When we manage money for people we get asked this question all the time. The investor who gives you $100,000 to manage typically wants to know in advance what you think the expected return on investment is with their cash and over what time frame. Typically, most investors want to know how long it will take you to double their money. With today’s student debt approaching almost $30,000 (source: Forbes), should we be choosing and ranking school by return on investment?
Payscale, a company who diligently tracks salaries in the United States, recently came out with its 2014 report on collegiate return on investment. You’ll note some of the best schools in the country are at the top supporting my theory about paying only for the elite colleges and universities in the United States. However, the most amazing part of the study is that clearly engineering and technology driven schools blow away the rest of the field.
Harvey Mudd College tops list with a 2013 four year cost of $229,500 and a 20 year return on investment of $980,900 which is almost a 9% return per annum. Our own Georgia Institute of Technology turned a $92,250 investment into $755,600 over 20 years and achieving a whopping 11.9% rate of return. Ahem . . parents you’d better get your children to start brushing up their math and science skills.
Payscale crunches these numbers by estimated how much a member of the class of 2013 paid to attend each school which is no easy task. They even have an adjusted return to figure in things including monetary aid. Payscale factors in graduation rates and then comes up with an estimated net cost to attend. It tends to be a fairly accurate depiction of the overall cost of school.
Payscale then uses its national survey data on salary to determine the expected 20 year earnings of someone who graduated from each college. You can be certain there are isolated stories of success and failure that probably lie within this data, but the good news it provides you with an analytic directional picture if you are trying to ascertain collegiate value. At least from a monetary standpoint. Stay tuned for my top 10 party school list which is an entirely different set of criteria and we will draw an X/Y grid to see which school intersects.
To see the full list of schools and where your alma mater stacks up, check out Payscale’s complete ranking http://www.payscale.com/college-roi/full-list. Now the question is how do you really measure the worth of a college education? Should you look at this investment over twenty years as would any other investment? It probably helps if your college or university wins a national title or two, so think about these statistics when your child starts applying for college. It’s either that or get them to become an engineer!
Written by: Ted Jenkin
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