Predicting a degree's value

When money is tight, students and parents worry more about the value of a college degree relative to the costs, writes Sue Shellenberger in the Wall Street Journal.

College graduates earn 60 percent more than high-school graduates, estimates a 2007 College Board report with students in technical majors doing the best.

For a more specific payoff prediction, will “generate a 10-year range of students’ likely postgraduation income based on their test scores, high school and college attended, grades and major.” lists “median salaries of actual grads by college, type of college, major and job.”

Ambition leads to financial success, researchers have found.

In a surprising twist, a stronger predictor of income is the caliber of the schools that reject you. Researchers found students who applied to several elite schools but didn’t attend them — presumably because many were rejected — are more likely to earn high incomes later than students who actually attended elite schools. In a summary of the findings, the Bureau says that “evidently, students’ motivation, ambition and desire to learn have a much stronger effect on their subsequent success than average academic ability of their classmates.”

Of course, there are non-monetary rewards, such as “preparing for a rich, well-rounded life” and  “finding a career you love.”

Update: Where Does All That Tuition Go? AEI’s Mark Schneider explains why college costs keep rising faster than inflation.

And here’s a provocative infographic.

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  1. It’s dangerous to assume that the degrees that have offered the best payback *historically* will be the ones that offer the best payback in the future. This is the same kind of error made by those who assumed that because house prices went up a lot historically, they would *keep* going up at similar rates.

  2. “It’s dangerous to assume that the degrees that have offered the best payback *historically* will be the ones that offer the best payback in the future.”

    Yes, it is.

    But it is reasonable to assume that easy majors with little content from poor schools (stereotypically … Rural Southwestern State Tech U) will be less economically valuable than difficult majors (often difficult because of math) with lots of content (hard to BS through physics, for example) from well regarded schools.

    This is true for almost any model you have for why degrees are valuable:

    1) Hard major versus Easy *signals* that the student is smart. If the difficult major actually teaches relevant content, all the better. A classics degree, for example, signals that the student can learn *something* real (Latin and Ancient Greek), even though the particular skills are unlikely to be used “for real”. A physics or engineering degree sends the same signal (with less verbal signaling and more math signaling) while also providing a better chance to be useful.

    2) Selective school versus easy school again signals “smart”, but also tends to run equivalently named classes/harder and faster. A BS in physics from CalTech, for example, is going to cover more ground than a BS in physics from RegionalRuralTech. So, again, you get both “signaling” (they let me in, so I must be smart) and content.

    It is, of course, possible to pick a “hot” major that becomes less hot (think physicists in the years after the cold war ended … lots of national labs were downsizing). But even those people tend to do better than the people that spent 4 years taking easy intro courses with little content. They may not do as well as they had hoped, but still better than the other route.

    -Mark Roulo

  3. Interestingly, I just read about a study that says the college you choose has almost no impact on lifetime earnings:

  4. Mike Curtis says:

    Education is a tool. The chisel does not tell the sculptor what to carve any more than an Ivy league degree can tell the graduate what to do. How ever, or where ever you learn, pales in comparison to motivation, self-actualization, and intrinsic talent; in determining what you actually accomplish

  5. I do not believe that going to Harvard is a ticket to the good life, but I have been surprised over the years how much going to grad school at Stanford has helped me. The connections that I made there have affected the trajectory of my career in ways that I would never have expected, and the branding has been a big help, too. I don’t hear this from my friends that went to Princeton, for instance, so I do not think that it’s true that any selective school is the same as any other one. And I’ve been told by Stanford graduates in other fields that they have found the same thing, although I’m pretty sure that not all of my classmates would say this.