Seattle - June 28th, 2010 - PayScale, Inc. today announced its groundbreaking 2010 College Return on Investment Report. Based on an analysis of PayScale's set of over 23 million unique user profiles, the report examines the return on investment at 554 U.S. undergraduate institutions that offer an on-campus residential experience.
Payscale's analysis and assessment comes at an especially critical time for parents, current university students, and future college attendees because personal finances are being squeezed and scrutinized in a soft economy and uncertain labor market.
PayScale findings indicate that a return on education investment is competitive with other investments over the last 30 years at most schools. At all schools, expected annual return for investment in education is competitive with current 30-year Treasury bonds (yielding ~4.5%). And while the S & P 500 has returned about 13% annually over the last 30 years, besting all but 88 of 554 schools (16%), 449 (81%) of schools can equal or better the more recent 20-year return of 8.1%. At many schools, investing in college costs, even at full price, has been competitive versus getting a job out of high school and putting the money in the market or treasury bonds.
Two measures of ROI calculations are made in this report.
One is the 30-Year Net Return on Investment (2010 Dollars) that is the dollar difference between the expected value of earnings as a college graduate over typical high school grad earnings (earnings differential) after subtracting the total cost of attending the specific school for 2009 graduates.
Second is the Annualized Return, which is the expected value of earnings differential divided by the total college cost, annualized to represent the compound average growth rate (percent gain) effectively received each year for 30 years after graduation. For more information on methodology, please go to:http://www.payscale.com/education/compare-college-costs-and-ROI.
Here are five highlights from Payscale's 2010 College Return on Investment Report:
- The magical $1,000,000 (at least in 2010 dollars) is hard to come by
Out of 554 institutions evaluated, only 40 (36 private and 4 public) schools delivered a Net ROI of $1,000,000 or more over high school earnings, after costs and probability of graduating were taken into account.
- There are huge variations in 30-year Net ROI across all school types
The top 30-year Net ROI private school (MIT) and public school (Berkeley) graduates get payoffs in excess of $1,000,000 from their respective $189,300 and $118,900 college expense investments.
The bottom 30-year Net ROI private (Shaw University) and public (Black Hills State University) colleges offer graduates less than $25,000 in gain over national high school graduate earnings for their respective $98,730 and $67,020 college expense investments.
- The biggest "bang for the tuition buck" can be found in-state at technical/leading state universities
While the highest 30-year Net ROI schools tend to be private, these schools also have high sticker prices. Annualized return measures investment efficiency: the higher the percentage, the more "bang" for each buck invested in college costs. Of the 40 schools with more than a 12% annualized return on investment, 29 are public.
Georgia Institute of Technology (Georgia Tech) tops the Annualized Return list with 14.2%, because of its $1,111,000 ROI, low education costs ($79,140), and above average graduation rate (77%).
Brigham Young University tops the Annualized Return list for private schools, because of solid earnings ($797,000), fifth cheapest education costs ($58,450), and a good graduation rate (79%).
- Graduating students matters
The top 10% of schools for 30-year net ROI average an 89% graduation rate; the bottom 10% of schools average 36%.
- There's big money, if you can just graduate
Several schools offer million dollar pay-offs, assuming a diploma is earned:
South Dakota School of Mines: $1,152,000 ROI for graduates (in-state), but only 37% of students actually graduate (1 in 3).
San Jose State University: $1,050,000 ROI for graduates (in-state), but only 41% of students actually graduate (1 in 2.5).
Lawrence Technological University: $1,074,000 ROI for graduates (private), but only 46% of students actually graduate.
"We hope this report will provide parents, as well as current and prospective college students, crucial financial information about college selection," says Dr. Al Lee, Director of Quantitative Analysis, at PayScale. "The data should also help as students weigh the options of entering the job market after high school or attending a four-year university."
Adds Lee: "It's important and encouraging to note that the annualized return can be almost infinite for a student getting financial aid, and a million dollar return is accessible to students whose families can't afford high tuition costs. Top private schools like MIT, CalTech, Harvard, Harvey Mudd, Dartmouth, and Stanford, for example, often offer huge discounts on their roughly $200,000 four-year education costs for lower income families. For instance, Stanford charges no tuition, room or board to families with income of less than $60,000, and it doesn't charge the $38,700 per-year tuition to families earning less than $100,000 a year."
A note on methodology: All compensation data used to produce the 2010 College Return on Investment Report were collected from employees who successfully completed PayScale's employee survey. Self-employed, project-based, and contract employees are not included.
PayScale.com (www.payscale.com) is the leading online provider of employee compensation data. With the world's largest database of individual compensation profiles, PayScale provides an immediate and precise snapshot of current market salaries to employees and employers. PayScale's patent-pending, real-time profiling technology collects and indexes employee pay attributes worldwide and makes this compensation data available through its online salary tools and salary benchmarking reports. PayScale was founded in 2002 and is headquartered in Seattle. For more information, visit: About PayScale.
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