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Over 25% of College Degrees Have a Negative Return on Investment

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39 comments on Over 25% of College Degrees Have a Negative Return on Investment

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Is College Worth It? 

Please consider a Comprehensive Return on Investment Analysis of College Degrees.

For students who graduate on time, the median bachelor’s degree has a net ROI of $306,000. But some degrees are worth millions of dollars, while others have no net financial value at all.

After accounting for the risk of dropping out, ROI for the median bachelor’s degree drops to $129,000. Over a quarter of programs have negative ROI.

For the most part, students’ earnings with a degree exceed their earnings without a degree. At age 45, the typical college graduate out-earns her counterfactual self by over $25,000 per year. But there are exceptions. About 7% of programs, mostly in art, music, and religion, have higher counterfactual earnings at age 45. In other words, these programs would not pay off even if there were no other costs to college.

ROI varies substantially by major. Sixty-nine percent of engineering programs deliver a lifetime payoff of $1 million or more, and 97% have ROI of at least $500,000. Another strong major is computer science, where 85% of programs have ROI exceeding half a million dollars. Programs in transportation, construction, and architecture also deliver handsome rewards to their students: 77% have a payoff above $500,000.

But plenty of programs have ROI that students might consider disappointing. 68 percent of programs in visual arts and music have negative ROI, meaning graduates are worse off financially for having received their degree. A majority of programs in philosophy and religious studies leave their students in the red, along with 28% of programs in psychology, English, liberal arts, and humanities.

A surprisingly high 31% of programs in life sciences and biology have negative ROI. The most likely explanation is that many students pursue these majors in preparation for a lucrative graduate degree in medicine. The ROI analysis in this report considers returns on the bachelor’s degree alone. If biology students don’t use their degree as a springboard for medical school, they will typically see disappointing returns. 

None of this is the least bit surprising. Yet, every year tens of thousands of students pick college programs that make no economic sense. 

And that does not account for dropouts where 100% of programs have negative ROI.

Add to that kids pressured into college who would really rather be in a trade. 

Parents with kids in high school should read the report and so should their kids. It’s quite comprehensive with a dozen charts. 

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Mike Shedlock

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Markab
Markab
2 years ago
At this point, it is tough to recommend college period. Inheriting assets and day trading bitcoin and stonks is the real path to financial freedom. Essentially since the mid-1990s that has been true, and it is now becoming tough to imagine a time where stocks and real estate could have sustained, multi-year declines. The threshold for government/central bank intervention keeps getting lower, and those interventions are progressively more massive. If the S&P declined by 10% now, I would fully expect the Federal Funds Rate to go negative, QE at least double that of the COVID era would be launched, and Congress & the Administration would announce massive funds transfers to children, the elderly, and business owners. A 20% S&P decline would likely result in a “Financial Stability Relief Payment”, basically covering the losses of families’ 401(k) losses.  Not really absurd given the Federal Reserve stepped in to buy junk bonds this last go around. 
So, if I had children, I’d say skip college, go learn a trade, and, oh, here is $250K and now BUY STONKS!!
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SAKMAN1
SAKMAN1
2 years ago
These charts do not surprise me one bit. While we fight to make everything equal during education, but out here in the real world people have to compete for the decent jobs.
We accept too many people to college because we offer too many loans. We pass too many students through both undergraduate and graduate programs who are incompetent.
It seems that someone told America that it is the best country in the world. Psycologists tell us not to use state functions when talking to children, like “you are good”, “you are smart”. It results in them thinking they do not need to improve. It feels like we’ve done that to an entire country.
I was raised by a mother who told me I was useless, and in an effort to prove her wrong throughout my life I have become someone that most people stand in awe of. Yet, I always feel like I have a long way to go. I feel like an alien when I talk to anyone under the age of 35.
You would think that the social engineers would have diverted courses by now and told the population that it was time to pull up its boots and get back to doing something useful for society, and I dont mean the Finance, Insurance, RE, service, or sales and marketing.
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Six000mileyear
Six000mileyear
2 years ago
The default rate for college loans is about 11%. That is well above the default rate for credit cards, automobiles, or mortgages. If private industry were to develop risk algorithms for college loans based on major selected and SAT scores, then the number of college admissions would drop about 25%. Those not making the cut can learn a trade, earn their college tuition through military service, or choose a different field of study.
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Eddie_T
Eddie_T
2 years ago
Reply to  Six000mileyear
Student loans…and student loans doesn’t always mean college loans. The default rate for public four year colleges is only 7.1% For private four year schools its even less at 6.5%.
On the other hand, private, for-profit two year schools have a default rate of 18%. Private non-profit two year schools aren’t much better, at 17.5%.
Most of the decent colleges, including most flagship state universities, have low rates of default. There are literally hundreds of schools with default rates lower than 2%.
Historically Black Colleges and Universities……16.65%. Native American Colleges (there are only 4) ……over 19%.
Larry’s Barber College, Chicago Illinois…..50%. There are a half dozen like Larry’s, spread around the country.
United Tribes Technical College (North Dakota)……40%
We tend to overgeneralize when we talk about student loan defaults.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  Eddie_T
“overgeneralize”? Absolutely, especially when you compare mega-colleges with hundreds of programs against single-interest schools, ignore quality, family income etc.
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anoop
anoop
2 years ago
just like 100% of all bonds.
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Naphtali
Naphtali
2 years ago
I earned my degree in mathematics after serving during the Vietnam war. It proved to be a very good choice and provided a fulfilling and financially rewarding career working within several scientific disciplines other than matematics. I was very fortunate to have been mentored by remarkably gifted teachers who had escaped the horror National Socialism in Europe during the second world war. I worked hard to mentor others as implored to do so by my mentors, but have found few that wish to follow such a path today. Those who were my best students were not born in this country but sought a better life as I did so very long ago. At 72, I still work to do what I can to pass on that which was generously given to me. The cost today for gaining knowledge is absolutely absurd and an obstacle which would be seen as immoral by those who taught me. We are in a very steep intellectual decline as a nation and shall reap a very bitter harvest.
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astroboy
astroboy
2 years ago
In the end you learn only two things in college, if you’re lucky. 
1) How to learn.
2) How to think. 
1) Will make you money. 2) Will probably result in the overthrow of the government, but it’s a very very rare thing. So much the worse for America. 
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Eddie_T
Eddie_T
2 years ago
From the article:
After making the completion adjustment, 55% of programs at for-profit colleges have negative ROI, compared to 24% of programs at public institutions and 30% of programs at private nonprofits.
For-profit colleges, including but not limited to online colleges, are not designed to educate people. They are designed to put college loan money into investor pockets.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  Eddie_T
You went to school to draw these conclusions? There may be some substantiation by anecdote–perhaps you should focus on those colleges you actually know. For example, those private non-profits include MIT and The Church of Podunk Seminary.
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Eddie_T
Eddie_T
2 years ago
Reply to  Captain Ahab
No, I went to school to get a job. The ROI on my education is probably in the tens of millions of dollars. I’d love to talk to anybody who got more bang for their buck.
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Yooper
Yooper
2 years ago
COVID put a halt to my son’s graduation in 2020, but looks good now – far different from my degree-seeking self…
IT trade school in high school, earned quite a few certs
his friends go to a liberal arts school at $25k per year
My son just earned a job at $45k per year at 19 years old
By the time his friends graduate at 23 yrs old, they would have spent at least $225,000, most in loans, and make an average income less than my son with no business experience and loan-financed drinking and spring breaks
My son would have earned $180,000 and 4 years of real-world business experience – basically a good $405,000 ahead and a rolling start
Industry-specific, of course, but there are many industries where it’s better to go trade and experience rather than learn Wokism with entitlement…
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Esclaro
Esclaro
2 years ago
My seven children all graduated from college. All of them are doing well but only three of them are millionaires so far. We are all Democrats who loathe Republican traitors. It’s way past time to divide the country!
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getMOTIVated
getMOTIVated
2 years ago
Reply to  Esclaro
Cool. 
How many of the millionaire children work for a government entity?
Draft the succession documents.
This may come as a surprise, but Republicans likely feel the same way about YOU.
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yooj
yooj
2 years ago
Reply to  getMOTIVated
Secession. Secession documents, not succession. Normally not pedantic, but given the topic of this post of Mish, I wish to show something of value from a higher education. 
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Tony Bennett
Tony Bennett
2 years ago
ANOTHER interesting day in the bond market … what say you, Jay Powell???
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Mish
Mish
2 years ago
Reply to  Tony Bennett
Yes –  may comment on it
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Dutoit
Dutoit
2 years ago
If you look at Fields medals you see that US got 1/3 of them from the beginning to 1986. After that it is only 1/10.
What is the reason for that ?
It seems that US uses in its universities many very good math teachers from the rest of the world, to produce not very much good US mathematicians.
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Tony Bennett
Tony Bennett
2 years ago
Reply to  Dutoit
“What is the reason for that ?”
…
Fear of getting punk’d by Will Hunting?
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Eddie_T
Eddie_T
2 years ago
Reply to  Tony Bennett
Math is hard.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  Tony Bennett
There are two ‘issues’ with math.
1) As with anything quantitative in nature, math tends to have right and wrong answers. In today’s culture, kids are so worried about their self-esteems, they cannot tolerate ‘wrong’. As a result, they focus on qualitative things, opinion-based learning where no one is wrong.
2) Math requires a certain kind of brain, right rather than left brain, and high intelligence–since math is primarily about understanding ‘patterns’  (IQ by definition) and quantitative logic.  Variation by gender in both IQ and right-brain thinking is well-known, yet seldom discussed.
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astroboy
astroboy
2 years ago
Reply to  Dutoit
There aren’t a huge number of jobs in math, especially if you only have a BS so it’s not a real popular major. The US imports a lot of math professors since they have NO math jobs in their country. If you’re trying to get a professorship in math in the US you’re competing against all the rest of the world. Bottom line: study econ or engineering if you can do math. 
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StukiMoi
StukiMoi
2 years ago
Reply to  astroboy
“econ” has become such a ghetto of mindless hocus-pocus and pure opinioneering, you may as well study alchemy. Or I suppose “political economy,” which is what economics, aside from the branch dealing with just applied statistics/econometrics, has largely devolved into. 
Engineering is very different from math. Technically, you end up “specializing” too early. Only approaching anything resembling a more holistic understanding during postdoc at MIT, if then. It takes a different sort of mind, to compartmentalize and hop from disconnected island to disconnected island, each with its own set of only vaguely justified rules, that aggressively. I know engineers at one point sought the status that came with being an “academic” discipline. But engineering school, at least below the doctoral level, is still effectively a trade school. Just for tradies who have it more in the head than in the hands.
For a more “real world” math education, physics is still hard to beat. (“astro” physics being a good one….) Much of the math one gets exposed to even well into graduate math studies, were originally motivated and developed in response to problems from physics. And is generally most intuitively illuminated by physics problems.
Yet, physics also provides exposure to empirical methodologies, which you don’t get from pure math and logic. Almost any non academic, practical function or job, tends to have large empirical components. Heck, in practice, as far as “getting a job” today is concerned, empiricism is now a requirement even in areas where it makes no sense whatsoever. Virtually all abstract and formal logic by now having been effectively thrown out, with the bathwater of its own pre-enlightenment overreach.
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KidHorn
KidHorn
2 years ago
Reply to  astroboy
Math majors become computer programmers. And they’re very good. Better than comp sci majors IMO.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  astroboy
Having had the acquaintance of two math geniuses, and several in other fields like astrophysics; and numerous engineers (bright but not genius), I think you have little understanding of what motivates people.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  Captain Ahab
I take that back. 🙂    At the bachelor level, you are absolutely right
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KidHorn
KidHorn
2 years ago
I suspect those in the poor paying fields are overwhelmingly democrats. Reason why Bernie has such strong support.
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Tony Bennett
Tony Bennett
2 years ago
Cost
all in now probably 6 figures for most 4 year institutions.  Back in the day a person could put themselves thru school waiting on tables.
Thank you! Uncle Sam.  By guaranteeing student loans you’ve poisoned the education sector just like you’ve done the health sector.
When I went thru school, if you needed to see The Dean … you saw The Dean.
Now?  There is an army of six figure assistant / associate deans running interference.  The Bloat mind boggling.
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TexasTim65
TexasTim65
2 years ago
Reply to  Tony Bennett
Yeah kids today must stare in amazement at the Dean / Delta House Frat Member interactions in Animal House. There is zero chance today that Students would ever see in the Dean in person for any reason.
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Doug78
Doug78
2 years ago
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Captain Ahab
Captain Ahab
2 years ago
The problem will continue until the universities are held accountable for their decisions to offer useless degrees, hire poor faculty, stop wasteful spending, accept unqualified students….
The solution is very simple. By accepting a student, a university becomes guarantor for any debt accumulated by the student to pay for tuition.
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KidHorn
KidHorn
2 years ago
Reply to  Captain Ahab
Except there’s more to college than job training. They go to school to learn about what they enjoy.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  KidHorn
If it is only about ‘enjoyment’, don’t ask me to pay for their entertainment.
Maybe, ‘enjoyment’ in sciences, engineering etc would be higher if the teachers at middle and high school had some appreciation and affection for the subject matter. Not reprogramming students to a progressive agenda.
IMHO, the best education nowadays comes from the co-operative education programs–combining academics and real work experiences that pay salaries because the students have valuable skills. Among the top programs are University of Cincinnati, College of Engineering. After a semester or two of work experience, their students realize whether their degree being studied is of interest, or not. They also learn on the job–it is not about being trained.
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TexasTim65
TexasTim65
2 years ago
Reply to  Captain Ahab
Co-op has been around since the 80’s when I was on a co-op program at University of Waterloo in Canada.
I agree 100% that these programs make for much better education. Every 4 months we’d rotate out of class in to the real world to learn that everything taught in class was more theoretical and what happened in the business world was more practical since it had to make money.
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astroboy
astroboy
2 years ago
Reply to  Captain Ahab
Well, you sure aren’t going to find out what you want to do in life in high school (usually). The American model of college requires every student to take basic courses in English, history, math, and science in their first two years, the basic idea being that a well rounded education   benefits society and the individual. You might actually find out what you’re good at and want to do in that time. In the rest of the world, from day one you study only your field: a math student isn’t going to learn a single thing about biology. That system at the bachelor’s level probably produces a better trained graduate within a narrow speciality (any deficiency is made up at the PhD level where no one comes near the US except the UK and Germany).  However, take my case: PhD in physics, I do a lot of cancer research because many aspects of cancer growth are physics problems. If I didn’t have some grounding in biology as an undergrad that would be impossible. 
As I note above, you learn two things in college: how to learn, and how to think. No one uses more than 20% of what they learn in college, and what they do learn will often be obsolete in 20 years. But in theory they have minds trained so they can learn new things on their own.  That’s what your tuition buys you.
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Captain Ahab
Captain Ahab
2 years ago
Reply to  astroboy
Two bachelors, two masters, one PhD in Finance–so, yes, I agree 100% about learning and critical thinking. What is missing are two other elements–creativity and integrating all three. That said, most faculty stop thinking with tenure. They have become non-thinkers over the last 30 years. The richness and vitality is fast disappearing.
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StukiMoi
StukiMoi
2 years ago
Reply to  Captain Ahab
“…universities are held accountable…”
By Dear Leader, no doubt! Arbitrary Dear Leaders arbitrarily “holding accountable” people, being such a guaranteed road to nirvana and all…..
Never mind universities somehow managing to provide Einstein with some sort of an education, without any such silly overreach….
What’s important is getting government OUT. Not even more involved than it already is. Limited government, as pointed out by The Founders, does not extend to universities. Hence universities, and what (and even whether…) they do and don’t, are completely, 100%, irrelevant; as far as any legitimate government is concerned. No “loans”, no “protected professions”, no “funding,” no “discrimination”; no nothing. Just leave alone. While only narrowly minding those very few limited functions which are legitimate government’s business. Nothing else.
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Karlmarx
Karlmarx
2 years ago
Guess the low return on biology degrees is one reason that the people in public health are so ill prepared to do their jobs
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Bungalow Bill
Bungalow Bill
2 years ago
Most colleges produce professional debtors. 
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