In calculating the return on investment, we first determine the investment in college and the return from attending college. The investment is the cost of college as determined by the out-of-pocket cost of attending college plus foregone wages while in school. The return (gain) is the additional expected future income stream received for being a college graduate.
Investment in College: This investment in college is the cost of attending college, as calculated by the cost for a Graduate in 2020, on and off campus, or the Cost, With Aid for a Graduate in 2020 (for those who get financial aid) as defined above.
Return from Attending College: The main financial benefit of attending college is the gain in income received by a college graduate over a high school graduate. However, by choosing to attend college, one is giving up 4 years of income one could have received if one went straight to work after high school. Therefore, we calculate the gain in median pay over a high school graduate (Earnings Differential) as the difference between the 20-Year Pay for a 2020 Bachelor’s Graduate and the 24-Year Pay for a 2020 High School Graduate.
ROI by Career and by Major: We include ROI calculations by major and by career when possible for school-major or school-career combinations. This does not change the investment required to attend a given school, but does affect the return one gets from attending college. This is due to differences in yearly salary and the maturity curves of a graduate over 20 years of employment. ROI by Major represents graduates of a school with the given major. ROI by Career represents graduates of a school who work in the given job category.
PayScale only includes school-career and school-major combinations with statistically significant samples. Exclusion from the study is not a reflection on the quality of the institution, but simply indicates that we did not have enough verified data from the school’s alumni to publish an ROI estimate. We acquire our data from individuals filling out the PayScale Salary Survey.
Using the Return and Investments above, we calculate two measures of ROI, each in four ways: on- and off- campus, and with and without financial aid.
1. 20-Year Return on Investment (2021 Dollars): To calculate the 20-Year Return on Investment, we use the Earnings Differential less the On Campus Cost, and the Earnings Differential less the Off Campus Cost. For example, a school with a $1,000,000 Earnings Differential for graduates and $200,000 in Costs would have an $800,000 20 Year Return on Investment. All dollar figures are in 2021 dollars.
We do not discount the earnings differential by the graduation rate, though we have in previous versions of this report. We show what the typical earnings potential would be if a person graduated from a school in 4 years. This ROI represents a net return on investment after the opportunity cost (High School Graduate Earnings) and cost of investment (tuition, room, board, books, etc.) have been taken into account. This measure is useful for high school seniors evaluating their likely financial return from attending and graduating college.
2. Annualized ROI: This is the Earnings Differential divided by the Total Cost for a 2020 Graduate, annualized to represent the percent of expected ROI received each year after graduation.
For example, a school with a $1,000,000 Earnings Differential for graduates and $200,000 in Total Cost would have an annualized return of 8.38% if we are looking at the 20-Year Return. In past years we have calculated annualized ROI in nominal terms using average real wage change over the past 20 years, but we have switched to real terms (current dollars).
Uncertainty in ROI Estimates
The average normalized error for a large school was ±3.0%, and ±6.8% for a small school. We defined large schools as those with more than 1250 graduates last year according to IPEDS, and small as those with fewer. PayScale does not provide confidence intervals for the estimates of 20-year earnings at the school level for the sake of brevity.
Data Set Characteristics
All data used to produce the PayScale College ROI rankings were collected from approximately 1.6 million college-educated workers who successfully completed PayScale’s Employee Survey between January 2007 and February 2021. The average sample size for an included school is 966 alumni profiles.
The data represent the civilian labor force, not active duty service members.
Bachelors Only: Only employees who possess a Bachelor’s Degree and no higher degrees are included. This means Bachelor graduates who go on to earn a Master’s degree, MBA, MD, JD, PhD, or other advanced degree are not included.
For some Liberal Arts, Ivy League, and highly selective schools, graduates with degrees higher than a bachelor’s degree can represent a significant fraction of all graduates. Careers that require advanced degrees, such as law or medicine, are not included.
U.S. Only: All reports are for graduates of schools from the United States who work in the United States. This sample does not include U.S. territories, such as Puerto Rico or Guam.
Full-time Undergraduates (as defined by IPEDS): A student enrolled for 12 or more semester credits, or 12 or more quarter credits, or 24 or more contact hours a week each term.
First-time Undergraduates (as defined by IPEDS): A student attending any institution for the first time at the undergraduate level. This includes students enrolled in academic or occupational programs. Also includes students enrolled in the fall term who attended college for the first time in the prior summer term, and students who entered with advanced standing (college credits earned during their high school education.)
Overall Graduation Rate: This rate is calculated as the percentage of full-time, first-time degree seeking undergraduate students who began their studies at the given school who graduate within six years. It is provided by the Integrated Postsecondary Education Data System (IPEDS) produced by the National Center for Education Statistics (NCES).
Typical Time to Graduation: Utilizing graduation rate data from IPEDS, we calculate the number of years it takes for at least 65 percent of graduates from a given class to receive their diplomas.
Percent Receiving Grant Money, Overall: This is the percent of full-time, first-time undergraduates who received local, state, federal, or institutional grant aid in the 2020-2021 academic year, as reported by IPEDS.
On-Campus Cost: This cost is comprised of the sum of Tuition and Fees, Room and Board, as well as Books and Supplies for each academic year used in the analysis. We utilized on-campus living costs for Room and Board. Data supplied by IPEDS. For public schools, we calculate the cost for both an in-state student and an out-of-state student.
Off-Campus Cost: This cost is comprised of the sum of Tuition and Fees, Room and Board (off campus), as well as Books and Supplies for each academic year used in the analysis. Data supplied by IPEDS. For public schools, we calculate the cost for both an in-state student and an out-of-state student.
Cost, With Aid: This cost, calculated for both on- and off-campus costs, is simply the reduced price of education accounting for average grant money received over four years of education.
Total Cash Compensation (TCC): TCC combines base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, and other forms of cash earnings, as applicable. It does not include equity (stock) compensation, cash value of retirement benefits, or value of other non-cash benefits (e.g., healthcare).
Median Pay: The median pay is the national median (50th percentile) TCC. Half of a school’s employed graduates earn more than the median, while half earn less.
20-Year Pay for a 2020 Bachelor’s Graduate: Using PayScale’s database, we calculate the current 20-year median pay for a bachelor’s graduate of 2020 as follows:
1. Calculate years since graduation at time of response for each individual in the sample by subtracting graduation year from survey response year.
2. Inflate pay to current dollars using the consumer price index (CPI).
3. Model pay as a function of years since graduation, squared years since graduation, and school to produce school-specific curves of pay over years since graduation ranging from zero through 19.
4. Sum all 20 pay estimates for each school to get 20-year pay.
This approach allows us to estimate 20-year pay more precisely and stably than taking median pay numbers for the data. Our model assumes that pay trajectories for a given school do not change substantially over time. In other words, it assumes that an individual who graduated in 1997 and responded to the survey in 2007 has had basically the same post-college experience as an individual who graduated in 2007 and responded to the survey in 2017. Both individuals were 10 years out of college at time of response, so our model assumes that they are directly comparable. This may not be the case; for instance, many schools have rapidly increased investment high-paying STEM education, which means that a typical graduate from the Class of 2007 might have a better pay trajectory immediately out of college than a typical graduate from the Class of 1997. Additionally, graduating cohorts are subject to different macroeconomic trends (such as the great recession) that color their employment and earnings opportunities after college. We tested for differences in pay trajectories over time between cohorts after accounting for inflation and found that these considerations do not translate to significantly differences in earnings: people who were 10 years out of the same college tended to earn similar amounts after accounting for inflation, regardless of year of graduation.
24-Year Pay for a 2020 High School Graduate: We calculate the 24-year pay for a high school graduate by finding the median pay for high school graduates zero through 23 years after graduation and aggregating all 24 median values. We do not need use the modeled approach because we have ample data in each year-after-graduation.
School Type: We separate schools into four categories: Public (In-State), Public (Out-of-State), Service Academy, and Private not-for-profit. Schools are deemed either Public or Private by IPEDS, while In-State or Out-of-State refers to the tuition used to calculate the Return on Investment.
Religious Affiliation (as defined by IPEDS): Indicates religious affiliation (denomination) for private not-for-profit institutions that are religiously affiliated.
Census Regions: Regions of state grouped by the US government (https://www.census.gov/geo/maps-data/maps/pdfs/reference/us_regdiv.pdf).
We categorize the schools into eight categories.
Research University: A school categorized by the Carnegie basic higher education classification system in one of three categories:
RU/VH: Research Universities (very high research activity)
RU/H: Research Universities (high research activity)
DRU: Doctoral/Research Universities
Research Universities are the ones that grant Ph.Ds and do at least some research.
Liberal Arts School: Any private school with a Carnegie basic classification of “BAC/A&S Baccalaureate – Arts and Sciences” and identified as private by IPEDS. These generally are non-pre-professional undergraduate focused institutions, and usually have smaller enrollments.
A Liberal Arts designation includes science majors. It does not include pre-professional degrees like business, nursing, and engineering.
Arts, Music & Design School: Any private school with a Carnegie basic classification of “Spec/Arts: Special – Arts” and which grants bachelor’s degrees according to IPEDS.
Business School: Any school (public or private) which grants more than 50 percent of their undergraduate degrees in business, accounting, entrepreneurship, finance, human resources management, management information systems and marketing majors based on data from IPEDS. The idea is to identify business focused schools, not necessarily schools that only have business programs.
Engineering School: Any school (public or private) which grants more than 50 percent of their undergraduate degrees in math, physical sciences, computer science, engineering and engineering technology majors based on data from IPEDS. The idea is to identify science, engineering and technology-focused schools.
Ivy League School: One of the eight schools in the Ivy League.
Party School: One of the 20 schools on the latest Princeton Review “Party Schools” list.
Sober School: One of the 20 schools on the latest Princeton Review “Sober Schools” list.
Private School: Any school identified by IPEDS as being privately funded.
State School: Any school identified by IPEDS as being publicly funded.
Religious: Any school with a religious affiliation, as defined by IPEDS.