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Choosing a college is one of the biggest financial decisions of your life. It's also one of the first financial decisions people ever make. Unless you have a trust fund to fall back on, you probably wouldn't let a 17-year-old decide how to invest $150,000 in the stock market. But every year, tens of thousands of 17 and 18 year old high schools seniors enroll in colleges across the United States, essentially signing up to pay that amount in the form of tuition, room and board and books. College is an investment, and PayScale designed this data visualization based on our College ROI Report annualized ROI comparisons to help you look at college in the same light as more traditional investments.
When students and their families start researching colleges, a lot of factors go into their final decision of where to enroll. We encourage students to think about location, reputation, family history, class size, and of course, whether or not they think they can get accepted to the college of their choice, but we approach cost in very different ways. Students who don't come from wealthy families, or at least families who have been able to set aside money to pay for college, are forced to navigate through a complicated and intimidating application process to obtain financial aid, and then must often take out tens of thousands of dollars in student loans to cover the remainder of the cost. Some students graduate with such crushing debt that they must delay home ownership, marriage and other markers of adulthood in order to catch up with payments, and others simply write off many fine college choices because the sticker price of the schools makes them seem unattainable. As a result, many of our poorest students miss key educational opportunities because they don't think they have a way to pay for college.Despite the high cost, college is generally a good investment. Most of the colleges above, both public and private, show an annualized ROI that is higher than the S&P 500, which has an annualized ROI of 7.8 percent over the last 20 years. On average, the 20-year Annualized ROI of schools on PayScale's College ROI Report is 8.9 percent. Going into a reasonable amount of debt for that kind of return isn't a bad thing. In fact, our data shows that a bachelor's degree may be worth more than it's weight in gold – the 20-year annualized ROI of gold from 1995 to 2015 was just six percent.
When you filter by category, the story changes a little. Public colleges tend to have higher ROIs than private schools because of their lower cost, assuming you pay in-state tuition. However, there are plenty of private schools that, despite their cost, provide a high return on investment, even compared to some of the most successful stocks of the last two decades. By looking at college as an investment, and using data to help make a smart decision, you can estimate when it's a good idea to pay more for your college education, or if it's better for you to stick to a lower-cost option.
Engineering-focused colleges provide the higherest overall ROIs, since they send the majority of their students into high-paying STEM careers. Most even beat out the Ivy League schools. Art and design schools provide the lowest overall ROIs. This doesn't mean that art should be ignored, but it does mean that you should consider how much debt to go into for an art school education before signing up for student loans.