Most high school students get the same message from parents, teachers, and guidance counselors: College is the surest path to upward mobility. Federal and state governments join the chorus with hundreds of billions of dollars’ worth of subsidies for America’s colleges and universities. The system screams at young people: College is worth it.
High tuition prices, however, have led students to stop taking that for granted. Horror stories about unaffordable student debt fill newspapers. Though advocates rarely admit it, the implicit principle behind the student loan forgiveness movement is that college doesn’t pay off, at least financially. If it did, why would borrowers on such a massive scale need their loans forgiven?
But neither of these perspectives fully captures reality. The binary framing that dominates higher-education discourse — “Is college worth it?” — is the wrong one. Instead, students can navigate college in ways that make it worth the cost, and we now have the information they need to understand precisely how to do so.
Fact is, not all college degrees are created equal. In a new report from the Foundation for Research on Equal Opportunity, we calculated the return on investment for 30,000 different four-year degree programs. The results show that college can pay off, and the paths students can take to make that result more likely. Moreover, this information tells us what types of workers the country is in need of and which careers might be better pursued outside of traditional, four-year college, perhaps at a trade school or apprenticeship.
Some degree programs can increase students’ lifetime earnings by half a million dollars or more, even after subtracting tuition costs. The average B.A. yields a return of around $129,000. But a large minority of programs have a negative ROI. Those programs leave students worse off financially than if they had never attended college.
Going to college can be one of the highest-return investments an individual makes over her lifetime. But college can also end up as a wash, or even a net negative. Whether college will pay off depends on which program students choose.
Measuring a degree’s worth
Determining the true value of college has always been a difficult business. A naive estimate looks at the raw gap between the earnings of college graduates and high school graduates. Bachelor’s degree holders earn $27,000 more per year than people who never went to college. In isolation, that statistic seems to suggest that college is a good bet.
But the raw gap is misleading. People who choose to attend college are different from those who forgo it. Collegegoers may come from families of greater means, or be more motivated to succeed, or have different cognitive abilities. Even if they didn’t have the degree, most college graduates would probably earn well above the typical high school graduate. Estimating college value, therefore, requires distinguishing the portion of the college earnings premium that’s attributable to the degree from the portion due to other factors.
To estimate college ROI, we calculated a “counterfactual” earnings profile for the typical student in each of nearly 30,000 bachelor’s degree programs. The counterfactual earnings are adjusted for student demographics, the school’s geographic location, and the cognitive ability and family background of graduates. We then compared this counterfactual to observed earnings and subtracted the cost of tuition and time spent out of the labor force while earning the degree. Finally, we accounted for the risk that students will take longer than four years to complete college — or fail to finish at all.
The true monetary value of most college degrees is less than the raw earnings would suggest. On average, there is still a significant financial return to attending college. But averages are just so, and not every program is a guarantee of financial success.
The majors that (don’t) pay
It’s no surprise that programs in engineering and computer science tend to pay off handsomely. Four in 5 engineering programs have a lifetime financial return of $500,000 or more, along with half of programs in computer science.
The most lucrative degree anywhere in the United States, with a return of $4.4 million, is the computer science program at the California Institute of Technology. Among the 25 highest-return programs in the nation, 17 are in engineering or computer science. Other majors with a strong financial return include math, economics, business, and nursing.
Overall, 28% of bachelor’s degree programs do not show a financial return, after accounting for the costs of college and the risks of failing to complete. From a purely financial perspective, the least-valuable degrees are in the arts. Seventy-eight percent of programs in visual arts and music show no financial return. The same is true for a majority of programs in philosophy, religion, and psychology.
Students face many choices in the college decision-making process. But the one society tends to emphasize the most is choice of school. College rankings such as those from the U.S. News and World Report reinforce the view that where you go to college is the most important factor in your future success.
But our results suggest that where you go is not nearly as important as what you study. Consider two majors at the University of Pennsylvania, a sought-after school that rejects more than 90% of its applicants. The finance major at Penn’s Wharton School has an estimated ROI of over $4 million. The film program at the same school has an ROI of negative $140,000.
That means choosing a major, not a school, is the most important financial decision many students will ever make.
America’s most elite colleges are famous for their hefty price tags, but students hope the post-graduation payoff will make the tuition bill worth it. But that only happens some of the time. There are many examples of degrees at elite schools that don’t have a net financial return.
The ethnic and gender studies program at Harvard University, the theater program at the University of Chicago, the dance program at UCLA, and the anthropology program at Tufts University all have a negative return on investment, according to our calculations. Each of those schools boasts an acceptance rate below 20%.
Meanwhile, students at many of the country’s nonelite schools can still secure a hefty lifetime return on their education, provided they choose the right major. The University of Wyoming (acceptance rate: 96%) offers a petroleum engineering major with a lifetime ROI of $1.2 million. The fire protection major at Eastern Oregon University (acceptance rate: 97%) yields a return of $1.6 million.
From a financial perspective, it’s better to study electrical engineering at nonselective Iowa State University than psychology at elite Grinnell College. While higher earnings for engineers contribute the most to the difference in return, it helps that Iowa State’s tuition is one-third that of Grinnell.
None of this is to suggest that choice of school is unimportant. Within college majors, some schools operate much better programs than others do. A student with her heart set on majoring in philosophy is more likely to achieve financial success with a degree from Dartmouth or Penn. But a remunerative major is usually a better bet than a brand-name school.
Beyond the ‘golden ticket‘
Society has for too long fed the fallacy that attending college is a “golden ticket” to success. College involves significant costs. Aside from tuition, students generally spend four years or more out of the labor force to earn their degrees. There are also risks involved in pursuing college: Some students don’t finish, in which case they realize few of the benefits of their education but are still on the hook for some of the costs (including the opportunity costs of lost time).
Students need better information to make the right decisions. College can be worth it, but only if students are deliberate about their choices. Our ROI database (which you can search here) should be a first step toward dismantling the golden ticket fallacy.
Maximizing lifetime earnings, of course, is not the only purpose of going to college. Students should also consider how their personal interests and talents align with different B.A. programs. Sometimes, the joy factor should outweigh the paycheck factor. It’s better to be happy in a five-figure job than miserable in a six-figure one.
That said, students should understand how much money they must give up to pursue a “dream” career in a low-paying field. Perhaps majoring in the arts instead of a more career-oriented field is worth giving up $200,000 over a lifetime. But is it worth giving up $500,000? $1 million?
There’s no right answer. But surveys show that students consider “getting a better job” and “making more money” their top reasons for going to college. Financial returns are not the only reason for going to college, but it’s safe to say they’re the most important to those who choose to attend.
Moreover, high earnings for certain fields such as engineering, computer science, and nursing are no accident. Wages and salaries are the mechanisms through which the economy signals its labor needs. High earnings for engineers are a sign that America needs more engineers. If students make decisions about college based on returns, society as a whole will benefit from the in-demand skills they acquire.
What about low-earning majors, such as art and music? Low or negative ROI for these fields shouldn’t lead us to believe that art and music jobs are worthless. Society needs artists and musicians. But there are too many art and music graduates for the relevant jobs available. As a result, earnings for these graduates are depressed.
Low return for these majors should also lead us to question whether college, which usually requires taking time out of the labor force and accumulating student debt, is the best way to prepare aspiring artists and musicians for their careers. Perhaps short-term credentials or apprenticeships, which are less costly to the student, would be a better way to prepare students who want to make a living on the canvas or the stage.
It is time to move beyond the simple question of whether college is worth it. Sometimes, college is worth it, but not always. Students’ choices regarding college can make an enormous difference in their earnings prospects, and whether they’ll make enough to repay their student loans. Better information on college ROI is the first step toward better choices.
Preston Cooper is a research fellow at the Foundation for Research on Equal Opportunity (freopp.org).
