A new database released by Georgetown University’s Center on Education and the Workforce (CEW) ranks 4,500 colleges and universities based on their return on investment (ROI).
“At 1,233 postsecondary institutions (30% of all colleges), more than half of students 10 years after enrollment earn less than a high school graduate,” the Center wrote in its accompanying report. “CEW’s previous research suggests that these low earnings may be related to low college graduation rates and disparities in earnings by gender and by race and ethnicity.”
The ranking assessed schools on a variety of factors, including tuition and costs, average student debt, graduation rates, and net earnings after enrollment. Institutions were ranked based on return on investment at the 10-year, 15-year, 20-year, 30-year, and 40-year periods.
Some surprises on the list included the prestigious Harvard University, which ranked 133rd in the nation for 10-year net present value and 45th for 40-year net present value.
“Twenty-five of the 30 institutions with the best short-term net economic gains primarily grant certificates or associate’s degrees,” the Center noted. “Because these programs require fewer credits to complete, they generally leave students with less debt and allow them to enter the workforce sooner. In the long run, however, the returns of these programs fall behind those of bachelor’s degree granting institutions because students’ long-term earnings are lower.”
Four-year institutions that boast low graduation rates lost points on the ranking as students often leave with loans but without a degree to help increase earnings.
“College typically pays off, but the return on investment varies by credential, program of study, and institution,” CEW Director Dr. Anthony P. Carnevale said. “It’s important to inform people about the risk of taking out loans but not graduating, which could leave them without the increased earnings that would help them repay those loans.”
The top schools for return on investment in the long-term period were University of Health Sciences and Pharmacy in St. Louis ($2.68 million), Albany College of Pharmacy and Health Sciences ($2.61 million), Massachusetts College of Pharmacy and Health Sciences ($2.51 million), California Institute of Technology ($2.49 million), and Massachusetts Institute of Technology ($2.49 million).
Although private colleges dominated the top of the list, the data actually showed that public schools have better long-term ROI on average.
“So the distinction there is that if you gathered all the data from all the people who went to public [institutions], they actually have a slightly higher ROI, after 40 years and all the people put together who went to [private institutions],” CEW Director of Editorial and Education Policy Martin Van Der Werf told Yahoo Finance in an interview. “But on an individual basis, you see privates at the top of the list.”
Public vs private schools
Part of the reason that public schools generally perform better than private institutions is because tuition is generally more affordable. Students at private colleges and universities are more likely to take out loans to cover the cost of tuition and other fees. According to data from National Center for Education Statistics, about 65% of students at public universities took out some kind of loans, compared to about 74% of undergraduates at private nonprofit colleges.
“We know from the data that there's also a number of private institutions where graduates don't have great financial returns,” Van Der Werf added. “Mostly, these are places like Art Institutes, and music conservatories. They have students who have a real passion for those disciplines. But those tend not to be disciplines that really pay off financially. They pay off, I think, in other ways, but they don't pay off highly financially. And so those colleges and some others, tend to drag down to the overall numbers for private colleges.”
College tuition costs continue to rise
Nationally, college tuition has continued a decades-long rise throughout the pandemic. Higher tuition prices have also coincided with lower overall college enrollment rates since 2020.
The National Student Clearinghouse Research Center found that “total postsecondary enrollment declined by 2.7 percent or 476,100 students in fall 2021, for a total two-year decline of 5.1 percent or 937,500 students since the beginning of the COVID-19 pandemic.” Undergraduate enrollment alone declined by 3.1 percent (465,300 students) in 2021.
Bigger universities have already announced hikes in tuition costs, effective this upcoming fall. The University of Virginia recently approved tuition hikes of 4.7% for the 2022-23 academic year and 3.7% for the 2023-24 academic year. Penn State similarly announced last year that they would raise the cost of tuition and fees by 2.5% for incoming in-state undergraduates. This represents the school’s first tuition increase since 2017.
It’s not exactly surprising that the cost of college is going up — the latest figures reflect broad price increases across nearly every sector of the economy. What might be more interesting is that, because of extraordinarily high total inflation rates in 2021, college tuition has actually risen more slowly than overall inflation in the past year. In fact, last year was the first year in decades that average college tuition costs declined when adjusted for inflation.
The lower rate hardly registers as a win for consumers struggling with across-the-board price increases that have wiped out wage gains. In recent months, consumers have been willing to pay higher prices, especially for food, but corporations warn this trend will not persist past the near future.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.