September 30, 2022

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New report shows which colleges offer the best ROI

Did you ever wonder if college was worth the money you spent on it?

A new report can give you an answer by estimating the return on investment a college student can reasonably expect over a lifetime. That report includes an ROI calculator that lets you search from 3,349 colleges.

In addition to the elite universities you’d expect, “you also see a lot of flagship public universities” high up on the list, Kevin Miller, one of the report’s authors, told Yahoo Finance Live on Wednesday.

“A lot of technical institutions and the institutions focused on science and engineering also tend to have high average payoffs,” says Miller, who’s associate director of higher education at the Bipartisan Policy Center, which put out the report.

The top colleges based on the report’s full model include places like Stanford, MIT, and Yale. The top 10 also includes lesser known colleges like the Massachusetts College of Pharmacy and Health Sciences, private business school Babson College, and the Maine Maritime Academy.

On the other side of the ledger, about one in 20 students in the U.S. currently attend institutions with a negative ROI, meaning they can reasonably expect to lose money by attending school.

Combating ‘built in inequality’

The model works by dividing the “college earnings premium” — the pay bump students get after graduation — by the tuition costs. Then, it takes into account a range of other factors from student debt levels to completion rates as well as the labor market discrimination many graduates will face.

“There’s a lot of built-in inequality in the economy,” Miller said. “…One of the things that we’re concerned about in our report is making sure that students who have the most to gain from college, especially women and people of color, are attending worthwhile institutions and that we’re protecting students from more predatory institutions that may not provide any payoff at all.”

Public institutions are the surest bet with 99%-100% of them providing a positive estimated median ROI under various models. Next up are private nonprofit institutions, which 93% of the time provide a positive return under the full model.

The clear laggards are private for-profit institutions — many of which “are estimated to provide little value to the typical student,” according to the report. Just 69% offer a positive return, according to the data.

‘We need to see greater accountability’

The authors hope that the report can change how higher education works in the years ahead, noting policymakers and student loan distributors can make better decisions using the data.

The federal government loans out around $150 billion annually to college students. While the U.S. Department of Education can technically punish colleges that have large numbers of borrowers who can’t repay their debt, the department rarely imposes such penalties.

“We need to see greater accountability standards applied at the federal aid level,” says Miller, who co-authored the report with Shai Akabas, the Bipartisan Policy Center’s director of economic policy. …”The federal government needs to seriously consider cutting off the worst offenders of institutions who don’t provide any value to students.”

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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