Randolph Kinney
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College: Big Investment, Paltry Return
http://finance.yahoo.com/college-education/article/109946/college-big-investment-paltry-return
The value of a college degree is a middle-class article of faith. But exclusive new research suggests it may be far less than previously thought.
New research suggests that the monetary value of a college degree may be vastly overblown. According to a study conducted by PayScale for Bloomberg Businessweek, the value of a college degree may be a lot closer to $400,000 over 30 years and varies wildly from school to school. According to the PayScale study, the number of schools that actually make good on the estimates of the earlier research is vanishingly small. There are only 17 schools in the study whose graduates can expect to recoup the cost of their education and out-earn a high school graduate by $1.2 million, including four where they can do so to the tune of $1.6 million. At more than 500 other schools, the return on investment, or ROI, is less—sometimes far less. College, says Al Lee, director of quantitative analysis at PayScale, "is not the million-dollar slam dunk people talk about."
The top of the list was dominated by elite private universities, with the Massachusetts Institute of Technology taking the top spot. Its net 30-year ROI of nearly $1.7 million makes it the most valuable undergraduate degree in the nation.
The next best education bargain was California Institute of Technology in Pasadena, Calif., where students out-earned high school grads by about $1.6 million, followed by Harvard University in Cambridge, Mass.; Harvey Mudd College in Claremont, Calif.; and Dartmouth College in Hanover, N.H.
One big conclusion that can be drawn from the PayScale data is that college—and college alone—may not be the great investment it was once thought to be. Richard Vedder, director of the Center for College Affordability & Productivity in Washington, D.C., notes that with the college-educated accounting for a larger percentage of Americans, the bachelor's degree has been devalued, and its ROI has taken a hit. "We have credential inflation in America. A college degree has become mundane and ordinary," Vedder said. "We used to send kids to college to become lawyers and doctors. Now we send them to college to work at Walmart."
A. Jordan, who graduated with a degree in political science from the University of North Carolina in Wilmington in 2008, knows about the devaluing of the college degree all too well.
As a stewardess in the private yachting industry with nothing but a high school diploma, she says she earned triple what she's making now in her administrative support job in Winston-Salem. She's making so little money with a college degree, she's considering returning to school for her master's. "Philosophy, political science, and other degrees of that nature are not giving you concrete skills," Jordan wrote in an e-mail. She declined to use her full name, citing possible career repercussions.
For many, the very notion of a financial return on investment misses the point of higher education entirely. Scott Jaschik, editor of Inside Higher Ed, a website that covers news of colleges and universities, says the return on a liberal arts education goes well beyond dollars and cents, and students who major in liberal arts aren't in it for the money. "People who major in history tend to think, 'I'd like to get a well-rounded education that will help me in many fields,'" says Jaschik, a history major himself. "I don't think philosophy and poetry majors are there because it's going to make them rich."
Maybe not, but most students expect, if not riches, then at least a comfortable life. And according to PayScale's Lee, if they're enrolled at many of the schools on the list, they will be bitterly disappointed. Over the past 30 years, the S&P 500 Index averaged about 11 percent a year. Only 88 schools out of the 554 in the study had a better return than the S&P. Everywhere else, students would have been better off—financially, at least—if they invested the money they spent on their college educations and never set foot in a classroom.
"For almost every school on the list," writes Lee in an e-mail, "prospective students paying full price would probably have been better off investing in the stock market 30 years ago rather than spending their money on a college education."
http://finance.yahoo.com/college-education/article/109946/college-big-investment-paltry-return
The value of a college degree is a middle-class article of faith. But exclusive new research suggests it may be far less than previously thought.
New research suggests that the monetary value of a college degree may be vastly overblown. According to a study conducted by PayScale for Bloomberg Businessweek, the value of a college degree may be a lot closer to $400,000 over 30 years and varies wildly from school to school. According to the PayScale study, the number of schools that actually make good on the estimates of the earlier research is vanishingly small. There are only 17 schools in the study whose graduates can expect to recoup the cost of their education and out-earn a high school graduate by $1.2 million, including four where they can do so to the tune of $1.6 million. At more than 500 other schools, the return on investment, or ROI, is less—sometimes far less. College, says Al Lee, director of quantitative analysis at PayScale, "is not the million-dollar slam dunk people talk about."
The top of the list was dominated by elite private universities, with the Massachusetts Institute of Technology taking the top spot. Its net 30-year ROI of nearly $1.7 million makes it the most valuable undergraduate degree in the nation.
The next best education bargain was California Institute of Technology in Pasadena, Calif., where students out-earned high school grads by about $1.6 million, followed by Harvard University in Cambridge, Mass.; Harvey Mudd College in Claremont, Calif.; and Dartmouth College in Hanover, N.H.
One big conclusion that can be drawn from the PayScale data is that college—and college alone—may not be the great investment it was once thought to be. Richard Vedder, director of the Center for College Affordability & Productivity in Washington, D.C., notes that with the college-educated accounting for a larger percentage of Americans, the bachelor's degree has been devalued, and its ROI has taken a hit. "We have credential inflation in America. A college degree has become mundane and ordinary," Vedder said. "We used to send kids to college to become lawyers and doctors. Now we send them to college to work at Walmart."
A. Jordan, who graduated with a degree in political science from the University of North Carolina in Wilmington in 2008, knows about the devaluing of the college degree all too well.
As a stewardess in the private yachting industry with nothing but a high school diploma, she says she earned triple what she's making now in her administrative support job in Winston-Salem. She's making so little money with a college degree, she's considering returning to school for her master's. "Philosophy, political science, and other degrees of that nature are not giving you concrete skills," Jordan wrote in an e-mail. She declined to use her full name, citing possible career repercussions.
For many, the very notion of a financial return on investment misses the point of higher education entirely. Scott Jaschik, editor of Inside Higher Ed, a website that covers news of colleges and universities, says the return on a liberal arts education goes well beyond dollars and cents, and students who major in liberal arts aren't in it for the money. "People who major in history tend to think, 'I'd like to get a well-rounded education that will help me in many fields,'" says Jaschik, a history major himself. "I don't think philosophy and poetry majors are there because it's going to make them rich."
Maybe not, but most students expect, if not riches, then at least a comfortable life. And according to PayScale's Lee, if they're enrolled at many of the schools on the list, they will be bitterly disappointed. Over the past 30 years, the S&P 500 Index averaged about 11 percent a year. Only 88 schools out of the 554 in the study had a better return than the S&P. Everywhere else, students would have been better off—financially, at least—if they invested the money they spent on their college educations and never set foot in a classroom.
"For almost every school on the list," writes Lee in an e-mail, "prospective students paying full price would probably have been better off investing in the stock market 30 years ago rather than spending their money on a college education."
Isn't that a little like the Moron Trucking Company? They bought melons for $1 and sold them for $1 and after a month decided they weren't making money so they bought a bigger truck...
