Money isn’t everything, but it is something.
Bloomberg has an article that reports on the findings from Georgetown University’s Center on Education and the Workforce about the return on investment for more than 1,500 four-year colleges in the U.S. It finds basically no correlation between the cost of tuition and the increase students’ expected earnings in the ten years after graduation.
It does find that Ivy League schools mostly provide graduates a very high return on investment compared with other schools. But non-Ivy elite colleges do not do very well, and in many cases they trail major public universities.
“The typical 10-year return on investment of the so-called ‘Hidden Ivies’ — a list of 63 top private colleges — is about 49% less than the official Ivies and 9% less than states’ most prominent universities, known as public flagships,” the story says. “For example, elite private institutions like Vassar College and Oberlin College respectively return 18% and a whopping 85% less than the median ROI of all public schools analyzed.”
If you want to go to school in New York City, your likely ROI would be much better at Manhattan College than at NYU. Both are private, but Manhattan College accepts 78 percent of applicants (compared with only 21 percent at NYU) and costs about $8,000 less per year, on average. The ten-year ROI for NYU is $107,000. For Manhattan College, it’s $180,000.
The data show that many of the schools with the highest ROI are specialized, such as the Colorado School of Mines, the U.S. Merchant Marine Academy, and the University of Health Sciences and Pharmacy in St. Louis. That’s to be expected, since they train people specifically for high-paying jobs.
But among more-general universities, the performance of relatively cheap public schools often surpasses that of expensive private schools. For example, my alma mater, George Mason University, with an acceptance rate of 89 percent and an annual cost of attendance of $25,717, has a ten-year ROI of $170,000. That’s higher than Pepperdine’s (cost: $75,312, acceptance rate: 42 percent), Middlebury’s (cost: $74,248, acceptance rate: 22 percent), Boston University’s (cost: $74,911, acceptance rate: 20 percent), Villanova’s (cost: $73,042, acceptance rate: 31 percent), and the University of Chicago’s (cost: $81,531, acceptance rate: 7 percent). GMU’s ROI is only $2,000 less than that of Brown, the lowest performing Ivy, which costs $77,490 per year and only accepts 8 percent of applicants.
The University of Wyoming has a 94 percent acceptance rate and costs $20,258 per year. It has a ten-year ROI of $152,000. That’s better than Wesleyan University’s (cost: $75,693, acceptance rate: 21 percent), Fordham’s (cost: $71,388, acceptance rate: 53 percent), and Wake Forest’s (cost: $74,135, acceptance rate: 32 percent).
The assumption that a higher price means a better return is not one that is made with other forms of investment. One does not assume that a stock with a higher share price will have a higher return than one with a lower share price, for example. Investors make good money on stocks that trade at relatively low prices and lose money on ones that trade at higher prices all the time. But when it comes to higher education, people become very sentimental and pay exorbitant premiums for “name brands” or “college experiences.”
“It is impossible to distill the excellence of any given college into one ranking, particularly one that only looks at success in terms of dollars and cents,” said an Oberlin spokeswoman quoted in the story. That’s true, no doubt. But it’s also the sort of thing you’d expect to hear from someone who works for a university that delivers a ten-year ROI of only $18,000, according to the study.
Or consider the Wellesley College economics professor who told Bloomberg, “Whatever that right fit school is for you, that’s where you should be, independent of financial ability or ability to pay.” That might sound nice, but it’s also rather convenient coming from someone who teaches at an institution that costs $75,198 per year yet provides the same ten-year ROI as the University of Texas at San Antonio, which costs only $18,923 per year.
Money isn’t everything, but it is something, and it’s hard to dismiss the massive gaps between cost and ROI at many elite colleges. Maybe instead of regimenting their children’s lives to get into elite schools, parents would be better off letting them have a childhood and enrolling in high-acceptance state schools instead. And maybe a federal student-loan program that doesn’t discriminate based on graduate outcomes is a poor way to incentivize schools or students to make wise decisions.