As the price of college tuition continues to rise, and the ocean of student debt expands, so too do questions of the value of attaining a college degree. How much is a college degree really worth? That’s precisely the question that PayScale has aimed to answer with its 2015 College Return On Investment (ROI) Report, published today, which provides prospective students and employers a snapshot of wages expected to be earned by college graduates over a 20 year time period.
PayScale, an online compensation comparison software company, boasts the largest database of salaries in the world, with nearly 40 million profiles from around 3,000 customers across 11 countries. For the purpose of the College ROI report, the company used only American university alumni who’ve earned a bachelors degree and are a full-time employee with an hourly wage or annual salary.
The survey compared nearly one thousand universities by taking answers from individual employees who visit the site and complete PayScale's ongoing online employee survey and calculating the 20-year ROI on their college degree. The ROI represents the additional money a person with a degree from the corresponding university can expect to make versus if they had entered the workforce straight out of high school. The survey also produced an annualized ROI percentage, much like one would expect to receive on a stock market investment. Lydia Frank, PayScale’s Director of Editorial and Marketing, said that giving high school students a window into the future, and soaring student debt which has eclipsed $1 trillion, were motivators for the study to first be compiled.
“The reason why we initially starting putting this information out there was that there were questions circulating around the value of a college degree and trying to understand, in the context the rise of tuition, what college students can expect in terms of monetary return on the other side of school and how college was setting them up for success in the job market,” Frank said.
The top school overall on PayScale’s survey when not factoring in financial aid, was Harvey Mudd College ($985,300) followed by California Institute of Technology (CalTech) ($901,400) and Steven’s Institute of Technology ($841,000).
Cal State Long Beach came in at number 255 on PayScale’s list with an 20-year ROI of just over $374,000. The school faired better when accounting for annualized ROI percentage, a value that represents that if education were a stock share, the return on that stock in a given year. Long Beach is in an eight-way tie for 110th place with an 8.8% annual ROI percentage, tied with the likes of Arizona State University and Sacramento State University and outpacing the number one overall school on the list, Harvey Mudd.
However, when adjusted for off-campus living—less than 1 percent of the over 35,000 students at Long Beach live on campus according to the 2013 campus demographics—those numbers got even better, with Long Beach’s ROI ($373,400) jumping to 171 and its annual ROI percentage (8.7%) jumping up to number 85 on the list.
Schools were sorted into four groups: public (in-state), public (out-of-state), private (for-profit) and private (not-for-profit). Because Long Beach is a public school, it was listed twice on the report to reflect both in-state and out of state tuition. However, of the 35,592 students enrolled in 2013, just over 2,000 (5.7%) of those paid out of state tuition.
State schools nearly all faired better when viewing them through the lens of annualized ROI percentage, with 37 of the top 40 schools being state schools after the adjustment. Frank said that this is usually due to low costs, which Long Beach, with an annual off-campus registration fees of just over $6,000, has.
“Typically when they’re doing better they’re keeping their costs low, relatively, and that students are seeing a nice return in terms of earning potential,” Frank said. “For some schools it can be that a higher percentage graduate from more lucrative fields, like STEM careers, that can certainly be impactful on how well the school does on the ranking.”
The study illustrated the earning power of specific majors and their corresponding ROI. Engineering schools dominated the list, with the average engineering school’s ROI being just shy of $680,000. According to the survey, alumni with degrees in engineering, computer science and math or business fields all had greater chances of reaching a 20-year net ROI of over $1 million.
This held true for Long Beach engineering graduates, with alumni of its program enjoying a 20-year net ROI of $743,400 and an annual ROI of 12%, almost $400,000 more than the campus average and over seven times that of those who majored in humanities ($101,400) over the same 20-year period. Michael Uhlenkamp Executive Director of News and Digital Media at CSULB said that the success of the engineering program is a mixture of the preparation in the classroom and the work the university does within the community to ensure their students succeed.
"We have an exceptional engineering program and obviously a part of that is a reflection of the jobs that folks are going out and getting," Uhlenkamp said. "We’re very proud of the engineering program. We do feel that not only are we preparing the future engineers, and we’re preparing them well, but we’re also working with local industry leaders to make sure that our students have the skills and knowledge so they can immediately impact the workforce upon graduation."
Frank said that while some obvious majors are more lucrative once a student graduates, the PayScale's survey isn't intended to steer students away from what they love. It's meant as a guide, meant to inform on how much they can afford to borrow for a given major based on how much they can expect to earn upon graduation.
“The reason this information is so vital and helpful is that students are taking on huge amounts of debt in some cases to pay for their education without kind of doing the research around earning potential,” Frank said. “What we wanted to do was connect the dots for students and parents and say ‘you should major in whatever you’re passionate about but you should know that for certain occupations you’re just not going to make very much.’”
The average loan taken out by Long Beach students was $21,480, which placed it near the bottom of the list. The figure is also below the national average which sits above $30,000 for a graduating student. Uhlenkamp cited this and other assets on campus at Long Beach in stating that choosing to invest in an education at The Beach is a gainful decision.
"Less than a quarter of cal state long beach baccalaureate degrees take on loan debt," Uhlenkamp said. "Those that do take on debt, take on less debt than the state average and the national averages. The median starting salary and mid-career salaries are also higher than the national averages for public universities. So by any measure, the investment in a CSULB degree is a sound one and i provides an exceptional return on investment."
For comparison’s sake, PayScale calculated the ROI on popular stocks like Apple (24.8%), Microsoft (15.2%) as well as U.S. Treasury Bonds (2.5%) and the S&P 500 (7.8%) to show the ROI students could’ve received had they invested in the stock market in leu of investing in a college education. While most schools’ ROI don’t supplant an investment in Apple, 24 percent of those included in the survey, including Long Beach, outpaced the S&P 500. While using stocks is a fun way to evaluate the value of a college education, Frank said the company doesn’t advocate dropping out and buying shares.
“Ultimately, we don’t believe that your investment in college is as volatile as the stock market so it would not be our advice to invest the money you were going to spend on college and invest in the stock market,” Frank said. “But in terms of understanding what that annualized number means, in comparing it to other things that use that calculation, it’s helpful.”
[Editor's note: A previous version of this story stated that the survey was compiled by taking information from alumni whose employers use PayScale's software. The information is actually submitted by individual employees who visited the website and filled out PayScale's online employee survey.]