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How to Calculate the ROI a College Gives Graduates


When high school students and their families do the typical college search, the aspects that are focused on are mainly school size, school location, class size, cost and fees, major and minor offerings, campus life, safety, etc. Sure, these factors are very important in determining the school in which you will spend the next four years, but there is one factor that many people fail to consider for the long term after graduation: return on investment. Calculating the Return on Investment (ROI) that an institution gives graduates is very important when considering desired post-graduate plans (job offers, salary, etc.). Will your time at a college or university allow you to obtain your desired salary and dream job post-graduation? Will the true value be realized?


In this article we will talk about how to determine a college’s ROI, so you can make the right choice when it comes time to choose where to spend your next four years. The good news is that researchers at well-respected business entities have already taken the time to help students and families determine from which school they might receive the highest ROI.


1. Georgetown Universities Center on Education and the Workforce

https://cew.georgetown.edu/cew-reports/roi2022/

Researchers at Georgetown ranked 4,500 colleges and universities by ROI after determining the Net Present Value (how much a sum of money in the future is valued today) at five different time periods from 10-40 years after graduation.


The database created by the Georgetown Center allows you to filter factors by state, public/ private institution, time interval after graduation, and lowest/ highest performing institutions during that time period.


Some of the information from the Georgetown Database gathered by Savvy College Planning (Horsesmouth LLC) shows that “An average of 60 percent of college students across institutions earn more than a high school graduate after 10 years. However, at 1,233 postsecondary institutions (30 percent), more than half of their graduates 10 years after enrollment are earning less than a high school graduate.”


2. Foundation for Research on Equal Opportunity

https://freopp.org/we-calculated-return-on-investment-for-30-000-bachelors-degrees-find-yours-1f2f3c5e6dac

The Foundation for Research on Equal Opportunity studies the academic return for various academic disciplines. Looking at estimated earnings at ages 25 and 45, the company calculated estimated earnings and lifetime ROI for approximately 30,000 Bachelor’s Degree programs.


3. Third Way

https://www.thirdway.org/report/which-college-programs-give-students-the-best-bang-for-their-buck

Third Way is a public-policy think tank which develops and advocates for policies they say represent the “modern center-left ideas.” They look at earnings by type of institution (liberal arts, doctoral universities, master’s universities, and specialty schools). “It does so by measuring what it calls the Price-to-Earnings Premium (PEP) calculated as the time it takes students to recoup their postsecondary educational costs based on the earnings premium that the typical student obtains by attending an institution of higher education,” (Savvy College Planning).


Using the data provided by these sources can go a long way towards informing a student’s earning expectations post-graduation from most accredited colleges and universities in the U.S. Looking at salaries that will be earned immediately after graduation is a thing of the past, as studying the long-term data that displays salaries of graduates many years after their graduation dates will be a useful tool in making a higher education decision with regards to ROI.


Citations

O’Shaughnessy, Lynn. “How to Calculate the ROI a College Gives Graduates.” How to Calculate the Roi a College Gives Graduates, 31 Mar. 2022,

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Disclosure: This material is provided by TrinityPoint Wealth for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation of any particular security, strategy or investment product. Facts presented have been obtained from sources believed to be reliable, however, TrinityPoint Wealth cannot guarantee the accuracy or completeness of such information. TrinityPoint Wealth does not provide tax or legal advice.