure out what’s likely to work best for you. The key to getting the best college ROI is doing your research ahead of time and understanding which schools and majors are likely to give you the best return on your education investment.

 

How to Increase Your College ROI

It’s possible to take steps to increase your college ROI, especially if you have information about the true cost of college and know what you plan to do when you finish.

Here are a few strategies that can help you get a better college ROI.

Choose your school carefully

Look for the colleges with the best return on investment in general, or in your desired major. Additionally, you can get creative with how you choose your school.

One of the things discovered from the Georgetown report is that a number of mid-tier schools with less prohibitive costs have a solid ROI. So, you don’t necessarily need to attend a big-name school to see good ROI.

It’s also worth noting that you can save money by completing concurrent enrollment while in high school to get college credits for generals at a lower cost. Additionally, going to a community college to start can lower your overall cost — increasing your long-term ROI.

Be realistic about your major

Understand that even going to a prestigious (and expensive) school when you have a major that might only pay a small amount of money when you finish won’t help you much. A good rule of thumb is to check your potential starting salary and avoid getting into debt that exceeds what you’ll earn in that first year.

So, if your starting salary is likely to be $45,000 a year, you want to be able to graduate with no more than $45,000 in student loan debt. Get real about your course of study and what you’re likely to make.

If you won’t be able to finish without a lot of debt, and your potential salary is going to be low, it might make more sense to go to a different school to improve your ROI.

Apply for financial aid

Lowering your initial cost is a good way to increase your college ROI. If you can qualify for scholarships and grants, you won’t have to worry about repaying that money. Review the trade-offs associated with going to different schools and look at your financial aid offers to see if there’s a way to get the most value by paying as little as possible.

Look at borrowing costs

Finally, look at borrowing costs and potential student loan forgiveness programs. In some cases, you might be able to get a lower interest rate with a private loan provider like College Ave Student Loans, especially if you’ve already maxed out your federal student loans and are considering PLUS loans. Adding private student loans to help fill the college funding gap can make sense in some cases.

However, it’s important to note that you likely won’t be able to take advantage of loan forgiveness programs with private loans. Check to see if you’ll have a career that will qualify you for some level of loan forgiveness and include that in your ROI calculations.

 

Is the Cost of College Worth the Return on Investment for Students?

In the end, your college ROI is individual. If you just attend a big-name school and borrow a lot of money without paying attention to what you’ll receive in return, there’s a chance that it won’t be worth what you pay. The cost of college can still be worth the return on investment — if you develop a strategy designed to maximize your ROI. Do the research and look for ways to get the best bang for your buck.

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This article is sponsored by College Ave Student Loans. Check out their private student loan rates and see how they compare to parent PLUS loans.


Miranda Marquit

Miranda Marquit

Miranda Marquit has been covering personal finance for more than 10 years, including aspects of college planning and student loans. She is a recognized money expert and has contributed to numerous media outlets, including Forbes, Marketwatch, NPR, USA Today, Investopedia, and U.S. News & World Report. She lives in Idaho with her teenage son — who she’s just starting to guide through the college selection and admissions process.
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