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Spend Smart on Your College Tuition: Rankings by ROI

By Bridget Quigg

Do you have $200,000 handy? How about $120,000? Okay, let’s go as low as $70,000. Got that? Outside of a few public schools’ in-state tuition, you’ll be paying $70,000 or more for a bachelor’s degree these days. It’s a lot of money so what if you thought of it as a financial investment? You could pick the school that gives you the most back on your tuition dollar and be… profitable.

Online salary database PayScale has taken on the task of figuring out how much a degree is really worth at nearly 700 of the nation’s top schools. They have come up with a calculation to help you make a fiscally sound college choice. Consider the information like typical college tuition rankings, but with a twist. Instead of simply listing schools by total costs, PayScale considers the long-term earning of graduates of the schools and tells you whether a tuition investment at that school will likely grow.

The concept is called return on investment (ROI). PayScale created a complicated calculation (see PayScale’s methodology for more information) where, somewhat simply put, the total cost of college (tuition, books, room and board) and missing income from not working while a college student, multiplied by some factors like graduation rate and likely number of years needed to graduate, is subtracted from 30 years worth of net career earnings (over what a high school graduate would make). In a sense, it figures out the profit on an education.

Is the information valuable? PayScale thinks so. They feel they earned a solid ROI on their hard work.

Some results are surprising. Namely, don’t necessarily avoid high tuition costs. PayScale’s director of quantitative analysis, Al Lee, explains, “If you can get into one of the top schools, do it. Even if you have to take it all as a loan, even then, it’s a win.” He adds that you won’t likely need to finance your whole education with loans at a private university. Many of these leading schools offer generous financial aid packages.

Lee goes on to say, “However, for many schools, just like houses, not every one is a good investment. You can look at our college ROI information and understand what makes a good choice.”

So, who are the winners in this unusual competition? Big name, private universities dominate the top ten. Some of the nation’s most pricey, well-renowned schools make it possible to earn all of you tuition back and then some, a big sum. Princeton University, for example, is fourth in PayScale’s college tuition rankings by ROI. For a person who graduated in 2010, Princeton cost them approximately $198,700 for total tuition, books, room and board. That’s a hefty price tag. But, your average graduate of Princeton (not even the best and brightest of the best and brightest) will go on to net a whopping $1,494,000 in their 30-year career (based upon PayScale’s fancy calculation explained above). That comes out to about $50,000 extra dollars per year.

To be clear, that doesn’t mean they will earn $50,000 a year on average. That’s a $50,000 per year bonus. According to PayScale’s data, the average Princeton grad earns $102,000 per year. The numbers are even bigger for the top three schools, which are all engineering-focused: CalTech, Harvey Mudd College and MIT.

Below are listings of the top 10 and bottom five schools in PayScale’s college ROI rankings. To see where your alma mater or favorite school falls in the line-up, see the full list of college tuition rankings by ROI.

Schools to Pick - Highest Tuition ROI

1. California Institute of Technology (Caltech)
2. Harvey Mudd College
3. Massachusetts Institute of Technology (MIT)
4. Princeton University
5. Stanford University
6. Dartmouth College
7. Duke University
8. Harvard University
9. University of Notre Dame
10. University of Pennsylvania

Schools to Avoid - Lowest Tuition ROI

1. Shaw University
2. University of Arkansas - Little Rock (UALR)
3. Chicago State University (CSU)
4. Davenport University
5. University of North Carolina at Pembroke (UNCP)

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