College return on investment: Here's what you need to know
When I recently typed the term “ROI of a college degree” into Google's Web search engine, in a little more than a quarter of a second there were 1.36 million results. Major media players like Forbes, The New York Times and ABC News have recently written articles on the topic, with most of the focus being on “ranking” colleges with the best and worst return on investment or calculating the “net worth” of a college degree at a specific institution.
In this post-recession reality where the value proposition of a college degree is being challenged more now than ever, high school students and their parents are eager for any information to support their decisions.
To begin with, what are the indicators that a college degree is still a worthwhile investment? If one of the primary ways you define "worthwhile" is in terms of earnings during a graduate's lifetime, the value of a college degree is indisputable.
A recent report from the State Higher Education Executive Officers — "The Economic Benefit of Postsecondary Degrees: A State and National Level Analysis" — provides clear evidence of the economic value of a four-year college degree. The authors of the report use data from the Census Bureau to examine the actual wage and salary income of employed persons ages 18 to 64 years working full time. In general, higher levels of education are associated with higher incomes.
For Pennsylvania, the report shows that workers with a bachelor's degree had a median income of $48,366 compared to a median income of $30,754 for those with only a high school diploma. Pennsylvania workers with an associate degree had a median income of $37,422. The highest median income ($67,033) was associated with Pennsylvania workers with a graduate or professional degree.
It is important to note the range of different salaries is correlated to the college major. For example, the difference in earnings between one major and another can be more than 300 percent, according to recent research from Georgetown University's Center on Education and the Workforce. Researchers there crunched U.S. Census data looking at 171 majors in 15 categories. The full study, "Hard Times: Not All College Degrees Are Created Equal," is available from the school's website (http://cew.georgetown.edu/unemployment).
So, how can students and families make informed decisions about the economic returns of investing in a certain college or degree? In her article, "Following the Money: Calculating the Net Worth of a College Degree," New York Times writer Samantha Stainburn evaluates a number of the online tools designed to compare graduates' income, which many consider to be a reasonable measure of the "worth" of a college degree.
Unfortunately, these tools are limited, because they will not permit users to compare multiple colleges and incomes earned by graduates in certain majors, and there are questions about the reliability, consistency and completeness of the underlying data. While these tools are far from perfect, they do provide useful information for students to make more-informed college and career choices.
While there are multiple individual financial measures of the ROI of a college education, there are also significant quality of life benefits — not only for private citizens but for society as a whole. According to the Institute for Higher Education Policy, the public benefits economically from more college graduates with increased numbers of tax returns, greater productivity, increased workforce flexibility and decreased reliance on government financial support. As a whole, the public benefits socially through reduced crime rates, increased charitable giving and community service, increased quality of civic life, appreciation of diversity and improved ability to adapt and use technology.
On a personal level, college graduates experience economic benefits such as higher salaries and benefits, steady employment, higher savings levels, improved working conditions and personal and professional mobility. Social benefits for graduates include improved health and life expectancy, improved quality of life for their children and the ability to make better decisions as educated consumers.
At Messiah College in Upper Allen Township, the college works to bring these tangible and intangible ROI benefits together to give its graduates a holistic college experience. Messiah's mission is to educate men and women toward maturity of intellect, character and Christian faith in preparation for lives of service, leadership and reconciliation in church and society. The college is focused on providing its students a useful and well-rounded education, and graduate outcomes are a priority. The college wants its graduates to reflect on their educational experience at the institution as being a worthwhile investment, and one they would make again — both personally and professionally — if given the opportunity to do so.
Brad Mease, a CPA and senior manager at ParenteBeard LLC, a top 25 accounting firm in the United States and a graduate of Messiah, says, "I not only appreciated the educational experience which led to excellent job opportunities post-graduation, but also the intangible items such as leadership development. Further, I gained an appreciation of discipline, hard work and teams through intercollegiate athletics and cross-cultural classes and service opportunities. Although it is challenging not to get stuck on what is measurable with a degree, it is equally important to consider each institution's ability to shape your personal and professional life."
David Walker is a CPA and the vice president for finance and strategic planning at Messiah College.