Study: For Nearly One-Third of Students, Higher Ed Doesn’t Pay Off

Two recent high school graduates, both highly accomplished students, will soon set off to college. One is heading to the University of Southern California (USC) to study drama. The other will pursue computer engineering at Princeton University.

Both hope their degrees will pay off. For one of them, it will, and handsomely. For the other, not so much.

In fact, the USC student can expect a lifetime return on that investment of -$540,000 — that’s negative half-a-million dollars — while the Princeton student stands to realize more than $7 million.

Those extreme figures bookend a new study calculating the return on investment (ROI) for tens of thousands of undergraduate and graduate programs. For a shocking number of degrees, it found, the ROI is negligible … or worse.

The study, “Does College Pay Off? A Comprehensive Return on Investment Analysis,” was published in May by The Foundation for Research on Equal Opportunity, a nonpartisan think tank.

Using data from the U.S. Department of Education’s College Scorecard, among other sources, the report estimates the ROI for 53,000 degree and certificate programs based on student cohorts from 2015-16 and 2016-17.

After crunching the numbers through a complex methodology involving earnings, cost of education, and completion rates, the study offers results for both undergraduate and graduate programs, showing earnings after one year and after 10 years, along with lifetime ROI calculations.

Its databases allow you to search by institution, field, and degree level. That makes it easy to compare outcomes.

For example, graduates of the University of Pennsylvania with a degree in history, like me, can expect a lifetime ROI of just over $1.6 million. Not bad. But had I majored in finance, I could have realized upwards of $7 million.

These are averages, of course, and the estimates assume certain variables. For one, it considers “counterfactual” earnings, or “what each student would have earned in a parallel universe where she did not pursue higher education,” and does so for the “typical student in each program.” That’s certainly a broad set of assumptions.

What’s more, these counterfactual estimates presume that “if college graduates had not gone to college, they would have still earned significantly more than the average high school graduate,” suggesting young people predisposed to college are inherently more valuable in the workplace, even without a degree.

With all the methodological dust settled, the report offers this sobering indictment of the higher education system: 31% of students are enrolled in programs that do not lead to a return on investment.

Curiously enough, these findings align with a recent BestColleges survey, which found that only one-third of students say college is worth the cost.

For students in such programs, it concludes, “the earnings benefits of the degree are unlikely to fully compensate students for the cost and risk of pursuing postsecondary education.”

Almost a quarter of bachelor’s degree programs have a negative ROI, the study claims, along with 43% of associate degree programs.

But here’s some good news: College, in general, does pay off. The median ROI for a bachelor’s degree is $160,000. It’s even more good news if you major in engineering, computer science, nursing, and economics, which result in a payoff north of $500,000.

Students in fine arts, education, English, and psychology, however, can expect smaller dividends, or none at all.

“For students who pursue a bachelor’s degree,” the study notes, “choosing a major is one of the most important financial decisions they will ever make.”

So is staying in college. For dropouts, the expected ROI is -$99,000.

For those earning credentials below the bachelor’s degree — an associate degree or certificate — the median ROI is $18,000.

Yet here again, what you study matters considerably. Certificate holders in the technical trades, including metalworking, HVAC technology, and electrical installation, enjoy a median ROI of $313,000 — meaning they realize far more than the typical college graduate.

Earn an associate degree in the liberal arts, though, and you can expect an ROI of -$9,000.

Not only does what you study matter but also how long it takes you to finish will dictate your ROI potential. Those who earn their bachelor’s degree in four years have an ROI of $343,000. Take five years, and that figure drops to $275,000. More time out of the job market plus extra tuition equals a less favorable return.

But wait, you say. What about the $160,000 ROI figure for bachelor’s degrees? Where does that come from? It reflects a “completion-adjusted” measure that factors in each college’s completion rates. The lower the overall completion rate, the lower the estimated ROI.

The study offers this example. It compares two biology programs — at Boston College (BC) and at the University of Massachusetts Boston. Both result in similar starting salaries, at about $38,000. But because BC has a much higher completion rate, its program’s expected lifetime ROI is $486,000, while UMass Boston’s is only $83,000.

Not surprisingly, the colleges with the highest completion rates have the highest ROI, according to this methodology.

What may be surprising, at least at first blush, is the finding that colleges with the highest net tuition costs have the highest median ROI, especially since the formula accounts for upfront costs. Yet many top private colleges have higher graduation rates and, as the study suggests, access to elite job markets and professional networks, helping these investments pay off.

Few students can get into these schools, however, so the study went one step further, adding a “mobility index” that combines value with inclusivity. While elite programs benefit the few, the mobility index “measures how successful programs are at promoting economic mobility on a large scale.”

The top program in that regard is the bachelor’s degree in registered nursing at Chamberlain University in Illinois, a for-profit institution. With an ROI of $842,000 and an enrollment of almost 36,000 students, it offers its students a collective lifetime return of $30 billion.

At the same time, a federal program designed specifically to bolster economic mobility might fall short of its potential.

According to this analysis, from 2018-2022, 29% of funds from the Pell Grant program, along with federal student loans — totaling $418 billion — went to students in programs with negative ROI. The study predicts much of this loan debt will remain unpaid as a result.

The report’s strongest indictment involves graduate degrees, especially those at the master’s level.

It estimates that 43% of master’s degrees and 23% of doctoral and professional degrees “do not increase students’ earnings enough to justify the costs and risks of graduate school.”

The median ROI for master’s degrees is $50,000. As with undergraduate degrees, those in engineering, science, and nursing offer better results than those in the arts and humanities.

Even the master of business administration (MBA), the most popular master’s degree, has a relatively modest ROI, at $101,000. And 39% of MBA programs have negative returns, the study shows, owing to graduates’ high preexisting earning potential, which renders the value added rather minimal.

In certain fields, such as education and social work, master’s degrees are encouraged, even required, as a means for advancement, but quite often those additional credentials aren’t worth the cost, the study says.

But some professional degrees are, such as those in medicine, dentistry, and law. One-fifth of law schools offer an ROI exceeding a million dollars. The top professional program in the country? Columbia Law School, with an ROI of $6.6 million.

Like most attempts at ROI calculations, this one focuses on income as the key measure of worth. Yet it does acknowledge the “joy factor” of choosing one’s career path and the intrinsic value of pursuing something with passion regardless of the financial implications.

It also concedes that “there is no perfect way to calculate the return on investment of higher education.”

Still, this latest contribution to the ROI literature offers important data for students and families seeking to make informed choices about where to go and, perhaps most importantly, what to study.