According to research from the Brookings Institution, despite soaring tuition and student loan debt, on average, the monetary and nonmonetary benefits of earning a four-year college degree “far outweigh the costs.”
Still, Brookings researchers said the return on investment of a college degree varies with several factors. Consider these findings:
- Selectivity: More selective schools, regardless of whether they’re public or private, typically offer a higher ROI than schools with a more open admission process. Students who attend the most selective private schools have a lifetime earnings premium of more than $620,000 (in 2012 dollars) while those who attend an open admission or minimally selective private school only enjoy a third of that premium, Brookings said. Still, “public schools tend to have higher ROI than private schools, even when comparing selective public schools (13 percent ROI) to selective private schools (11 percent ROI),” Brookings noted.
- College major: This likely comes as no surprise, but students’ postcollege earnings vary significantly depending on their college major, with graduates with STEM (science, technology, engineering and math) degrees enjoying the highest lifetime earnings.
- Time spent earning a given degree: Completing a four-year degree in more than four years adversely affects your ROI. In other words, graduating on time is important.
- Education financing: Borrowing money for college costs money. So it stands to reason that how much debt a student amasses has a dramatic impact on whether their investment will pay off in the end.
The Brookings’ report calculates value-added college rankings, going beyond popular school rankings published in U.S. News, Forbes and Money. Those traditional rankings “focus only on a small fraction of four-year colleges and tend to reward highly selective institutions over those that may contribute the most to student success,” the report says.
This report instead “analyzes college ‘value-added,’ the difference between actual alumni outcomes (like salaries) and the outcomes one would expect given a student’s characteristics and the type of institution.” Brookings provides value-added college rankings for both two- and four-year colleges.
When researching universities and majors, Brookings recommends carefully analyzing college costs, financial aid packages and the success of previous graduates before making a choice.
In your own experience, was a college education worth the cost? Share your thoughts below or on our Facebook page.