The fact that a college degree pays off in terms of lifetime earnings is well-documented. But the return on a student’s investment can vary; the choice of college and degree matter.
That’s the conclusion reached in a new report from the Georgetown University Center on Education and the Workforce. The center’s researchers used expanded College Scorecard data to calculate the payoff for students enrolled at more than 4,500 colleges and universities in the United States.
According to its data, Rochester Institute of Technology ranks No. 1 in the Rochester area, with a median net present value of $1,260,000 four decades after enrollment. RIT’s 40-year NPV placed it 139th nationwide.
Rounding out the top five colleges locally are the University of Rochester, with a 40-year NPV of $1,228,000 (which ranked 170th nationwide); Hobart and William Smith Colleges, $1,046,000 (423rd); SUNY at Geneseo, $1,013,000 (526th) and St. John Fisher College, $962,000 (699th).
“The study places RIT in the top 3 percent nationally in return on investment, a testament to our belief that an RIT education pays off in a bright future,” said RIT President David Munson, when asked for comment. “Recognizing that the cost of higher education is on the minds of our current and future students and their families, we will continue to challenge ourselves to create even more value going forward. That includes developing degree programs that mesh with the careers of the future, preparing our graduates for the workplace and launching them into the world as productive, well-rounded citizens.”
Net present value is the “discounted sum of all future earnings minus the total amount invested over time (also discounted),” the Georgetown researchers explain. They believe the long-term NPV is the “most comprehensive benchmark for judging value.”
At the same time, they recognize some students want or need a quicker payoff, so they also analyzed NPV at the 10-year mark. The contrasting results are striking: Among local schools, the Genesee Valley BOCES-Practical Nursing Program earned the top spot, followed by the Wayne Finger Lakes BOCES-Practical Nursing Program. Among the 4,529 schools examined, they rank 51st and 85th, respectively. By comparison, RIT’s 10-year NPV placed 2,690th.
In fact, nursing schools generally do well in both time horizons. Veeb Nassau County School of Practical Nursing in New York ranks fourth in terms of NPV at the 10-year mark and 75th after 40 years.
Top honors, however, go to pharmacy colleges:
■ Albany College of Pharmacy and Health Sciences’ 40-year NPV of $2,722,000 ranks No. 1; its 10-year NPV of $385,000 is sixth.
■ St. Louis College of Pharmacy is second at the 40-year mark ($2,714,000) and fifth at the 10-year mark ($385,000).
■ Massachusetts College of Pharmacy and Health Sciences, third for long-term ROI ($2,421,000), ranks 93rd in the shorter time horizon.
Also among the top 10 in long-term NPV are elite four-year institutions such as Massachusetts Institute of Technology and Stanford University, plus two public four-year institutions, Maine Maritime Academy and the United States Merchant Marine Academy.
The factors that help community colleges and credential programs generate higher ROI at the 10-year mark are what you’d expect: lower tuition, lower levels of debt, and less time needed to complete the degree and enter the workforce.
Those advantages disappear in the longer time horizon. “Of the 10 colleges (nationwide) with the best long-term net economic gain, all are four-year institutions,” the researchers note. “Returns on investment from bachelor’s degrees eventually overtake returns from most two-year (schools).”
They also found that private nonprofit institutions generally outperform public colleges, earning eight of the top 10 spots for long-term economic gain.
“Even though students, on average, take out more than twice as much in loans to attend private colleges, a degree from a private nonprofit college is worth $8,000 more annually 10 years after enrollment,” the researchers say. “Over the course of 40 years, the average graduate of a private college has a net economic gain of $838,000, even after paying off higher amounts of debt, compared to $765,000 for a graduate of a public college.”
The median NPV for all colleges is $723,000 40 years after enrollment, compared with $107,000 a decade after enrollment.
Like investments in stocks and commodities, not all colleges deliver robust returns to their students—or, in a few cases, any ROI at all.
“A wide variety of institutions have low long-term economic value,” the report observes. “The bottom 10 institutions (40 years after enrollment) range from theological institutions to beauty schools to colleges specializing in the arts. They are evenly divided between two- and four-year institutions.”
They’re not stellar short-term investments either. The 10-year NPV for all of the bottom 10 institutions is less than $60,000. For one, the NPV is only $8,000. But it outperforms the Rabbinical College of Ohr Shimon Yisroel and the Pennsylvania Academy of the Fine Arts; they have negative NPV at the 10-year mark.
The title of the report—“A First Try at ROI: Ranking 4,500 Colleges”—acknowledges that its analysis is not the last word. Some might raise questions about the methodology; for example, the researchers say they projected future earnings based on the College Scorecard data for earnings 10 years after students enter each institution. “We assume no earnings increases after 10 years, so our estimates can be considered to be at the lower end of possible outcomes,” they note.
Bottom line, though, it seems hard to argue with the report’s main conclusion: Yes, college is a worthwhile investment, but for most students it’s best viewed as a long-term investment.
Paul Ericson is Rochester Beacon executive editor.