PayScale Releases 2016 College Return On Investment Report

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Report includes groundbreaking data about impact of household income on earning potential and career readiness upon graduation; Caltech takes top spot as engineering-focused schools dominate the top 10.

PayScale, Inc., the world's leading provider of on-demand compensation data and software, today announced the release of its annual College Return on Investment Report. This year PayScale added new data on how a student’s household income when entering college impacts his or her earning potential after graduation, as well as data around student loan payments and career readiness upon graduation.

"For most people, college is one of the largest expenses they'll ever take on, so it makes sense to think about it like any other financial investment," said Aubrey Bach, PayScale's Head of Alumni Analytics. "We created the College ROI Report to help students and their families understand the long-term implications of their decisions about school and major. We hope that with this kind of data, students can make smarter educational choices and avoid crippling debt."

The PayScale College Return on Investment rankings are based on Net 20 Year ROI assuming On Campus Costs (Without Financial Aid). If a school does not report On Campus cost, then it is not included in the main ranking. There are 962 schools included in the overall PayScale College ROI list; 442 public (both in-state and out-of-state cost structures are included), 505 private not-for-profit, and 15 private for-profit schools. PayScale provides median earnings data of workers who attended college based on where their household fell in the income distribution when they attended college. Median earnings by household income is provided overall, by experience, job level, and school type. PayScale provides data on average student loan payment amounts by major, job family, household income bucket, age, highest degree obtained, and school category. PayScale examines how prepared college grads felt after graduation by major, school categories, and household income bucket.

“New this year, we examined how current earnings relate to household income at the time of attending college and found they are positively correlated,” said Katie Bardaro, Vice President of Data Analytics, PayScale. “This means that those from the upper quartile of household income also have the highest median pay after graduation, for both the early career and mid-career measures, while those from the lower quartile have the lowest. From this data, one can hypothesize that the post-graduate earnings opportunities are not equal across the levels of household income.”

PayScale College Return on Investment Highlights

COLLEGE ROI RANKINGS

  • Engineering schools remain at the top of the PayScale College ROI list. The schools ranked 1 through 3, overall, and six out of the top 10 schools are engineering schools. The average net ROI for engineering schools is $756,000, compared to the average net ROI for Liberal Arts, Religious, Arts, or Music and Design Schools which are all less than $250,000.
  • Public schools dominate the overall ranking for annualized ROI, indicative of their relative low cost when compared to private Schools. Only two out of the highest 100 on campus annualized ROI values come from private schools. Brigham Young University (BYU) and Park University are the exceptions, and both have inexpensive on campus costs; $69,400 and $91,600, respectively.

EFFECT OF HOUSEHOLD INCOME PRE-COLLEGE ON INCOME POST-COLLEGE

  • College graduates that come from wealthy households when entering school have a greater earning potential post-graduation. The median pay for respondents whose household income was in the bottom 25 percent of the income distribution (self-reported) when they attended college is $55,300. The median pay increases to $62,900 for respondents whose household was in the middle 50 percent of the income distribution. Respondents whose household income was in the top 25 percent have the highest earning potential post-graduation with a median pay of $69,300. The same pattern holds true across experience levels, job levels and school types.
  • The positive effect of high household income during college upon earnings post-college is compounded with more experience. While the bottom 25 percent and middle 50 percent realize wage growth from early to mid-career salaries by 66 percent and 68 percent, respectively, individuals who reported being in the highest 25 percent of household income in college experienced 91 percent median wage growth from early to mid-career salary.
  • Are college graduates from low-income backgrounds still suppressed? Thirty-three percent of mid-career workers (10+ years work experience) that report being in the bottom 25 percent of the household income distribution in college report earnings in the bottom 25 percent post-graduation. Only 18 percent of mid-career workers that started in the bottom 25 percent now earn in the top 25 percent. Conversely, only 15 percent of mid-career workers that started in the top 25 percent now earn in the bottom 25 percent.
  • A higher percentage of executives came from a household in the top 25 percent of income distribution pre-college (18 percent) than any other job level.

STUDENT LOAN PAYMENTS

  • Thirty-nine percent of respondents currently paying student loans report a monthly payment of $100 or less. 25 percent report a monthly payment of $101-$250, 24 percent report $251-$500, 9 percent report $501-$1000, and only 3 percent report a monthly payment over $1001.
  • Over 50 percent of respondents that report currently paying student loans are between the ages of 23 and 32. Respondents in this age group have the highest percentage of respondents that have a monthly payment greater than $250 a month (ages 23-27 at 42 percent and ages 28-32 at 41 percent). The median pay for respondents in these age groups are among the lowest, with the median pay for ages 23 to 27 at $46,700 and the median pay for ages 28 to 32 at $57,900. The only age group with a lesser median pay is 18 to 22 with a median pay of $42,300.

DO COLLEGE GRADS FEEL ADEQUATELY PREPARED FOR THEIR JOB RESPONSIBILITIES?

  • Eighty-five percent of college graduates surveyed said they felt well prepared for their job after college and needed only minimal additional training if any at all. Eleven percent felt minimally prepared and needed substantial training while 4 percent felt completely unprepared.
  • Philosophy and Religious Studies majors have the highest percentage of respondents that felt unprepared for their day-to-day job responsibilities after graduating college (8 percent).
  • The three occupational groupings with the greatest percentage of respondents that were prepared for their day-to-day job responsibilities within the first 3 months (answered extremely or mostly prepared) are Healthcare Support Occupations (90 percent), Community and Social Services Occupations (89 percent), and Education, Training, and Library Occupations (89 percent).

The full report can be found at: http://www.payscale.com/college-roi

About PayScale

Cloud software, crowd sourced data and unique algorithms power the world’s largest real-time database of rich salary profiles giving PayScale the unique ability to provide employees and employers alike immediate visibility into the right pay for any position. PayScale’s cloud compensation software is used by more than 3,500 customers including Bloomberg BNA, Cummins, Warby Parker, Clemson University and Signature HealthCARE.

For more information, please visit: http://www.payscale.com or follow PayScale on Twitter: http://twitter.com/payscale.

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