Return on Investment Becoming More Important in Choosing a College and Major

Posted By Donna Fuscaldo on April 25, 2016 at 10:05 am
Return on Investment Becoming More Important in Choosing a College and Major

Hindsight is 20/20, but for college graduates shackled with thousands of dollars in student loan debt, knowing the return on investment for their college degree upfront could’ve made a big difference.

With only 40 percent of college students actually graduating and 50 percent of graduates either unemployed or underemployed, college return on investment is becoming a much bigger component when weighing which school and degrees to pursue. After all, the pavement is littered with tales of people who racked up $100,000 in student loan debt only to graduate with a degree that gets them a low paying job at best. And while the colleges and universities are partly to blame for not steering students toward the right degrees, it’s also the job of the students and families to view college more like a business investment than rite of passage.

“It’s way too expensive now to go to college just to explore,” says Derek Redelman, senior program director at USA Funds, the non-profit focused on improving student outcomes. “It’s too expensive to spend $120,000, be done in four years, or not be done in four years, and still not know what you want to do.”

ROI studies that focus on schools and programs of study

Recognizing that college return on investment is becoming a more important factor when deciding which school and degree to pursue, last October USA Funds committed $3.5 million in grant money to develop new models for measuring the return on investment for postsecondary education, with the fruits of their labor now starting to emerge. The funding went to the Indiana Commission for Higher Education, U.S. Chamber of Commerce Foundation, National Center for Higher Education Management Systems, and National Skills Coalition, all of which are gathering data to provide people with a realistic return on the degree and school they choose. All of the institutions share a common focus: analyzing data at the program level.

While there are already rankings out there that look at college return on investment or the salaries graduates can expect to earn, this initiative is designed to get much more granular, providing more specific data not only on the salary ranges for a state but even a region. “A college may have an overall good ROI but one degree can have a different return than the other,” says Redelman. “This data drills it down to the program level to help consumers understand the likely return in terms of employment and wages.”

Lifestyle should be part choosing a college and major

But the data analyzation doesn’t stop there. USA Fund’s is seeding College Measures, a partnership between the American Institutes for Research and Optimity Advisors, which along with polling company Gallup are coming up with tools that will help prospective students choose colleges based on the type of life they hope to lead once they graduate from college. “Where looking at trying to help students estimate the cost of living if say they want to live in New York City or Rochester, if they want to live in a condo, rent an apartment or own a house. How many kids, what kind of car,” says Mark Schneider, president of College Measures. “Based on four or five questions we can give them a reality check to estimate how much money they will need to achieve their goals.” For example, a finance degree may make their goals achievable in say five years while a liberal arts degree may never get them there.

Although development of these tools is still underway, ROI measures are being embraced by a handful of states that see this as an important way to help students make smart decisions about college. It also comes amid a push by the White House for there to be more information readily available for families when shopping for college. College Measures is working with states including Tennessee, Colorado, Indiana and Texas and anticipate ROI will become an integral part of the information the states provide to their constituents. Indiana, another state that’s embracing ROI, already has it live on its website.

In the past colleges and universities may have resisted ROI rankings, but with the skyrocketing cost of a college education and the record student loan debt, schools realize there’s no stopping this increased accountability. Whether or not ROI tools will become ubiquitous, one thing is clear, there is a growing movement toward holding schools more accountable for their students’ outcomes. States including Ohio and Texas are earmarking a portion of their college outlays to schools that meet certain measures in a practice known as performance-based funding. “We are starting to see employment outcomes and wage outcomes sneak into the discussion,” says Schneider. “How much of this actually turns into driving policy as compared to focused on informing student choice that, to me, is a very interesting question.”

Donna Fuscaldo
Donna Fuscaldo is a freelance journalist hailing out of Long Island, New York. She has also written for,,,, Business Insider, Dow Jones Newswires and the Wall Street Journal.

You May Also Like