Is College a Good Investment?

Does it make economic sense to invest in a college degree? If you’re studying engineering or can get yourself into a private research university, especially an Ivy League school, the answer is a whopping ‘Yes!’ according to Payscale’s return-on-investment calculations for over 850 schools.

Payscale calculates the value of a college degree by looking at earnings over a 30-year period, and deducting the earnings of a typical high school student. The net cost of college includes the amount spent over the entire time it takes students to graduate. And they factor in a college’s graduation rate.

The 2012 numbers were released last month, and the data show that 43 of the top 50 schools are private research universities. Close to a third of the top 30 schools are engineering schools, with Harvey Mudd College, Caltech, and MIT taking the report's top three spots. On average, engineering schools had ROIs of $603,362, more than double that for liberal arts schools ($245,943), and more than triple that of business schools ($141,014).

All eight Ivy Leagues are in the top 25 of the list, with an average ROI of more than $1 million. Although these schools are expensive, they provide generous financial aid and have high graduation rates, which bumps up their ROIs.

But private schools aren't the only good investments. Of the handful of public universities on the list, the Colorado School of Mines, Georgia Tech, and University of California, Berkeley take two spots each, for in-state and out-of-state tuition, respectively. And, at over $750,000 their ROIs aren't too shabby.

A college degree is worth the price “if you look at the wage premium that people with a college degree obtain over those without one,” says Nicole Smith, a senior economist at Georgetown University’s Center on Education and the Workforce. This is especially true for science, technology and engineering jobs, which are amongst the most highly paid, she says.

Still, with the rising cost of college, a four-year degree might not be the best choice for everyone from a purely economic standpoint, argues Richard Vedder, an economist at Ohio University. From Businessweek:

“As a general rule, I would say graduates in the top quarter of their class at a high-quality high school should go on to a four-year degree program, while those in the bottom quarter of their class at a high school with a mediocre educational reputation should not (opting instead for alternative methods of credentialing and training).

Those in between should consider perhaps doing a two-year program and then transferring to a four-year school. There are, of course, exceptions to this rule, but it is important for us to keep in mind that college is not for everyone.”

 

PHOTO: 401K, Flickr

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