Considering the ROI of College? What Alumni Earnings Reveal (and Don’t) About the Worth of Higher Ed
September 03, 2019
Georgetown’s recent report ranks colleges by how much money their alums make at around age 28. Should these data inform your college search?
“How much can I earn with this degree?"
It’s an increasingly important question for prospective college students. With almost 70 percent of grads facing student loan debt, it’s hard not to take a transactional attitude toward higher education.
After all, students want to know: Will I get a worthwhile return on my (sizeable) investment of time and money?
A recent report from the Center on Education and the Workforce at Georgetown University, “Ranking Your College: Where You Go and What You Make," aims to answer this question.
Using data from the U.S. Department of Education’s College Scorecard, researchers studied information from thousands of colleges and universities to determine how much students earned 10 years after enrolling — generally at around age 28. They also collected data from students who had filed for federal financial aid and derived earnings data from tax returns.
The report’s three sets of college rankings sort schools, as you might expect, according to alumni earnings: The first ranks schools according to earnings alone, while the second takes into account students’ majors and programs. The third uses information from the first two lists, but also looks at students’ preparation for college (based on ACT scores) and their likelihood of earning a graduate degree.
On the face of it, Georgetown’s publication seems to tell prospective students which school (and which major or program at that school) will help them land a high-paying job. Unfortunately, however, predicting how much money a grad will earn isn’t that simple.
What the Data Can Tell Us, and What the Data Can’t
As with any study, the research methods have both strengths and weaknesses.
Using median earnings rather than averages is wise. A few star earners at the top can make an average appear atypically high; median figures provide a more realistic indicator of what alumni are actually earning at work. Adjusting findings according to majors, programs of study, and student preparedness also helps add nuance to the report.
One major weakness is the sample set that researchers worked with. They analyzed information only from students who filed for federal aid, meaning that individuals who were able to pay for college without assistance are not represented.
This suggests that the sample set does not include graduates from all socioeconomic backgrounds, since those from wealthier families are more likely to have paid for college without applying for financial aid. They may also be more likely to earn more money than otherwise comparable peers after graduation (for a whole host of reasons — perhaps chief among them family networks).
Another shortcoming is that the study examined individuals’ earnings around age 28 (10 years after starting college and about six after graduating). This can skew results toward jobs that pay well from the start, while ignoring careers that start slowly but may end up paying even better. (A pharmacist, for example, is likely to make more money at 28 than a doctor, though this doesn’t hold true over a lifetime.)
The Bureau of Labor Statistics reports that 12 out of the 20 best-paying jobs are in the medical field, but much of this work requires years of additional study and laboring for low pay before big paychecks start coming in down the line.
Georgetown’s report may ultimately say less about any given college than it appears to. It leaves many questions unanswered: Do individuals’ almae matres play a dominant role in determining earning potential? How do we begin to disentangle factors like quality of instruction, networking opportunities, and the prestige of a university? Are employers more consistently interested in individual graduates’ drive, intellectual accomplishments, and curiosity?
What comes next, of course, is the difficult work of factoring these findings into a decision about where to go to college — or of whether to go to college in the first place. It’s not enough to take a quick skim over the rankings or rely on the stats quoted in a college brochure.
For starters, it’s a mistake to assume any kind of guarantee based on alumni earning stats. Labor markets change, often in response to college students reading too much into short-lived trends.
It’s not hard to imagine a scenario like this: Perhaps there’s a shortage of nurses in the workforce, a supply problem that drives up salaries. Then greater numbers of students, anticipating big money in the field, major in nursing. In only a few years, this might lead to a glut of applicants and difficulty finding a job — and no guarantee of a high salary after all.
As The Economist points out, college enrollment doesn’t work via random assignment. Students choose where to apply based on a complex set of factors: size, strength of a given program, reputation, student-to-faculty ratios, extracurricular offerings, and more.
Then, it’s the college’s turn to select students based on GPA, standardized test scores, essays, and recommendations (most of which describe a student’s motivation and work ethic).
If you think of colleges as team captains during gym class, the most selective ones get the first pick. They’re able to stack the deck in their favor by choosing the most promising future workers (according to their own criteria) before classes even begin. For students, this can indicate that getting accepted to a top college increases the likelihood of earning a relatively high salary after graduation.
Beyond reputation, culture matters, too. Some colleges — and some students — still view getting a lucrative job as a secondary goal of a college education. Liberal arts colleges, for example, may emphasize learning for learning’s sake, rather than as a means to achieving career success.
Some students may even see the “rat race" as ideologically distasteful and avoid work environments where the focus is on climbing the ladder. This means that two colleges with equally strong academic programs may produce graduates who earn very different ranges of salaries.
What This Means for College Applications
As for post-college earnings, both extrinsic and intrinsic factors matter. It’s difficult to imagine a report nuanced enough to predict future earnings and their causes in any definitive way.
Prospective students may do well to treat alumni earnings data as a (flawed) guide rather than a strict prescription.
For example, if a student is drawn to colleges with lower median alumni salaries, then taking out extensive loans may not be the best move. As long as there isn’t a large discrepancy between expected and actual median earnings, low figures might have more to do with the market value of a given school’s most popular set of majors than with any weaknesses in instruction or curricula.
If a college is turning out grads who earn significantly lower salaries than expected based on their choice of major and their preparedness, then prospective applicants should look more closely into what might be sinking alumni earnings. A poor market in the surrounding area or limited career resources at a given school could provide a good reason to think twice before enrolling.
Choosing a college based on the money it may help you make is pragmatic, if lacking in romance. But if tuition rates continue to climb, only a very privileged few students will have the luxury of selecting their dream schools without considering the financial consequences. As it stands now, Georgetown’s report can’t provide a thorough or definitive answer for choosing a college that will help you earn money later in life.
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