Does College Pay Off? A Comprehensive Return On Investment Analysis

Key Points

• This report estimates return on investment (ROI) — how much college increases lifetime earnings, minus the costs of college — for 53,000 different degree and certificate programs.
• Bachelor’s degree programs have a median ROI of $160,000, but the payoff varies by field of study. Engineering, computer science, nursing, and economics degrees have the highest ROI.
• Associate degree and certificate programs have variable ROI, depending on the field of study. Two-year degrees in liberal arts have no ROI, while certificates in the technical trades have a higher payoff than the typical bachelor’s degree.
• Nearly half of master’s degree programs leave students financially worse off. However, professional degrees in law, medicine, and dentistry are extremely lucrative.
• Around a third of federal Pell Grant and student loan funding pays for programs that do not provide students with a return on investment.

Executive Summary

In recent years, young Americans have expressed more skepticism about the financial value of higher education. While prospective students often ask themselves if college is worth it, this report shows the more important question is when college is worth it.

This report presents estimates of return on investment (ROI) for 53,000 degree and certificate programs ranging from trade schools to medical schools and everything in between. I define ROI as the increase in lifetime earnings that a student can expect when they enroll in a certain degree program, minus the costs of tuition and fees, books and supplies, and lost earnings while enrolled. My preferred measure of ROI accounts for the risk that some students will not finish their programs.

This report updates FREOPP’s previous research on ROI, utilizing new data from the U.S. Department of Education’s College Scorecard.

The findings show that college is worth it more often than not, but there are key exceptions. ROI for the median bachelor’s degree is $160,000, but that median belies a wide range of outcomes for individual programs. Bachelor’s degrees in engineering, computer science, nursing, and economics tend to have a payoff of $500,000 or more. Other majors, including fine arts, education, English, and psychology, usually have a smaller payoff — or none at all.

Alternatives to the traditional four-year degree produce varied results. Undergraduate certificates in the technical trades tend to have a stronger ROI than the median bachelor’s degree. However, many other subbaccalaureate credentials — including associate degrees in liberal arts or general education — have no payoff at all. Field of study is the paramount consideration at both the baccalaureate and subbaccalaureate levels.

The ROI of graduate school is also mixed. Professional degrees in law, medicine, and dentistry tend to have a strong payoff, often in excess of $1 million. However, nearly half of master’s degree programs have no ROI, thanks to their high costs and often-modest earnings benefits. Even the MBA, one of America’s most popular master’s degrees, frequently has a low or negative payoff.

The report introduces a new metric — the mobility index — to quantify the aggregate financial impact of each degree or certificate program. The mobility index multiplies each program’s ROI by the number of students it enrolls, thus rewarding programs for both financial value and inclusivity. Bachelor’s degrees in nursing and business administration dominate the top ranks of the mobility index.

Finally, the report estimates how much federal government funding flows to programs that leave students with no ROI. Around 29 percent of federal Pell Grant and student loan dollars over the last five years were used at programs that leave students with a negative ROI. The results point to a role for federal policymakers in improving the ROI of higher education.

While ROI should not be the only consideration for students approaching the college decision, the ROI estimates presented in this report can help students and their families make better choices regarding higher education. The estimates may also be of interest to other stakeholders, including policymakers, researchers, journalists, and institutions.

The full ROI estimates for undergraduate programs are available here. The full ROI estimates for graduate programs are available here.

Introduction

High schoolers consistently tell pollsters that what they want most out of college is a good job that will help them earn more money. But fewer Americans today have confidence that a college degree is worth the cost. This skepticism has contributed to falling enrollments at the nation’s universities. While higher education’s boosters insist that a degree is worth it, many young people look at student debt volumes and raise an eyebrow.

Is college worth it? As this report shows, the framing of the question is wrong. The decision to attend college is less important than the choices that come next: which school to attend and which subject to study.

This report assesses the economic value of 53,000 degree and certificate programs at thousands of colleges nationwide. The key measure of economic value is return on investment (ROI), defined as the amount that a student can expect to gain, financially, for having pursued a college degree. ROI compares the main financial benefit of college — the increase in lifetime income attributable to the degree — to the costs, including tuition and foregone earnings while enrolled. The preferred measure of ROI also accounts for the risk that a student could fail to complete college.

The estimates of ROI in this report improve on existing estimates of ROI in several ways. I calculate ROI at the program level, meaning I can report results for individual majors at each college rather than the college overall. I also craft estimates of earnings throughout students’ careers, instead of focusing merely on the first few years after graduation. The methodology also provides more accurate estimates of the increase in earnings attributable to each degree by adjusting for demographics, socioeconomic status, academic ability, and local labor markets.

In 2021 and 2022, FREOPP published three reports assessing ROI for bachelor’s degrees, graduate degrees, and subbaccalaureate credentials. This report updates our analysis of ROI, leveraging additional data that the U.S. Department of Education has since published through its College Scorecard. The new report also augments the methodology in critical ways, such as accounting for the socioeconomic distribution of each college’s students, to provide more accurate measures of ROI.

Overall, 31 percent of students are enrolled in higher education programs that do not lead to a return on investment. In other words, ROI for these programs is negative: the earnings benefits of the degree are unlikely to fully compensate students for the cost and risk of pursuing post-secondary education.

All sectors of higher education contain negative-ROI programs. Nearly a quarter of bachelor’s degree programs have negative ROI, along with 43 percent of associate degree programs. Master’s degree programs, with their high costs and uneven benefits, are among the worst performers: nearly half fail to pay off.

Differences in ROI between programs can amount to millions of dollars. While 23 percent of bachelor’s degree programs yield negative ROI, 6 percent have an expected value above one million dollars. Certain college majors have much higher expected value than others, including engineering and computer science. But institutional factors also play a role. Colleges with low completion rates are much less likely to generate positive ROI.

ROI does not capture everything a prospective student might care about. Some students see non-financial benefits in certain low-ROI fields of study, such as theology and the arts. Nevertheless, the individual financial returns to college are the paramount consideration for the vast majority of students. Moreover, those who deliberately choose a low-ROI program should understand the financial cost of pursuing that “dream” career or less practical field of study. The measures of ROI in this report provide the knowledge necessary to navigate those tradeoffs.

Students will benefit from using these measures of ROI to choose programs with a greater financial return. But other stakeholders, including colleges and policymakers, can use these ROI figures to understand where higher education is succeeding at its mission of economic mobility, and where it’s falling short. Knowledge of ROI is the path not only to individual prosperity, but a stronger economy and society.

Calculating the financial value of college

In 2022, workers with a bachelor’s degree earned 68 percent more than workers with only a high school diploma. For this reason, many assume that college is a “golden ticket” to economic prosperity.

But golden ticket thinking is flawed. First, that 68 percent earnings premium is a median: not every college graduate earns so much. Second, people who attend college and people who stop out of their formal education with only a high school diploma are different along other dimensions, and have different preexisting earnings potential. College graduates probably would have out-earned the median high school graduate even if they had not gone to college. Finally, raw earnings premiums do not account for the cost of college or the risk of not finishing.

The 68 percent earnings premium is therefore an upper bound on the financial return to college. The aim of this report is to calculate a more accurate measure of college ROI, accounting for the problems in the golden ticket way of thinking.

I start by developing estimates of what college graduates will earn over the course of their lifetimes. My primary dataset is the program-level College Scorecard (Scorecard), which reports the median earnings of graduates of tens of thousands of different degrees and certificate programs. The Scorecard now records earnings for the first four years after graduation, up from two years in the previous iteration of this report. Since earnings tend to rise considerably in later years, I use the Census Bureau’s American Community Survey to estimate lifetime earnings for all programs. More details are available in the methodology article accompanying this paper.

Next, I estimate counterfactual earnings for the typical student in each program; in other words, what each student would have earned in a parallel universe where she did not pursue higher education. It is not sufficient to simply use the median earnings of high school graduates, because college-goers have different preexisting earnings potential. Instead, I estimate counterfactual earnings for each program’s typical students, based on their demographics, socioeconomic status, academic ability, family background, and geographic location. Counterfactual earnings for graduate programs also account for students’ undergraduate majors.

By comparing observed earnings to counterfactual earnings, I estimate the true earnings benefit to each college degree. For the median bachelor’s degree program, estimated earnings at age 27 are approximately $52,000. Counterfactual earnings at age 27 for the median program are $37,000. Graduates therefore enjoy a 39 percent wage premium in that year when using a counterfactual wage that accounts for their higher earnings potential. That wage premium is respectable, but considerably less than the 68 percent premium implied by unadjusted numbers.

In fact, around seven percent of bachelor’s degree programs — weighted by enrollment — have higher counterfactual earnings than realized earnings for graduates aged 27. The same is true for 22 percent of associate degree programs. These programs would leave their students worse off even if there were no other costs to college.

But there are other costs. Most obviously, students must pay tuition and required fees while they are enrolled in school. Even after accounting for financial aid, these charges are still hefty. Along with tuition, other costs include lost earnings while out of the labor force and the cost of books and supplies. Living expenses, while often considerable, are not counted as a “cost” of college because students would have to pay for them regardless of whether they go to college or not.

To determine ROI, I calculate the present discounted value of the lifetime earnings of the median graduate of a higher education program. Next, I subtract the present discounted value of the typical graduate’s lifetime counterfactual earnings, including their counterfactual earnings while enrolled in school. I then subtract the present discounted cost of tuition, required fees, books, and supplies. I initially assume that the typical student graduates from their program on time and spends the rest of their career working, though I’ll relax the on-time completion assumption in a moment.

Consider the bachelor’s degree in biochemistry at Boston University. Over the course of his career, the median graduate of this program will earn an estimated $1.88 million, in present value terms. His lifetime counterfactual earnings, also in present value terms and including foregone earnings while enrolled, are $1.19 million. Net tuition, fees, books and supplies costs are $155,000 over four years. The ROI for this program is equivalent to lifetime earnings minus counterfactual earnings minus college costs, or approximately $535,000. This is the ROI of Boston University’s bachelor’s degree in biochemistry, assuming on-time completion.

Present value of lifetime earnings with the degree: $1,881,894

Subtract present value of lifetime counterfactual earnings (incl. earnings while enrolled): $1,191,692

Subtract present value of tuition, fees, books, and supplies: $154,837

Return on investment (ROI) assuming on-time completion: $535,368

These figures assume that pursuing higher education is riskless for the student. In practice, college is risky: many students take longer than the standard time to finish college, and many never get their degrees at all. Dropping out leaves students responsible for many of the costs of college, but they usually receive few to none of the benefits of the degree.

Accounting for noncompletion complicates the ROI equation. For the median bachelor’s degree program, ROI assuming on-time completion is approximately $343,000. But if a student takes five years to finish instead of four, ROI for the median bachelor’s degree program drops to $275,000. The student who graduates one year late pays for additional semesters of school, spends a longer period out of the labor force, and loses one year of her working career. All these factors drive down ROI. For students who take six years to finish, ROI is just $245,000.

The worst outcome, though, is starting college but not finishing. Because they must pay for one or more years’ tuition and spend time out of the labor force, dropouts almost always see negative ROI from college. Dropouts also start their careers later than they would have if they had never gone to college, depriving them of critical labor market experience. I estimate that for dropouts, ROI for the median bachelor’s degree program is negative $99,000.

I estimate ROI for each of these completion statuses, then calculate a “completion-adjusted” measure of ROI based on each college’s actual completion outcomes. Colleges with higher on-time completion rates have more weight placed on their on-time ROI figures. The result is the expected value of each degree or certificate program: the average ROI that a student starting college as a freshman can expect, given the risks of noncompletion.

For the median bachelor’s degree program, completion-adjusted ROI is nearly $160,000. Even though noncompletion rates at many schools are high, the large rewards associated with earning a bachelor’s degree mean the expected value of four-year college is still positive. But as we shall see, that’s not true for all programs.

Things look worse for two-year degrees and other subbaccalaureate credentials. ROI for the median subbaccalaureate program is $170,000, assuming on-time completion. But when adjusting for actual completion outcomes — community colleges and other less-than-four-year schools have notoriously low completion rates — expected ROI drops to just $18,000.

The remainder of this report will focus on the completion-adjusted version of ROI, as it is the most comprehensive measure of higher education’s financial value. Of course, readers should remember that the estimates reported here are for the “typical” student in each program. But no student is exactly typical. Most students will enjoy higher or lower ROI than the estimates reported here. While outcomes for the typical students are the best way to analyze the overall financial value of higher education, prospective students should remember that typical outcomes are not destiny.

College pays off, except when it doesn’t

About 70 percent of undergraduate programs yield a positive return on investment. While that means higher education is still a decent bet on average, a large minority of programs do not pay off. Around 23 percent of four-year degree programs have a negative return on investment, along with 43 percent of two-year degree programs. (These figures, along with all others in the report unless otherwise indicated, are weighted by enrollment.)

The below histogram displays the distribution of estimated ROI for undergraduate programs. The considerable range shows that the value of “college” is almost a meaningless concept. “College” is actually tens of thousands of different programs, with a wide distribution of financial value.

At one end of the spectrum, the bachelor’s degree in drama at the University of Southern California costs students over $160,000 over four years, but delivers earnings more than $10,000 per year below the counterfactual. As a result, I estimate that USC’s drama program has an ROI of negative $540,000.

But some bachelor’s degrees are incredibly lucrative. I estimate that graduates of Princeton University’s computer engineering program earn nearly $200,000 within a few years of graduation, more than enough to recover the Ivy League school’s steep price tag. Princeton’s computer engineering program has a lifetime ROI of $7.1 million, per my estimates.

While most programs are somewhere in the middle — neither as ruinous nor as rewarding as the examples given here — choice of program can still influence students’ future lifetime earnings to the tune of hundreds of thousands of dollars. One of the most important factors is the field of study.

The ROI of a four-year degree

For students who pursue a bachelor’s degree, choosing a major is one of the most important financial decisions they will ever make.

The following chart shows ROI for the median program in each of 21 college major categories. Students looking to maximize the financial value of college should explore the engineering school: engineering degrees have a median payoff of $949,000. Other majors with a handsome return include computer science ($652,000), nursing ($619,000), and economics ($549,000).

By contrast, fine arts — a category including studio art, music, and drama — leaves students financially worse off most of the time. While not quite negative, the ROI of several other majors is quite low, including English, education, and psychology — one of America’s most popular college majors. Biology is another major with low ROI, though this is only for students who do not pursue a higher degree. Those who use a biology major to complete medical school see a handsome payoff (more on that later).

Majors in the middle of the ROI distribution include popular ones such as business (where the median payoff is $258,000) and political science ($262,000). Other majors with a decent payoff include mathematics and the physical sciences (which includes chemistry, geology, and physics). Some majors do better than one might expect based on their reputation — sociology and journalism each have a median ROI around $120,000.

One reason that ROI varies so much by major is that different fields of study prepare students for different jobs. Different jobs may face a surplus or shortage of qualified workers, depending on the field. High salaries for engineering and computer science majors are a signal that the economy needs more workers with those skill sets to build bridges and develop software. Low ROI for fine arts majors does not mean fine arts is a worthless field; rather, there are simply too many aspiring artists chasing too few jobs.

While choice of major is an important factor behind ROI, it isn’t everything. Even within certain majors, ROI can vary widely across institutions. The histogram below shows the distribution of ROI for several college major categories; use the dropdown menu to select a major and see its distribution.

One major with a wide range of outcomes across institutions is business. At the University of Virginia, the business program’s estimated ROI exceeds $3 million. But ROI is negative for 13 percent of business programs, and only modestly positive for even more. In addition to the field of study, choice of institution can make a significant difference to students’ financial prospects.

The same logic holds for traditionally low-paying majors. Some institutions buck the trend. The fine and studio arts program at California Polytechnic State University has an ROI of $785,000, thanks to its high starting salaries and relatively affordable tuition. Students interested in fields with low average pay can still find some schools that do well transforming those fields of study into high-paying careers.

Factors associated with ROI

When choosing a college and program of study, students should evaluate several key variables that contribute to ROI. The most important is earnings after graduation. While factors such as cost play a role in ROI, earnings are paramount. A high-earning career trajectory will deliver benefits for decades — college graduates work for 40 years or more — while high tuition costs must be paid for a few years at most.

The following chart divides bachelor’s degree programs into quintiles based on their starting salaries. Degrees with a starting salary of $31,000 or less are unlikely to pay off. Degrees with a midrange starting salary, between $31,000 and $36,000, tend to deliver a modest but positive lifetime return. The highest returns are associated with degrees that generate a starting salary of $57,000 or more.

Besides starting salary, another critical factor is the institution’s completion rate. While students’ individual ability and motivation affects their likelihood of completion, research shows that college quality also has an impact on completion rates. Some institutions have better support systems in place to help students across the finish line. Other schools have been known to aggressively recruit students who are not prepared for college, which brings down completion rates.

The biology programs at Boston College and the University of Massachusetts-Boston have similar starting salaries (around $38,000). But since Boston College has a much higher completion rate, its biology program’s expected ROI is $486,000, compared to just $83,000 for UMass-Boston.

As the following chart shows, schools with the lowest on-time completion rates have a median ROI below $50,000. But those with the highest completion rates, where more than two-thirds of students graduate on time, enjoy a median ROI of $367,000.

Tuition costs are an important element of the ROI calculation, though the story is complicated. Colleges with the highest net tuition costs (above $16,000 per year) also have the highest median ROI. Median ROI is lower, though still positive, for schools where costs are lower (see the next chart).

It appears that higher tuition at certain schools may be worth it in some cases, if the heftier tuition outlay buys students access to a higher-quality education. It’s also possible that causality runs the other way: prestigious schools with access to elite job markets and professional networks can provide their students with higher ROI — and charge them more for the privilege.

New York University is one of the most expensive schools in the nation, with an annual net cost above $44,000. Seven of its bachelor’s degree programs have negative ROI. For instance, the film program has an estimated ROI of negative $22,000. If NYU’s tuition were lower, the film degree would probably have positive ROI. Indeed, the film degree at the far cheaper SUNY-New Paltz, just a short drive upstate, has a modest but positive ROI of $148,000.

What about subbaccalaureate credentials?

Interest in alternatives to the traditional four-year degree path is rising. One option is a subbaccalaureate credential — an associate degree or certificate — which students earn after completing a program of two years or less. These programs have promise, but the same lesson applies here: the choice of program matters.

The median ROI for subbaccalaureate programs is low overall: just $18,000. That compares unfavorably to four-year degrees’ median ROI of $160,000. But as with bachelor’s degrees, the field of study for subbaccalaureate credentials is vital.

Undergraduate certificates in the technical trades — which include vehicle maintenance and repair, precision metal working, HVAC technology, and electrical and power transmission installation — are more lucrative than a bachelor’s degree. Median ROI for the technical trades is $313,000, compared to just $160,000 for the median bachelor’s degree. Two-year degrees in nursing and other health professions also boast a strong median ROI of $224,000.

But other fields of study perform much worse. Almost all undergraduate certificates in cosmetology — a popular and notoriously low-paid field — yield a negative ROI. Associate degrees in liberal arts or general studies, which aim to give students a broad education without any specific career training, also tend to perform poorly. The median ROI for this field, which accounts for roughly half of students enrolled in two-year degree programs, is negative $9,000.

As the below histogram shows, subbaccalaureate credentials tend to serve students well when they prepare for a specific career path, provided that career path has reasonably high wages. Within fields of study, there is less variation in ROI at the subbaccalaureate level. However, choice of institution remains important, particularly because many of the community colleges and proprietary institutions that offer subbaccalaureate credentials have low on-time graduation rates.

The mobility index

Of all programs with data available, the highest-return degree is Princeton University’s computer engineering program, which boasts an ROI of $7.1 million. But Princeton’s computer engineering major also enrolled just two dozen students in the most recent academic year. While the degree offers exceptional value, only a select few students can access it.

It’s tempting to rank programs in the database by absolute ROI and nothing else. However, this ranking is not useful to most students because it includes mostly programs at highly selective universities that enroll an infinitesimal fraction of undergraduates. A better list would incorporate both ROI and inclusivity.

To assess each program’s impact on economic mobility, broadly defined, I create a measure called the “mobility index,” which is the product of each program’s ROI and the number of students it enrolls. The mobility index measures how successful programs are at promoting economic mobility on a large scale.

The following table ranks the top 25 undergraduate programs in the nation by mobility index. The top program, the bachelor’s degree in registered nursing at Chamberlain University, has an ROI of $842,000. It also enrolls nearly 36,000 students on average. Multiplying those two figures together, I estimate that currently-enrolled students will enjoy a collective lifetime return of $30 billion.

The highest ranks of the mobility index include several programs in registered nursing, which prepare students for a high-wage profession with growing demand. These include two associate degree programs in registered nursing. Large, high-quality programs in engineering, business, and computer science appear on the list, as does one program in aviation.

All sectors of higher education are represented. Chamberlain University is a national for-profit nursing school with online and in-person options. Several large nonprofit colleges, which enroll students mostly or exclusively online (including Western Governors University and Southern New Hampshire University) also make appearances. An online presence gives these schools a national scope, enabling them to reach more students. But several large public schools do well on the mobility index; these include state flagship universities such as Rutgers University along with other schools like the University of Texas at Arlington.

Is graduate school worth it?

The share of the population with a bachelor’s degree has risen over the past several decades. As a result, more college graduates continue on to graduate school to give themselves an extra boost in the labor market. On paper, this seems like a good bet: workers with a master’s degree earn 16 percent more than workers with only a bachelor’s degree, while workers with a doctoral or professional degree earn 45 percent more.

But the raw earnings gap between workers with bachelor’s and advanced degrees is misleading for the same reasons the raw gap between high school and college graduates doesn’t tell the full story. There’s tremendous variation in the return to different graduate degrees. Students who continue on to graduate school may have higher preexisting earnings potential. And graduate school may not boost students’ earnings enough to compensate them for the often-exorbitant price of tuition.

As a result, I estimate that a large share of graduate degrees — 43 percent of master’s degrees and 23 percent of doctoral and professional degrees — do not increase students’ earnings enough to justify the costs and risks of graduate school. Moreover, given the higher costs involved, a significant share of graduate programs leave the typical student worse off by more than $100,000, as the following histogram shows.

Master’s degree programs are particularly fraught. The median master’s degree delivers an ROI of just $50,000. Once again, this median conceals variation by field of study: master’s degrees in science, engineering, and nursing tend to have very strong ROI, while master’s programs in the arts and humanities usually leave students much worse off. Master’s degrees in public-service fields such as education and social work also have low to negative ROI. One reason is that state policies require or encourage workers in these professions to earn master’s degrees, even though the professions often don’t pay enough to justify the degrees’ cost.

Certain master’s degrees that students often view as a golden ticket may disappoint. The Master of Business Administration (MBA), one of the most popular graduate degrees, has a median ROI of just $101,000 — and 39 percent of MBA programs have negative returns. One reason for this poor performance is that MBA students typically have high preexisting earnings potential, having often chosen high-ROI undergraduate majors such as finance and economics, so the MBA adds little value on top of that. While a handful of MBA programs at elite institutions such as the University of Pennsylvania and the University of Chicago deliver million-dollar returns, that is not the case for most MBAs.

Doctoral and professional programs tend to perform better. Despite high costs and long durations, the majority of medical and dental degrees deliver an ROI above $1 million. Law school is also a good bet, with a median ROI of $470,000. A fifth of law schools come in above the million-dollar mark. The top professional program in the nation is Columbia University’s law degree, which has an ROI of $6.6 million.

Longer doesn’t always mean better, though. PhDs and equivalent doctoral degrees have unreliable returns, even in STEM fields. These programs require a long time out of the labor force, and the academic jobs into which they place graduates often do not pay enough to compensate students for that extended commitment — especially if the program is not fully funded.

The role of subsidies

The measures of ROI throughout this report have focused on the student’s perspective and framed ROI as a tool that students can use to decide between different programs. But other stakeholders have a role to play in ensuring that higher education delivers on its promise of economic mobility. Policymakers at all levels of government, who fund higher education to the tune of hundreds of billions of dollars per year, should also want to know whether taxpayers’ investment is paying off.

The federal government, for instance, funds higher education through Pell Grants — a scholarship program for low-income undergraduates — and federal student loans, which are available to undergraduates and graduate students of all income levels. Recently, the U.S. Department of Education released a dataset that tracks how much of this funding has flowed to each individual program. For the first time, it is possible to understand how much federal funding pays for degree programs that do not yield a return on investment.

Between 2018 and 2022, $418 billion in federal funding flowed to one of the programs for which I estimated ROI. Roughly $122 billion of that funding–29 percent — paid for programs where ROI is negative. That figure includes $37 billion in Pell Grants, $47 billion in loans to undergraduates, and $39 billion in loans to graduate students.

Because ROI is negative for these programs, it’s unlikely that most of those loan dollars will be repaid. A new federal program which ties student loan repayments to income means borrowers in low-ROI programs will repay little of what they borrowed, and sometimes will pay nothing at all.

Colleges receive additional subsidies through other avenues. State and local governments typically provide direct appropriations to public colleges and universities. Private schools benefit from tax exemptions for donations and endowments. Because of these subsidies, the amount that college students pay in tuition is usually less than what their colleges spend to educate them.

The University of North Carolina at Chapel Hill (UNC), for instance, collects around $7,700 in net tuition from the average student. But it spends nearly $48,000 per student on core educational functions including instruction, administration, and student services, while excluding research and auxiliary enterprises like dormitories.

Stakeholders may be interested in how ROI changes when it accounts for the full cost of education. An educational investment that makes sense from an individual perspective may not make sense from a social perspective, once the full cost of providing that education is considered. I therefore calculate a supplementary measure of ROI which considers how much the university spends to educate a student, not just the student’s contribution.

This adjustment reduces ROI for almost all programs. At UNC, incorporating institutional spending reduces the ROI of the bachelor’s degree in drama from positive $80,000 to negative $69,000. Nationally, ROI for the median bachelor’s degree drops from $160,000 to $124,000. A handful of “cash cow” credentials, where universities charge more in tuition than they spend providing the education, see modest increases in ROI once institutional spending is considered.

Conclusion

Although it’s not the only consideration when approaching the college decision, no prospective student should ignore ROI. The choice to attend college is arguably less important than choosing which school to attend and which subject to study. Some programs leave students worse off financially than they would have been had they not gone to college at all.

College ROI is also important for society. Certain programs have higher ROI because they prepare students for jobs with high labor market demand. If more students pursue these programs, all of us will enjoy the economic benefits of more skilled workers and higher productivity.

The estimates of ROI provided in this report can help students and their families make better decisions about postsecondary education. They are also a resource for other stakeholders, including policymakers, researchers, journalists, and colleges themselves. The ROI estimates for all 53,000 postsecondary programs are available for download here (for undergraduate programs) and here (for graduate programs).

The results also offer some broad takeaways.

Field of study is critical

College-ranking outfits typically emphasize choice of institution. But field of study is the more important consideration, as choice of major explains more of the variation in ROI than choice of college. At the bachelor’s degree level, students will typically see a greater financial return to college if they study engineering, computer science, or nursing. But students in the arts, education, and psychology are far less likely to enjoy a net boost in their lifetime earnings.

Field of study is even more important in other sectors of higher education. While subbaccalaureate programs in the technical trades or registered nursing have a higher payoff than the median bachelor’s degree, programs in cosmetology or the liberal arts usually leave students worse off. The returns to a master’s degree also depend on the field of study, as even popular credentials like the MBA often yield disappointing ROI.

This isn’t to say that lower-paid fields are worthless. Society needs artists and musicians. But low earnings for these fields signal that supply and demand are mismatched. Too many art majors chasing too few jobs that can use their skills is a recipe for low wages and negative ROI. Students who want to pursue careers in the arts should at the very least be aware of this fact, and consider alternatives to a four-year degree if they are committed to this career path.

Many degrees are not good investments

Nationwide, around 31 percent of students are enrolled in a program that is unlikely to produce a financial payoff. While a four-year college degree is still a decent bet most of the time, a troubling 23 percent of bachelor’s degree programs have a negative ROI, and for many others the payoff is only modest. Two-year degrees and master’s degrees are among the worst investments, with 43 percent of each credential type failing to deliver a return. Accounting for subsidies rather than just tuition pushes these numbers up even further.

Institutions should work to improve the performance of their negative-ROI degrees. Lower costs, better career services and interventions to boost completion rates are three obvious paths for reform. But colleges should also reconsider whether it is necessary to offer some of these credentials at all, especially in fields where labor markets are saturated. Not every college needs to offer every major; some schools should shut down low-ROI programs and reallocate institutional resources to programs with a better return.

Employers and lawmakers should also work to reduce degree requirements for jobs associated with low-ROI fields of study so students don’t have to pursue negative-ROI credentials just to land a job in that field. Social workers are an obvious example. Many states require social workers to hold a Master of Social Work (MSW), but this is an extremely low-ROI degree. Reducing education requirements for this profession may allow aspiring social workers to avoid negative-ROI programs.

ROI isn’t everything

While return on investment is an important metric, it does not tell students and other stakeholders everything they need to know about the value of college. Most obvious is the “joy factor” — students should consider how likely they are to enjoy a particular field of study before they set themselves on that path. They should also consider whether the career that field of study leads to is one they feel passionate about. Law degrees have a high ROI because lawyers make a lot of money, but the profession isn’t for everyone.

ROI also doesn’t tell us everything about the social value of a college degree. Education produces benefits that accrue to other parties besides the student. Drew Weissman’s bachelor’s degree in biochemistry at Brandeis University contributed to Weissman’s role in the development of mRNA vaccines, which have generated trillions of dollars in economic benefits. Those are not captured in the ROI measure.

However, it would be irresponsible for defenders of negative-ROI programs to use “social benefits” as a catchall excuse for poor performance. It’s likely that programs which generate large social benefits also come with significant private rewards. Moreover, some degrees can generate social costs if they fuel degree inflation. More college-educated workers as a share of the labor force can lead employers to raise degree requirements, shutting less-educated workers out of certain jobs. Workers with degrees may enjoy higher wages, but at the expense of workers without.

While social benefits and social costs are important to keep in mind, prospective college students should think about how to use these measures of ROI to make higher education work for them. The estimates of ROI in this report can empower students and their families to make more informed decisions. They can start by reframing the question they ask — not “is college worth it?” but “when is college worth it?”