09 May

New College Rankings: Best Return on Investment

For years parents have turned to the rankings of popular magazines like the U.S. News and World Report or Forbes to help them choose the best school for their child. While I would argue that a magazine’s rank list is not usually the best tool for making your final decision, it can be helpful as an overview of what each school has to offer.

This year, Bloomburg Businessweek and PayScale have unveiled an improved version of their new ranking system: listing schools by their return on investment (ROI).

College as an Investment

Most students and their families are willing to make financial sacrifices for a college degree because they feel that college is an investment worth making. With that thought in mind, Bloomburg Businessweek’s report took a look at the schools that give their students the best return based on the cost of attendance and their pay scale after graduation.

The 2011 top twenty colleges based on ROI over 30 years are:

  1. The California Institute of Technology
  2. Harvey Mudd College
  3. The Massachusetts Institute of Technology
  4. Princeton University
  5. Stanford University
  6. Dartmouth College
  7. Duke University
  8. Harvard University
  9. University of Pennsylvania
  10. University of Notre Dame
  11. Babson College
  12. Yale University
  13. Columbia University
  14. Lehigh University
  15. Amherst College
  16. Colgate University
  17. Worcester Polytechnic Insitute
  18. University of California, Berkeley
  19. Cornell University
  20. Rensselaer Polytechnic Institute

The first three of these schools gave their graduates an estimated ROI in excess of $1.5 million over 30 years.

One the other hand, the PayScale study showed one college–the College of the Ozarks in Missouri–whose graduates actually earned $133,000 less over 15 years than typical high school graduates!

Methodology

You may find this list interesting to use as a comparison tool, but you might wonder how each school earned their rank on the list. The methodology used was fairly straightforward:

  • For the college price portion, the study looked at total college cost (tuition, room and board, supplies, etc.) as well as how that cost might be reduced by typical amounts of grants-in-aid at each school. They multiplied that cost of attendance by the average number of years a 2010 graduate took to graduate from each school.
  • For the earnings portion of the ranking, PayScale used approximately 1,000 pay reports per school from alumni who graduated between 1981 and 2010.
  • Graduation rates for each school also came into play, as funds spent at a college from which a student did not graduate would decrease the average ROI for that school.

All in all, this study adds a nice twist on the traditional college ranking measures. This study provides a different frame of reference for college comparisons by analyzing, in hard dollars, the benefits of earning a college degree from various colleges. It sure sure beats just focusing on a college’s sticker price, doesn’t it?

All the best,
Deborah Fox

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