ROI, or Return on Investment, is a measure that is often used to evaluate the efficiency or profitability of an investment.
In the context of education, it refers to the cost of a degree versus the financial benefits that the degree will bring over a person’s career.
This can include increased earning potential and better employment opportunities.
How is ROI Calculated for College Degrees?
Calculating ROI for a college degree involves considering several factors including:
- Average ROI by retirement: This is a measure of the return on the college investment by the time a student reaches retirement age.
- Median Earnings 1 Year after Graduation: This is a measure of how much a graduate is likely to earn in the year immediately following their graduation.
- Percent of Graduates Employed 2 Years after Graduation: This is a measure of the employability of graduates from a particular program or institution.
- Year-over-Year Difference between 1st and 2nd Year Earnings: This is a measure of the growth in earnings in the first two years following graduation. (Source)
Another organization, the Center on Education and the Workforce (CEW) at Georgetown University, has its own methodology for ranking colleges by ROI.
It includes several additional metrics, such as:
- Net Present Value (NPV): This is how much a sum of money in the future is valued today. This metric includes costs, future earnings, and the length of time it would take to invest and earn a specific amount of money over a fixed horizon.
- Net Price: The average cost of attendance, which includes tuition, fees, books and supplies, and living expenses, minus aid received from all sources.
- Earnings-Price Return: A ratio that expresses the degree to which earnings 10 years after enrollment are above or below the net price (in percent).
- Earnings-Debt Return: A ratio that expresses the degree to which earnings 10 years after enrollment are above or below the median total debt (in percent).
- 7-Year Repayment Rate: The share of borrowers who have repaid at least $1 of the principal on their student loans since entering into the repayment phase.
- Graduation Rate: The rate at which full-time, first-time students complete their credentials within 150 percent of the expected time, such as earning a bachelor’s degree within six years. (Source)
Specific ROI of College Degrees
To provide specifics on the ROI of various college degrees, we would need to look up data for specific colleges and programs.
This data could potentially be found through the U.S. Department of Education’s College Scorecard, which is used by organizations to calculate ROIs for different institutions and degrees.