7 ms·

Measuring 'Return on Investment' of Various College Degrees

34 points by prostoalex 5y ago

dv_dt 5y ago
On one hand, with the cost of a university education in the US, doing this analysis is rational. On the other, as a society and an economy, we give up so many indirect benefits by filtering out degrees that don’t have a high ROI or even a first order negative ROI.
- chii 5y ago
  > we give up so many indirect benefits ... So if you make those benefits direct, or have those who obtain value from these benefits pay for them, then you can obtain the true cost of a degree, and the true ROI.
kevcampb 5y ago
"If their degree cost them $60,000 to obtain, it would take them four years to recoup their education costs ($60,000 net cost / $15,000 earnings premium)." They completely omit the time spent getting the degree and associated loss of earning during that period
s3tz 5y ago
Can anyone offer a mirror?
- dmarchand90 5y ago
  The wayback machine is a good resource to avoid paywalls https://web.archive.org/web/20210813130806/https://www.nytimes.com/2021/08/13/your-money/college-degree-investment-return.html https://web.archive.org/web/20210813130806/https://www.nytim...
  - gtsnexp 5y ago
    Brilliant, thanks for this.
lordnacho 5y ago
This whole discussion is based on wrong assumptions. You don't go to uni, learn about thermodynamics, and then go and build turbines. It's certainly possible to have such a career path, but you won't have actually learned the thing you need to know in uni and then applied it at work for the next 40 years. What you do in uni is demonstrate that you're interested in certain things and you have enough work ethic to learn the exam answers. That's all. I had a guy with a biology degree at an HFT debug a threading issue. Really smart guy. He didn't learn how CPP works in his PhD, he learned it in his own time because he had an interest. I actually did study thermodynamics as part of my engineering course, and guess what, it's not in itself useful in finance. It's just a demonstration that I might be able to learn certain mathy things, not even the same things. So coming back to this idea of ROI on a degree, there's only broadly two things you can demonstrate. I'm more of a lumper than a splitter, so you might have more. But the two things for me are whether you can do technical cave diving like figuring out what happened to that threading issue, and whether you have the capacity to read and understand a large amount of text, like being a lawyer or political science student. The thing to remember is you don't just gain some skill in uni, chances are you mostly have personal preferences that are revealed, and that that is far more important than what you learned. ROI in this case would seem to just mean "the kids who studied business did so because the are interested in business and so went and got high paying MBA jobs". Similarly for kids who liked building robots or kids who read a lot about history. Finally I'd like to say we all need to learn broadly about the world, I don't condemn people who happened to not be technical. But education itself is worth pursuing just for it's own merits.
- nobrains 5y ago
  :) So college degree is like POW (proof-of-work) in blockchains.
  - waterhouse 5y ago
    And, estimating the cost... I see some site say $27k for tuition per year. Assume four years per person; assume people live for 80 years; assume half the population goes to college; then 1/40 of the population is attending college in any given year. If we say the U.S. has 300M people, then that's about $200 billion per year, for this proof of work. Meanwhile, this site estimates Bitcoin's annual electricity consumption at $7 billion worth: https://digiconomist.net/bitcoin-energy-consumption/ https://digiconomist.net/bitcoin-energy-consumption/
systemvoltage 5y ago
I don’t like NYTimes tone about this. If you decide to major in Cinematography and then blame the college for negative ROI, the fault is entirely on you. No amount of fudging will bend the market forces for employment in your favor. Supply far exceeds the demand for such roles (similar video game software devs). We need more community and polytechnic institutes. Trade craft schools and apprenticeships like they do in Switzerland. I don’t understand why people (mostly progressives but also conservatives) in USA continue to double down on degree programs.
- rahimnathwani 5y ago
  Right, but: - a child makes the decision - the main influences on the child probably don't impress on the child the need to analyse the decision rationally - even if the child tried to analyse it rationally, what % of prospective college students have the financial literacy to do that successfully? - even if they had the financial literacy, it's not like colleges provide useful data. Even this article talks about earnings uplift without isolating the impact of the degree (vs. existing increased prospects compared with typical HS grad).
  - notsureaboutpg 5y ago
    No a child doesn't make the decision. Most people in college are 18, i.e. adults. We have to stop babying adults. Honestly a lot of smart 16 year olds could make the decision of how to spend their loan money wisely. If you are not adult enough to figure out how to invest a loan wisely, you are not adult enough to receive a loan in the first place.
  - shapefrog 5y ago
    Unemplyment rate by qualificaion (ignoring participation rate which would skew these numbers far more to the side of getting qualified) https://www.bls.gov/news.release/empsit.t04.htm https://www.bls.gov/news.release/empsit.t04.htm: - HS dropout 9.5% - HS only 6.3% - Some college or associate degree 5.0% - Bachelor's degree and higher 3.1 %
    - 5y ago
rahimnathwani 5y ago
NYT says the authors define the earnings premium by reference to a typical HS grad. But folks who can gain acceptance into a good program at a good school would (after 4 years) earn more than a typical HS grad, even if they skipped college. Why attribute 100% of the uplift to the degree?
- irjustin 5y ago
  Is there another thing you would attribute it to? It's not hard to simply ask "of this profession, what is the salary of those w/ a degree, and those w/o" at the national level
  - rahimnathwani 5y ago
    Imagine there are two groups of 30-year-olds: A) Those who were offered university places, but decided not to go. B) Those who were not offered university places. I would expect group A to have a significant 'earnings premium' over group B. Even though neither group attended university, group A are more likely to be smart, hard working, lucky, or whatever drives career success. If you want to estimate the earnings premium of a university degree, you have to compare the folks who went to university with other folks just like them, i.e. with folks in group A. Not with a mixture of groups A and B. > Is there another thing you would attribute it to? Yes, some of the earnings premium is due to the students pre-university chances of success. > It's not hard to simply ask "of this profession, > what is the salary of those w/ a degree, and those w/o" at the national level This wouldn't measure the thing we're trying to measure, because it suffers from selection bias.
nivenkos 5y ago
Wow, US degrees aren't as expensive as I thought, it comes out pretty comparable to the UK. And then US tech salaries are 3x higher so it's still a good investment overall.
- deleted 5y ago
  [deleted]
irjustin 5y ago
The NYTimes barely mentions the data. Here's the original article that talks about the ROI: https://www.thirdway.org/report/which-college-programs-give-students-the-best-bang-for-their-buck https://www.thirdway.org/report/which-college-programs-give-... I think the most alarming thing is the "For Profit" section of the charts. 40% (of students) don't recoup their cost ever vs 13% in Private and 8% in public. "For Profit" schools prey on the venerable to take out huge loans for a degree from "City University" or ITT Tech (defunct) with the promise that you could make a lot of money "just like our 1 person we put in all our commercials." I'm glad a number were shut down, but there are still too many that operate.
- notsureaboutpg 5y ago
  If 60% of for profit students recoup their cost (and then go on to earn more because of their investment), then isn't it still a valuable investment to have available overall?
- Empact 5y ago
  For-profit schools also take on more marginal students, who may be less likely to prosper in any case. My father, admittedly an outlier, went from growing up in poverty, to ITT Tech, to Marquette (a Catholic University), to a Ph.D. from U of I Urbana-Champaign in one long continuous path of transfers. It’s not clear to me that he would have achieved what he did without the initial venue to acquire and demonstrate skills, but I could see how many might not travel that path. To what extent can we really weigh the experiences of those who do net benefit (presumably the 60%) against those who do not? Perhaps one man’s preying is the answer to another man’s prayers.
  - irjustin 5y ago
    Not to diminish what your father has accomplished because it is rightfully amazing, but a possible question to whether your father needed ITT there? Could there be another avenue through a community college or other non-profit system? > Perhaps one man’s preying is the answer to another man’s prayers. I reject this premise. This is a really poor justification for preying. So many lives were destroyed that ITT was forcibly shut down.
deleted 5y ago
[deleted]
_xander 5y ago
The cited report includes an extract of all programmes in .xlsx format [1]. There are some surprising majors towards the bottom of the <= 10 year ROI: * Neuroscience - 21% proportion w/ ROI * Biology - 27% proportion w/ ROI * Anatomical sciences - 45% proportion w/ ROI * Biochemistry, Biophysics and Molecular Biology - 46% proportion w/ ROI Why might this be? [1] https://thirdway.imgix.net/Program_Level_PEP.xlsx https://thirdway.imgix.net/Program_Level_PEP.xlsx
- navbaker 5y ago
  My initial guess would be because those are degrees where higher earnings and upward mobility tend to require higher level degrees.
blippage 5y ago
What a wise man does in the beginning, a fool does in the end. I graduated in the 80's in UK, and it was the best time of my life. I had no debt. Fantastic! If I was asked to make the same decision again, I'd probably decline. The idea that I'd start my young adult life tens of grand in the hole - a mini-mortage - strikes me as highly unpleasant. As far as I'm concerned, these guys take their "return on investment" calculations and shove it where the sun doesn't shine. "But blippage," I hear you enquire, "aren't you being irrational?" To which I respond: "I'm not the one who's insane here." Of course, it's not "wrong" to want to get an education especially when the job prospects are good at the end of it. Still, if you couch things in terms of "returns on investment", then I'll figure that either you've a bridge that you're trying to sell me, or you're severely lacking in common sense. Yeah, sure, maybe at the end of the day it's just me that doesn't "get" it, but still, I don't like debt, and I suggest that you don't, either. University fees escalate ever-higher, and people keep coughing up based on Groupthink. In my not-at-all-humble opinion, of course.
oenetan 5y ago
https://ghostarchive.org/archive/DeNGv https://ghostarchive.org/archive/DeNGv https://archive.is/PMu54 https://archive.is/PMu54

34 points by prostoalex 5y ago

On one hand, with the cost of a university education in the US, doing this analysis is rational. On the other, as a society and an economy, we give up so many indirect benefits by filtering out degrees that don’t have a high ROI or even a first order negative ROI.

chii 5y ago
> we give up so many indirect benefits ... So if you make those benefits direct, or have those who obtain value from these benefits pay for them, then you can obtain the true cost of a degree, and the true ROI.

kevcampb 5y ago

"If their degree cost them $60,000 to obtain, it would take them four years to recoup their education costs ($60,000 net cost / $15,000 earnings premium)." They completely omit the time spent getting the degree and associated loss of earning during that period

s3tz 5y ago

Can anyone offer a mirror?

dmarchand90 5y ago
The wayback machine is a good resource to avoid paywalls https://web.archive.org/web/20210813130806/https://www.nytimes.com/2021/08/13/your-money/college-degree-investment-return.html https://web.archive.org/web/20210813130806/https://www.nytim...
- gtsnexp 5y ago
  Brilliant, thanks for this.

lordnacho 5y ago

This whole discussion is based on wrong assumptions. You don't go to uni, learn about thermodynamics, and then go and build turbines. It's certainly possible to have such a career path, but you won't have actually learned the thing you need to know in uni and then applied it at work for the next 40 years. What you do in uni is demonstrate that you're interested in certain things and you have enough work ethic to learn the exam answers. That's all. I had a guy with a biology degree at an HFT debug a threading issue. Really smart guy. He didn't learn how CPP works in his PhD, he learned it in his own time because he had an interest. I actually did study thermodynamics as part of my engineering course, and guess what, it's not in itself useful in finance. It's just a demonstration that I might be able to learn certain mathy things, not even the same things. So coming back to this idea of ROI on a degree, there's only broadly two things you can demonstrate. I'm more of a lumper than a splitter, so you might have more. But the two things for me are whether you can do technical cave diving like figuring out what happened to that threading issue, and whether you have the capacity to read and understand a large amount of text, like being a lawyer or political science student. The thing to remember is you don't just gain some skill in uni, chances are you mostly have personal preferences that are revealed, and that that is far more important than what you learned. ROI in this case would seem to just mean "the kids who studied business did so because the are interested in business and so went and got high paying MBA jobs". Similarly for kids who liked building robots or kids who read a lot about history. Finally I'd like to say we all need to learn broadly about the world, I don't condemn people who happened to not be technical. But education itself is worth pursuing just for it's own merits.

nobrains 5y ago
:) So college degree is like POW (proof-of-work) in blockchains.
- waterhouse 5y ago
  And, estimating the cost... I see some site say $27k for tuition per year. Assume four years per person; assume people live for 80 years; assume half the population goes to college; then 1/40 of the population is attending college in any given year. If we say the U.S. has 300M people, then that's about $200 billion per year, for this proof of work. Meanwhile, this site estimates Bitcoin's annual electricity consumption at $7 billion worth: https://digiconomist.net/bitcoin-energy-consumption/ https://digiconomist.net/bitcoin-energy-consumption/

systemvoltage 5y ago

I don’t like NYTimes tone about this. If you decide to major in Cinematography and then blame the college for negative ROI, the fault is entirely on you. No amount of fudging will bend the market forces for employment in your favor. Supply far exceeds the demand for such roles (similar video game software devs). We need more community and polytechnic institutes. Trade craft schools and apprenticeships like they do in Switzerland. I don’t understand why people (mostly progressives but also conservatives) in USA continue to double down on degree programs.

rahimnathwani 5y ago
Right, but: - a child makes the decision - the main influences on the child probably don't impress on the child the need to analyse the decision rationally - even if the child tried to analyse it rationally, what % of prospective college students have the financial literacy to do that successfully? - even if they had the financial literacy, it's not like colleges provide useful data. Even this article talks about earnings uplift without isolating the impact of the degree (vs. existing increased prospects compared with typical HS grad).
- notsureaboutpg 5y ago
  No a child doesn't make the decision. Most people in college are 18, i.e. adults. We have to stop babying adults. Honestly a lot of smart 16 year olds could make the decision of how to spend their loan money wisely. If you are not adult enough to figure out how to invest a loan wisely, you are not adult enough to receive a loan in the first place.
- shapefrog 5y ago
  Unemplyment rate by qualificaion (ignoring participation rate which would skew these numbers far more to the side of getting qualified) https://www.bls.gov/news.release/empsit.t04.htm https://www.bls.gov/news.release/empsit.t04.htm: - HS dropout 9.5% - HS only 6.3% - Some college or associate degree 5.0% - Bachelor's degree and higher 3.1 %
  - 5y ago

rahimnathwani 5y ago

NYT says the authors define the earnings premium by reference to a typical HS grad. But folks who can gain acceptance into a good program at a good school would (after 4 years) earn more than a typical HS grad, even if they skipped college. Why attribute 100% of the uplift to the degree?

irjustin 5y ago
Is there another thing you would attribute it to? It's not hard to simply ask "of this profession, what is the salary of those w/ a degree, and those w/o" at the national level
- rahimnathwani 5y ago
  Imagine there are two groups of 30-year-olds: A) Those who were offered university places, but decided not to go. B) Those who were not offered university places. I would expect group A to have a significant 'earnings premium' over group B. Even though neither group attended university, group A are more likely to be smart, hard working, lucky, or whatever drives career success. If you want to estimate the earnings premium of a university degree, you have to compare the folks who went to university with other folks just like them, i.e. with folks in group A. Not with a mixture of groups A and B. > Is there another thing you would attribute it to? Yes, some of the earnings premium is due to the students pre-university chances of success. > It's not hard to simply ask "of this profession, > what is the salary of those w/ a degree, and those w/o" at the national level This wouldn't measure the thing we're trying to measure, because it suffers from selection bias.

nivenkos 5y ago

Wow, US degrees aren't as expensive as I thought, it comes out pretty comparable to the UK. And then US tech salaries are 3x higher so it's still a good investment overall.

deleted 5y ago
[deleted]

irjustin 5y ago

The NYTimes barely mentions the data. Here's the original article that talks about the ROI: https://www.thirdway.org/report/which-college-programs-give-students-the-best-bang-for-their-buck https://www.thirdway.org/report/which-college-programs-give-... I think the most alarming thing is the "For Profit" section of the charts. 40% (of students) don't recoup their cost ever vs 13% in Private and 8% in public. "For Profit" schools prey on the venerable to take out huge loans for a degree from "City University" or ITT Tech (defunct) with the promise that you could make a lot of money "just like our 1 person we put in all our commercials." I'm glad a number were shut down, but there are still too many that operate.

notsureaboutpg 5y ago
If 60% of for profit students recoup their cost (and then go on to earn more because of their investment), then isn't it still a valuable investment to have available overall?
Empact 5y ago
For-profit schools also take on more marginal students, who may be less likely to prosper in any case. My father, admittedly an outlier, went from growing up in poverty, to ITT Tech, to Marquette (a Catholic University), to a Ph.D. from U of I Urbana-Champaign in one long continuous path of transfers. It’s not clear to me that he would have achieved what he did without the initial venue to acquire and demonstrate skills, but I could see how many might not travel that path. To what extent can we really weigh the experiences of those who do net benefit (presumably the 60%) against those who do not? Perhaps one man’s preying is the answer to another man’s prayers.
- irjustin 5y ago
  Not to diminish what your father has accomplished because it is rightfully amazing, but a possible question to whether your father needed ITT there? Could there be another avenue through a community college or other non-profit system? > Perhaps one man’s preying is the answer to another man’s prayers. I reject this premise. This is a really poor justification for preying. So many lives were destroyed that ITT was forcibly shut down.

deleted 5y ago

[deleted]

_xander 5y ago

The cited report includes an extract of all programmes in .xlsx format [1]. There are some surprising majors towards the bottom of the <= 10 year ROI: * Neuroscience - 21% proportion w/ ROI * Biology - 27% proportion w/ ROI * Anatomical sciences - 45% proportion w/ ROI * Biochemistry, Biophysics and Molecular Biology - 46% proportion w/ ROI Why might this be? [1] https://thirdway.imgix.net/Program_Level_PEP.xlsx https://thirdway.imgix.net/Program_Level_PEP.xlsx

navbaker 5y ago
My initial guess would be because those are degrees where higher earnings and upward mobility tend to require higher level degrees.

blippage 5y ago

What a wise man does in the beginning, a fool does in the end. I graduated in the 80's in UK, and it was the best time of my life. I had no debt. Fantastic! If I was asked to make the same decision again, I'd probably decline. The idea that I'd start my young adult life tens of grand in the hole - a mini-mortage - strikes me as highly unpleasant. As far as I'm concerned, these guys take their "return on investment" calculations and shove it where the sun doesn't shine. "But blippage," I hear you enquire, "aren't you being irrational?" To which I respond: "I'm not the one who's insane here." Of course, it's not "wrong" to want to get an education especially when the job prospects are good at the end of it. Still, if you couch things in terms of "returns on investment", then I'll figure that either you've a bridge that you're trying to sell me, or you're severely lacking in common sense. Yeah, sure, maybe at the end of the day it's just me that doesn't "get" it, but still, I don't like debt, and I suggest that you don't, either. University fees escalate ever-higher, and people keep coughing up based on Groupthink. In my not-at-all-humble opinion, of course.

oenetan 5y ago

https://ghostarchive.org/archive/DeNGv https://ghostarchive.org/archive/DeNGv https://archive.is/PMu54 https://archive.is/PMu54