New Analysis Indicates Public College Alumni Will See Much Higher Financial Return on Education Investment If Tuition and Wage Increases Stay on Current Trajectories
Seattle – June 17, 2015 – PayScale, Inc., the world’s leading provider of on-demand compensation data and software, today announced a College ROI Forecast through 2025.
PayScale’s new analysis provides a look at potential future financial returns on investment for a bachelor’s degree at public and private colleges. This forecast expands upon PayScale’s annual College ROI Report.
“What this forecast brings into focus is that the name of your alma mater matters far less than your commitment to your education,” said Lydia Frank, Senior Editorial Director, PayScale. “The biggest driver around return on your educational investment is cost, assuming you graduate, so go to a college you can afford. Sometimes that will be a private school if they’re offering you great financial aid, but get all the information on cost of attendance before you accept any offer. If you put in the effort, you can get a stellar education at any number of universities. Don’t put yourself in dire financial straits to attend a school that’s financially out of reach.”
The full report can be found here: http://www.payscale.com/college-roi/forecast
Highlights from PayScale’s 2025 College ROI Forecast include:
1. The financial return on investment of a college education will continue to increase in the next 10 years, but at very different rates for public and private colleges. By 2025, the 20-year net ROI of a bachelor’s degree at private colleges will rise 4 percent, but the 20-year net ROI of a bachelor’s degree at public colleges will rise 17 percent.
2. It is projected that the financial ROI at public colleges will be 24 percent better than at private colleges by 2025. Today, the percentage difference is 13 percent – also in favor of public colleges.
*Outcomes for individual alumni at individual schools may vary as this data is projected for public colleges and private colleges as cohorts.
3. Post-graduation earnings do not differ greatly between public college and private college alumni. PayScale data shows that major has the biggest impact on earning potential, rather than school attended.
4. What does differ greatly between private and public colleges is cost. For the schools included in PayScale’s College ROI Report, the average four-year cost for a 2014 public school graduate was $29,609. For a private school graduate, the cost was $83,192. (Cost includes tuition & fees, room & board and books & supplies and was supplied by the U.S. Department of Education Integrated Postsecondary Education Data System).
“The increased cost of a college education makes it even more important that students factor cost, career goals and projected alumni outcome data into their decisions around college choice,” said Katie Bardaro, Director of Analytics & Lead Economist, PayScale. “Make sure you do some research on your fields of interest in terms of earning potential and employability so you can ensure you’ll be able to pay off any student loan debt you have to incur.”
PayScale calculated the 20-year net Return on Investment (ROI) for those with a bachelor’s degree and no higher degree for the years 2006 through 2014. The 20-year net ROI is the difference between the earnings differential between a college graduate and a high school graduate less the in-state 4-year total cost of obtaining a degree. For each year, we calculate the 20-year earnings of the college graduate as the sum of the median earnings for each year of graduation going back 20 years (for example, for 2006, we utilize the graduation years of 1987 to 2006). Since high school graduates get an additional 4 years in the labor force, we calculate the high school earnings as the sum of the median earnings for each year of graduation going back 24 years (for example, for 2006, we utilize the high school graduation years of 1983 to 2006). All wage data comes from PayScale and is in nominal terms.
The cost data is obtained through IPEDS. We calculate the cost of a degree as the 4-year total cost for in-state students. This includes tuition and fees, room and board, as well as books and supplies for each school year for the 4-year window (for example, for 2006, we sum the total cost figures for academic years 2002-03, 2003-04, 2004-05, and 2005-06).
PayScale calculated the 20-year net ROI values for the years 2006 through 2014, w and calculated a line of best fit for these data points. Using this line, PayScale projected the ROI values for both public and private colleges in 2025.
Cloud software, crowdsourced data and unique algorithms power the world’s largest real-time database of rich salary profiles giving PayScale the unique ability to provide job seekers and employers alike immediate visibility into the right pay for any position. PayScale’s cloud compensation software is used by more than 3,000 customers including Bloomberg BNA, Cummins, Warby Parker, Clemson University and Signature HealthCARE. For more information, please visit: www.payscale.com or follow PayScale on Twitter: http://twitter.com/payscale.