By Bridget Quigg
When you hear that someone graduated from Harvard or Princeton, do you automatically assume that they’re making the big bucks? You’re probably right, according to PayScale’s data on what different college graduates earn. But, they also likely paid the big bucks to go to an elite private school rather than a local, state institution. Is all of that tuition really paying them back?
Online salary database PayScale.com decided to answer this question and figure out how valuable a 4-year college degree is over a 30 year period of work for 554 U.S. colleges. They did so using a common business calculation: return on investment (ROI).
PayScale figured out how much more a college graduate of a certain school makes in 30 years of working compared to a high school graduate, then subtracted tuition, room and board costs, factored in the school’s graduation rate (non-graduates see little improvement in pay over high school graduates), did some number crunching and came up with a handy guide for potential students and their funders can compare college costs.
“Public institutions provide the best bang for your buck,” says Al Lee, PayScale’s director of quantitative analysis. His team calculated an annualized return on investment for each school, and while a degree from M.I.T. may gross you more money in total over 30 years, a Georgia Tech degree will earn you back more return for each tuition dollar you spend. If you want to spend a little as possible on your education and earn back as much as you can, an in-state, public school with a technical focus is your best bet, according to PayScale’s research.
Is there any time when a private school may pay back equal or even better returns per dollar as a public school? Lee points out that if you can receive financial aid scholarships at a private school, you’re likely to out-gain your public school counterparts over time because you’ll probably enjoy higher income over 30 years.
Another way to make a private school education pay off is to simply graduate. Public schools have an average graduation rate of 52 percent, while private schools graduate 71 percent of their students, on average. For example, freshman at the Georgia Institute of Technology have a one in four chance of not graduating. If they do, they’ll earn more money per tuition dollar than if they had attended any of the Ivy League schools in PayScale’s study.
But, those odds of graduating make attending Georgia Tech more of a gamble than attending M.I.T., which boasts a 95 percent graduation rate. A low graduation rate dropped schools significantly down PayScale’s list. In their study, the top 10 percent of schools for 30-year net ROI have an average graduation rate of 89 percent. The bottom 10 percent of schools have a 36 percent average graduation rate.
“Essentially, if you don’t graduate, you’ve not only lost money to tuition, you’ve also lost wages that you would have earned by working instead of going to school. A non-graduate’s time in school creates, more or less, a net zero in their lifetime earnings,” says Lee.
There is one private school that outdoes most public schools for, not only low tuition, but also graduation rates and post-graduation earnings. That school is Brigham Young University. A recent grad will have paid a total $58,450 for tuition, room and board for four years and they can look forward to earning an extra $797,000 over a 30-year work period after graduation. That mean’s they’re earning an annualized ROI of 14.1 percent on their tuition dollars. That’s better than many market averages.
Curious what attending your favorite school could earn you, or where your alma mater falls on the list? Check out PayScale’s College ROI report to compare college costs and the potential return on investment for each school.