Payback

Which college graduates will earn enough to pay off their loans? Using PayScale data, SmartMoney looked at college costs and median alumni income two years and 15 years after graduation to calculate the return on investment.

For example, a hypothetical grad who spent $100,000 to attend college and now earns $150,000 a year would score 150. The higher the score, obviously, the better.

The payback rankings show flagship state universities provide faster payback than the high-priced Ivy League or other high-end private institutions. Ivy Leaguers earn more, but they paid a lot more. Georgia Tech, a public university that educates many engineers, has the highest payback rank at 221, followed by the University of Texas at Austin. Sarah Lawrence, a very expensive liberal arts college, is the tail-end Charlie at 60.

At Sarah Lawrence College, in Bronxville, N.Y., graduates often choose careers in education, public administration or social work, and come out earning, on average, just $38,600 after two years. (Officials at Sarah Lawrence say that figure may underestimate alumni salaries but also contend that’s beside the point: “Their rewards are measured not just by earnings but by how much they are giving back to society,” says Tom Blum, the vice president of administration.)

Smart Money analyzed only 50 colleges and universities: the eight Ivies, plus more than 40 of the priciest non-Ivy private schools and public universities (based on out-of-state tuition).

As Cost of College points out, the SmartMoney rankings assume students pay the full cost. Many students get some financial aid, especially at the elite private colleges, which have huge endowments. And public flagship universities are a very good deal for in-state students.

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Comments

  1. The classmates I knew who attended schools like Sarah Lawrence were primarily girls from wealthy families who could afford to take philanthropic type jobs because they had Mummy and Daddy to help support them. There was also the unspoken expectation that eventually they’d have a rich husband to do the same. The 21st century equivalent of the old “finishing schools” as it were.

  2. Deirdre Mundy says:

    Meanwhile, depending on income, schools like Harvard, Princeton, Stanford and Uchicago can be practically free these days. I know my kids would qualify for a free ride at any of these, provided they can get in. (Which figures into the calculation for staying home and homeschooling– It’s actually a BETTER investment at this point to educate the kids than it is to work, turn them over to mediocre public schools, and then have to PAY for college……)

  3. Sean Mays says:

    Right on DM! My wife and I are hoping the kiddos enjoy homeschool and earn scholarships. We plugged data into the FAFSA estimator for planning purposes and apparently the gov’t feels we should pay full freight. Staying home with the kiddos probably beats the 80+ hour weeks of management consulting and outsourcing raising my kids to strangers.

    Mr. Blum can say what he likes about “how much they are giving back to society” but if we the taxpayers are subsidizing the higher ed enterprise (loans, grants, etc etc) an occasional public referendum is to be expected. At some point to we quit investing in negative NPV projects?

  4. Staying home with the kiddos probably beats the 80+ hour weeks of management consulting and outsourcing raising my kids to strangers.

    Whoever is staying home is taking a huge financial risk.

  5. Deirdre Mundy says:

    It’s only really a risk if you worry about divorce, Cal. And if you have a degree that is actually a money maker— my degree in Greek and Latin is barely worth enough to cover daycare and school tuition at a mediocre school….

  6. The divorce risk for my demographic is relatively low. A recent study I saw quantified the percent decrease:

    Annual income over $50,000 -30
    Having a baby seven months or more after marriage -24
    Own family of origin intact -14
    Religious affiliation -14
    College graduate -21

    The only category I didn’t fit was the “got married after age 25”. I was a month shy of my 22nd birthday and my DH was just-turned-23 when we got married. But we’d been together for 3 1/2 years so it wasn’t like we rushed into marriage. The folks I know who married young & wound up divorcing nearly all got hitched impulsively after a whirlwind courtship.

    I think it’s sad how much fearmongering there is surrounding the issue of divorce risk as a reason not to sequence one’s career. The demographic of women who are most frequently warned “don’t become a SAHM because 50% of marriages end in divorce” actually are among the LEAST likely to divorce.

    • But women in the least-likely-to-divorce demographic are also less likely to be “SAHMs” : http://www.census.gov/newsroom/releases/pdf/cb10-ff09.pdf.

      I am glad that fewer professional couples are getting divorced, SAHMs or not, but I don’t think people (David Brooks, I’m looking right at you!) realize how punishingly expensive divorce is for a couple that is well-to-do by any reasonable standard, but one that hasn’t accumulated enough assets for both parties to maintain the same lifestyle they did when married. In other words, love might not be the only thing keeping a lot of people together.

  7. It’s not just about divorce. For anyone to take a break from the workplace is to undergo a serious financial risk, and most people can’t afford to do it. But go ahead and do what you do. Just don’t bore the rest of the world with your tedium about how superior you are–particularly when you apparently have a daughter who melts down at any sign of failure. And remember, all you are is a luxury item that someone bought and paid for.

    And if you don’t want to discuss your differences, Sean May, then stop yammering about how superior you are.

    It’s amazing how sensitive the idle luxury items (or the ones footing the bill for it) are about their life choices, while not hesitating to criticize others who decide that financial security is a far superior choice for their children.

  8. Sean Mays says:

    Cal: I always try to consider the source before I feel insulted. There are days when I miss the corporate grind. But I think back to the stories partners and senior partners used to tell how when their kids saw an airplane and say: “Daddy!” I made the switch late into teaching, but when kiddo #2 appeared and I had some perspective on the social issues of modern school, becoming a stay at home really seemed like a good alternative.

    CW: Thanks for the stats, but I’m a rarer bird. SAHD. But I do hit all those factors. After dating 10 years and married 13 it feels pretty secure.

    Financial risk? Hrmm, maybe. But with a marginal tax rate over 50% and the cost of daycare, etc; I’d effectively have to turn over 85% of my gross. Seems like a marginal return for the sacrifice. That’s 85% even up to FICA max, or whatever they’re calling it these days. Don’t think of how much earning you’re giving up, imagine how much you’re giving back to society and the family unit.

  9. The classmates I knew who attended schools like Sarah Lawrence were primarily girls from wealthy families who could afford to take philanthropic type jobs because they had Mummy and Daddy to help support them. There was also the unspoken expectation that eventually they’d have a rich husband to do the same. The 21st century equivalent of the old “finishing schools” as it were.

    Ironic, really, considering who made this post.

    • My parents aren’t wealthy and I was a junior executive making a decent salary before my second child was born. It just wasn’t big enough after taxes and the costs associated with being a dual-income family (2nd car, professional wardrobe, housecleaning service, etc.) to cover $25k per year per child for private elementary school or housing in a neighborhood with decent public schools. It would be a net financial drain on my family for me to go back to work at this point.

  10. Sean Mays says:

    Daycare rather than “outsourcing …” would have been more politic. I forgot that was a nerve for some … but to go back on topic …

    It’s an interesting study. More detail, like decile breakdowns or even quartiles might be nice. Somebody will always point out an outlier like Carly Fiorina, former HP head and Renaissance Studies major. More granularity might be nice but it’s rarely forthcoming. It would be nice to see more transparency in higher ed both on the income and the spend side. Not every degree is a success and far too many kids don’t even get that far.

    There was a nice WSJ piece about 3 years ago where they looked at student indebtedness versus type of institution. Several state schools made the list for most student debt – like South Dakota State University grads had something like 40k (out of staters?) but Princeton grads had less than 4k. Again – AVERAGE, and your mileage may vary.

  11. “And remember, all you are is a luxury item that someone bought and paid for.”

    Wow, that was really rude.

    A person who teaches is a teacher, regardless of whether they get a paycheck for it or not.

  12. Back to the subject at hand, the idea of doing a college calculator is really good, although as people have mentioned, it’s important to key in your actual costs, not the sticker price. The New York Times has a nice rent-buy calculator for real estate, and it’s incredibly helpful (especially for the less math-y). The college calculator has the potential to similarly revolutionize and de-emotionalize the college selection process, which is surrounded by the same sort of hype and drama as real estate.

  13. Deirdre Mundy says:

    I had very little student debt from college because of scholarships, grants, my parents, my savings from all my babysitting and jobs, and “term time employment” (i.e. I worked 20-30 hours a week the whole time.) Basically, just subsidized Stafford Loans. On the other hand, I have friends who went to smaller liberal arts colleges (the kind with no endowment) who spent 4 years and came out with over 100,000 in debt! Their schools had lower tuition than mine, but no means to help students afford it.

    So, yes, looking at “sticker price” is a big mistake. When I was in school, 48% of students did not pay full tuition.

    As for Cal’s “Luxury good bought and paid for” comments, I think they say a lot about her philosophy of marriage and family. I read them to my husband, who cracked up. But in a way, I guess homeschooling is a luxury in the same way that the really awesome Montessori school one town over is…. except that it’s a less expensive luxury. Really, every family has to weigh options and decide how to balance time and money– and it’s going to be different for every family. For me with my particular children, staying home and teaching the kids isn’t much of a risk. Working and sending them to the local public school would be. The calculus is different for people who like their schools, or who really like their jobs.

  14. “But in a way, I guess homeschooling is a luxury in the same way that the really awesome Montessori school one town over is…. except that it’s a less expensive luxury.”

    Right, particularly when you have a biggish family. The family two doors down sends their four kids to the same private school we do, but at $500 a month per kid, that’s $2,000 a month just for school if they’re paying full-price. And elsewhere in the country, the same education could easily cost twice as much. If the question is, how can I afford a top-notch education for a large family on a moderate income, homeschooling may well be the answer.

    That said, I’ve been hearing recently about some homeschooling disasters, but all but one involved non-college graduate mothers. For instance, a relative’s ex-wife kinda sorta forgot to teach the kids how to read. But fortunately, other family members were paying attention and picked up the slack, at least with regard to reading instruction. There’s a huge difference between somebody like that and the homeschooling moms that one meets on the internet that are bluestockings and curriculum fiends. My kids’ school was actually started by a small group of homeschooling mothers who got together, created a coop, and then eventually a school.

    • I wish I could find a decent private school that was only $500 per month. The ones in my neck of the woods are $25k per year. I’ve got 3 kids and there’s no way we’d qualify for financial aid, especially if I resumed full-time employment.

      • Deirdre Mundy says:

        Exactly. And then you take a financial risk by SENDING kids to schools that it takes an extra income just to afford, because if you or your spouse gets laid off, or if health insurance costs go up, or if you get hit with inflation…. Bam! Suddenly the private school isn’t affordable anymore,and you’re stuck figuring out how to educate the kids.

        Meanwhile, it turns out staying home has actually given us MORE flexibility. Prices are going up, raises are non-existent, but I can pick up part-time work from home jobs to keep us on an even keel until things get better. (Housework does suffer, though–those 12 hours a week have to come from SOMEWHERE….)

        • Any private school that’s worth a damn will extend financial aid to families who’ve suffered a job loss or a significant reduction in assets.

          • If the schools can. The economy has hit endowments and also donations from alumni & other sources. There are a number of families in our homeschool support group who used to send their kids to private school but could no longer afford it.

  15. Lightly Seasoned says:

    l love my job, my kid goes to a great school, not a single one of her teachers is a stranger to me (two of her teachers are actually national teachers of the year), and I get to spend time with her during the day. Can’t beat that. I don’t how I got so lucky. In any case, I find the rate of return stuff on education to be a cynical calculus. It’s like equating intellectual development to a three-bedroom house. I don’t get paid that much, but I still think my education is more valuable than the lost equity in my house.

  16. Deirdre Mundy says:

    I think the “rate of return” from the article was more about students’ odds of paying off their debt from various schools. I’d say my education was totally worth it– but I had great courses, great professors, and great classmates.

    Some people pay A LOT to go to colleges that aren’t challenging and take horrible courses. If I’d spent four years studying marketing instead of great books, I wouldn’t be as satisfied as I am now…..

    So cost-benefit should come into play. Someone who spends 4 years and 100K to major in criminal justice may find that their college classes don’t contribute to quality of life.

  17. Deirdre Mundy says:

    As far as home school disasters– most of the families I know are somewhat over-educated and really do home school out of a desire to provide an excellent, classical education to many children for a low cost. The few “disaster” cases I’ve seen usually involve situations where one spouse wants to home school, and the other is adamantly opposed…. Or the people who home school to protect their kids from knowledge…. you know, the “We can’t read Shakespeare because he’s dirty!” types.

    However, these families are definitely the fringe. They’re just more memorable. The family of nerds with the kids who think a trip to the science museum is the ultimate vacation just don’t stand out in the same way….

    • The homeschool disasters I’ve seen are some of the uber-hippie “unschoolers”. I’ve seen “unschooling” work well for bright, self-motivated kids. I ask them what they’ve been up to lately and they always have the most interesting projects and whatnot. Those kids, I’m not worried about- they’ll do fine in the long run.

      The ones that concern me are the kids who seem to be neglected educationally. They’re not “autodidacts” taking charge of their own learning but the kids who seem like they aren’t doing much of anything educational.

  18. “Just don’t bore the rest of the world with your tedium about how superior you are”

    Please feel free to follow your own advice.

    Now, back to the original post… Cynical as it may be to think this way, being saddled with debt for decades that one doesn’t have the resources to pay of can be a crippling way to live. Like it or not, return on degree has got to be part of the consideration for anyone using student loans to finance an education.

  19. “Some people pay A LOT to go to colleges that aren’t challenging and take horrible courses.”

    Or, they choose a college based something silly like proximity to good skiing. This is a bit embarrassing to admit, but two of my younger relatives chose so-so Colorado schools for that reason. And our home state has a couple of excellent state schools!

    My dad’s had a couple of homeschool disasters come his way as a result of his community college teaching (he teaches remedial math). One of them had been a child athlete in one of those sports where you start really young and have to commit a lot of time and her education was really on the back burner (like, they didn’t teach her math at all). And then she washed out of her sport at 14, which must have been extremely depressing. I think that’s more of a crazy sports story than a homeschooling story, though.