Which college will make you the richest?

[SeaConquest]

http://m.theatlantic.com/business/archive/2014/03/which-college-and-which-major-will-make-you-richest/359628/

The corollary research on which will make you the poorest is pretty brutal.

[8filltheheart]

http://m.theatlantic.com/business/archive/2014/03/which-college-and-which-major-will-make-you-richest/359628/

The corollary research on which will make you the poorest is pretty brutal.

I just skimmed the article and I don't get it. Granted, I'm exhausted bc I am at my ds's house and spent most of the day outside playing with my 4 yr old and my 2 grandkids. (I'm getting old. They wiped me out! )

But, the rate of return over 20 yrs is only in the $1,000,000 range? That seems way to low to me. 10 yrs, maybe. (And even 10 yrs seems pretty long to me.). Am I completely misreading the article?

[Nan in Mass]

GRIN - Richest in what?  Friends?  Knowledge?  Information on how to do something you are passionate about?  Practical ideas for solving global problems?  Love?

[Emerald Stoker]

GRIN - Richest in what?  Friends?  Knowledge?  Information on how to do something you are passionate about?  Practical ideas for solving global problems?  Love?

 

Amen, sister!

[Anacharsis]

I'm glad that someone is calculating this. "Any college is (economically) valuable college" has been a staple of admissions boards across the country for quite some time now, despite the fact that that just isn't so. In many ways colleges are like currency, with different degrees making up the different denominations. Just the same way that a U.S. dollar is worth more than an Australian dollar and an Australian dollar is worth more than a Hong Kong dollar, despite all being dollars, a degree from Princeton is worth more than a degree from Rutgers and a degree from Rutgers is worth more than a degree from New Jersey City University, despite all being degrees.

 

If college were free, then I suppose this would all be less important, but with costs rising as they have been, it's good to know what the current "exchange rates" are.

[maize]

I just skimmed the article and I don't get it. Granted, I'm exhausted bc I am at my ds's house and spent most of the day outside playing with my 4 yr old and my 2 grandkids. (I'm getting old. They wiped me out! )

But, the rate of return over 20 yrs is only in the $1,000,000 range? That seems way to low to me. 10 yrs, maybe. (And even 10 yrs seems pretty long to me.). Am I completely misreading the article?

If I were calculating ROI of a college degree, I would use direct workforce entry as a baseline for comparison purposes. So if the average high school grad who goes directly into the workforce earns a total of, say, $700,000 over the next 20 years, and the college grad earns $1,800,000 over the same time period but invested $100,000 initially into college, the ROI would be $1,000,000. You have to account for lost earnings during the college years and the fact that if the student had not pursued a degree they would still be working for pay, just (on average) at a lower rate.

That is of course a very simplified picture and I have no idea what formula they actually used.

ETA I have no idea if I am using terms properly, hopefully the general meaning is clear :)

[8filltheheart]

If I were calculating ROI of a college degree, I would use direct workforce entry as a baseline for comparison purposes. So if the average high school grad who goes directly into the workforce earns a total of, say, $700,000 over the next 20 years, and the college grad earns $1,800,000 over the same time period but invested $100,000 initially into college, the ROI would be $1,000,000. You have to account for lost earnings during the college years and the fact that if the student had not pursued a degree they would still be working for pay, just (on average) at a lower rate.

That is of course a very simplified picture and I have no idea what formula they actually used.

ETA I have no idea if I am using terms properly, hopefully the general meaning is clear :)

That is the way I interpreted it. I also tried to use the pay scale site and everything I entered said no data. So it seems like the data must be limited to certain name brand schools.

[maize]

That is the way I interpreted it. I also tried to use the pay scale site and everything I entered said no data. So it seems like the data must be limited to certain name brand schools.

I don't understand why you see a $1,000,000 return as low. In the scenario I gave, that return would come from $1,800,000 in earnings in 16 years after completing school (allowing four years for school, and assuming no grad school...) that seems more than decent to me (certainly more than we will bring in in that time frame, but then we didn't invest $100,000 either...) all of this of course assumes no student loan interest etc.

[8filltheheart]

Actually thinking about it, no I didn't factor in the yrs for earning the degree. So, for the ROI 20 yrs, is the pay scale 20 yrs really only 16 or less (depending on the length of time spent earning the degree)?

[8filltheheart]

I don't understand why you see a $1,000,000 return as low. In the scenario I gave, that return would come from $1,800,000 in earnings in 16 years after completing school (allowing four years for school, and assuming no grad school...) that seems more than decent to me (certainly more than we will bring in in that time frame, but then we didn't invest $100,000 either...) all of this of course assumes no student loan interest etc.

We cross posted. Is the Roi on 16 or 20 yrs? Eta. 2: In going back and re-skimming the article, it seems to be comparing 20 yr to 20 yrs not 20 to 24.

Eta: I think this is where the degree may matter and the school not so much?? For example, a college grad starting out at 72,000 and getting multiple raises and promotions to reach 85,000 in 2014 that went to a no name school which cost very little will reach that differential must faster than a college grad starting at $45000 and is in a career with low opportunity for promotions or raises.

Considering the names of the schools and the associated price tag and fields like computer science, I guess I thought their grads probably started off with higher incomes than they do. Considering COL variants (CA and NY vs. say some place with no state income tax like TN) I wonder how they are making salary comparisons.

[creekland]

GRIN - Richest in what?  Friends?  Knowledge?  Information on how to do something you are passionate about?  Practical ideas for solving global problems?  Love?

 

I feel for those who feel rich = most money.  There is so much more value to other things in life.

[maize]

We cross posted. Is the Roi on 16 or 20 yrs? Eta. 2: In going back and re-skimming the article, it seems to be comparing 20 yr to 20 yrs not 20 to 24.

Eta: I think this is where the degree may matter and the school not so much?? For example, a college grad starting out at 72,000 and getting multiple raises and promotions to reach 85,000 in 2014 that went to a no name school which cost very little will reach that differential must faster than a college grad starting at $45000 and is in a career with low opportunity for promotions or raises.

Considering the names of the schools and the associated price tag and fields like computer science, I guess I thought their grads probably started off with higher incomes than they do. Considering COL variants (CA and NY vs. say some place with no state income tax like TN) I wonder how they are making salary comparisons.

I wasn't sure what 20 year timeframe they meant, but it seemed to me that accuracy would require including the college years when a person who chose direct job entry would be earning rather than spending, so if you wanted 20 years post degree you would have to do a 24 year comparison (so 24 years post HS for both...) The other thing I don't know how they dealt with is the fact that many--I would think a majority--of those who go to an elite school go on to graduate degrees...

Yes, COL would make a difference. We took a paycut when we moved from California to Utah, but our quality of life went up significantly...

[Jane in NC]

Their data source, Payscale, defines ROI as follows:

 

 

The total income that a graduate will earn after graduation in 20 years of working, minus both what they would have earned as a high school graduate and the cost of college (tuition, room and board, books and supplies), minus the average financial aid amount awarded to students at that school if that filter has been selected. It is their net earnings in 20 years as a college graduate.

 

Something doesn't seem right about some of the numbers.  Maybe I will fiddle if I have the time.

 

Agreeing with others that there is a whole lot more to life than cumulative earnings!

[8filltheheart]

Their data source, Payscale, defines ROI as follows:


Something doesn't seem right about some of the numbers. Maybe I will fiddle if I have the time.

Agreeing with others that there is a whole lot more to life than cumulative earnings!

Thanks Jane. I didn't see that info. The pay scale website page also displays funny on my iPad.

I agree with others that obviously life is more than income. :)

But the entire thing seems whacky to me. Simple numbers are not going to give a very accurate picture. For example, if we were transferred to CA, we would be given a huge COL raise. So if the numbers are simply based on self-reported income and taken at face value, location alone would skew data.

[Nan in Mass]

I think something the people who do this sort of calculation forget is that happiness does not just mean money, but also choice and power.  (And a whole lot of other things - those are just something that I think they should take into account with a money-type calculation.)  You can have a high-paying job that does not allow you the time or energy to be with the loved ones you are working so hard to support, or do something you love other than your work (play), or alter your work or work environment in ways which will make your work effective, efficient, or pleasant, especially especially effective and important, rather than ineffective or trivial.  If this is true, you may be miserable, much more miserable than you would be if you were working a job that allowed you only to feed and house safely your family.  (I am not under-rating feeding and safely housing one's family.  That obviously is the first consideration.)  You can have a higher-paying job but not be able to switch careers if necessary, if you discover something else you want to do or if your job situation shifts or if your life shifts (health problems, for example).  The old "college trains you to think" idea stills seems like a valid consideration to me, giving you more flexibility and control in your life.  Few families are going to be able to afford $240k per child to launch them, but I think many colleges are still worth a reasonable investment.  You meet some surprisingly powerful people from some surprisingly humble colleges, so I don't think you can rank the colleges simply.  It is complicated.  And intelligence and contacts and location probably have more to do with the equation than we want to admit.

 

Nan

[Elisabet1]

The colleges don't make you the poorest. The entire correlation on how much you earn when you graduate is really how much money you came from and what you are doing for a career. Trumps children and Bill Gates children will end up wealthy even if they completely skip college.  A public school teacher with little financial extra whose children go to top schools, but end up public school teachers, will not become wealthy.

[Nan in Mass]

The colleges don't make you the poorest. The entire correlation on how much you earn when you graduate is really how much money you came from and what you are doing for a career. Trumps children and Bill Gates children will end up wealthy even if they completely skip college.  A public school teacher with little financial extra whose children go to top schools, but end up public school teachers, will not become wealthy.

 

Define wealthy GRIN.

I know people who own almost nothing and have no income who consider themselves wealthy.  Even by some of the world's standards, they are wealthy.  They have power and influence and are changing the world.  They are happy and busy and loved.

Nan

[In The Great White North]

There are two major problems with these calculations:

 

1.  

 

 

College name is just foot in the door.  Performance afterwards counts.

 

 

The ROI really happens in the first five years or so.  After that, your pay/career progression depends on how well you do your job.  College "old boy" networks only get you won't help you if you can't find your way out of a wet paper bag.

 

2.  

 

 

 Start with cost, which is the time and money it takes to finish school. Colleges advertise their sticker price, but about half the students at many elite colleges get grants. Without financial aid, four years at Stanford University costs $236,000, making it one of the 10 most expensive colleges in America. But the "weighted net cost," factoring in grant aid and time to graduation, of going to Stanford is more like $74,000. For my purposes, I'm interested in net cost, not sticker price.

 

 

Well, duh!  Everything has a better ROI if you only use the sale price.  The cost of a college is the sticker price. His "weighted net cost" is, at best, an average that applies to nobody.  Would Stanford, or any of the others on his list, still be there if he used the sticker price?  What about the other half of the students?  The half that didn't get grants?

[Jane in NC]

Looking at schools at the bottom of the expanded lists, I cannot even begin to understand the negative 20 year ROI for UNC-Asheville or Francis Marion (public uni in SC). Their tuition is not expensive for in-state students.  Meredith College in Raleigh also has a negative ROI. Since Meredith is a women's college, maybe some of their grads drop out of the work force temporarily or permanently to raise children? Does this mean their degrees did not have value?

 

Engineers and computer scientists are going to start earning higher incomes out of the gates, but not everyone has the skill set and personality to be an engineer or computer scientist.  (Fortunately, notes Jane, who is married to a software engineer.  ;)  )

 

Technology changes as I write but knowing how to think is a constant.  Clearly some people graduate from college not have learned much (including how to think) but I believe that college remains the right path for many students ripe for knowledge. 

 

[8filltheheart]

Nm

[SeaConquest]

The colleges don't make you the poorest. The entire correlation on how much you earn when you graduate is really how much money you came from and what you are doing for a career. Trumps children and Bill Gates children will end up wealthy even if they completely skip college. A public school teacher with little financial extra whose children go to top schools, but end up public school teachers, will not become wealthy.

A couple of points:

1) I posted this here to spur discussion, not because I endorse a view that financial wealth should be the driving force in selecting a college. However, given that students are currently weighing a great many variables in choosing a college, and a variety of financial aid options, I do believe that taking into consideration the financial ROI of one's investment in a particular university is prudent. And, to that extent, I find the information reasonably useful.

2) I don't believe that what people make after graduation is primarily driven by whether they come from money. I've seen too many students of modest means leverage the power and prestige of a school's reputation into very lucrative professions. Doors that were previously closed were open on the basis of the university they attended, and to varying degrees, performance. For example, in my law school class, even students in the very bottom of the class were given job offers that only students at the very tippy top of other schools were offered. While I make no comment about whether that is an effective strategy for employers, it is the reality in some professions. And, knowing that you have that kind of cushion, one is much more free to enjoy the educational experience and not obsess over grades and class rank.

[Crimson Wife]

One big caveat is that it excludes graduates who have anything higher than a bachelor's degree. So it's going to undervalue any major where most people go on to get a graduate or professional degree.

[Jane in NC]

Something else that is bugging me about the Payscale site data:  sample size.  They don't indicate what composes "adequate" data/

[shawthorne44]

I've been thinking about this.  I don't think this gives the complete picture.  Harvey Mudd Computer Science for example.  Being a California school, a large percentage of the those students will work in San Jose where 100K salary might get you a 1,000 sq. ft house an hour's drive away from work, assuming you eat mostly beans and rice.  Whereas the UTD student is more likely to end up in Dallas where the standard of living will be a lot higher on a lesser salary.