Is the degree worth it? ROI can provide a clue.
When families are checking out colleges and universities, many people don’t consider what the educational program’s return on investment will be. And while future earnings are important, choosing the right major becomes an even more important decision for college-going teens.
But there are many Internet tools that help students build the ROI of some of the larger companies.
The topic of ROI came up recently when I was advising a family friend about her college options.
Jenny, who is attending a community college in Southern California, had planned to transfer to a nearby four-year state school to complete her bachelor’s degree. However, the academic program that interested her was terminated during the pandemic.
Looking for a different major to pursue, Jenny considered transferring to San Diego State University and obtaining a degree in theater arts.
Pursuing this degree made sense to him. She loves theatre; Her mother spent years as a costume designer; And he has experience in making theater sets.
But I thought it was a terrible idea.
If Jenny’s parents were well and if she couldn’t make a living wage in the theater world, it would be less of a problem. However, this young woman will be on her own financially in the future with little or no financial support from her parents who have their own student loan debt.
Going to a state public university makes sense for students with fewer resources because they are often the cheapest option. The problem was Jenny’s intended head.
Statistics from the US Department of Education show that the return on investment from a theater arts degree in the state of San Diego is poor. The starting salary for a theater-arts graduate from San Diego State is only $21,970. And the principal’s estimated return on investment is a loss of $240,611.
Seeing these stark figures persuaded Jenny not to pursue a theater degree.
Through a tool created by the Foundation for Research on Equal Opportunity, a non-partisan think tank one can find their estimated earnings, as well as the estimated lifetime ROI for the approximately 30,000 undergraduate degree programs at colleges and universities.
If you examine the tools of the foundation, you will see that the ROI for majors within a university can vary wildly. For example, in the state of San Diego, the lifetime ROI for the accounting and aeronautical majors is $610,618 and $815,459, respectively. Compare this to the ROI for Anthropology and Dietetics/Clinical Nutrition at University which is negative $243,700 and negative $265,463 respectively.
The data generated by the foundation was derived from data honors at the academic major level at individual higher-education institutions that were recently made available through the US Department of Education.
You can access some of this information through the federal college scorecard for individual schools. For the first time since 2018, the Department of Education is publishing institution-level earnings data in its data files and on a consumer site, providing a holistic understanding of career outcomes for an institution’s alumni. The scorecard also includes additional information about graduates who are better suited to go on to college, showing only the percentage of earners higher than the typical worker with a high school diploma.
External groups, such as Georgetown University’s Center on Education and the Workforce, Third Way, center-left think tanks, and the Foundation for Research on Equal Opportunity, are presenting data in a way you can’t find on college scorecards .
For example, Third Way recently released its analysis of college scorecard data. Studying the Third Way calculates the cost-to-income premium, or the amount of time it takes students to offset college costs, based on the salary premium that comes with a college degree.
According to Third Way analysis, 10% of bachelor’s degree programs and 21% of associate’s degree programs provide no return on investment.
According to Third Way, the highest percentage of programs nationwide that generate zero economic return on investment are:
Meanwhile, Georgetown ranked 4,500 colleges and universities based on return on investment, using new federal data.
In his research, Georgetown concluded that on average 60% of college students earn more than high school graduates after 10 years. However, at 1,233 post-secondary institutions (30%), more than half of their students are earning less than a high school graduation 10 years after enrollment.
Before sinking money into a specific academic major, families should examine its return on investment or lack thereof.
Nationally recognized college specialist, Lynn O’Shaughnessy, offers an online course — the Savvy College Planning — specifically for financial advisors. Click here to get Lynn’s guide to finding the most liberal colleges.