Colleges with the Worst Return on Investment: Are They Worth It?

Oberlin College

This seems to be the year to talk about college return on investment (ROI).  Earlier this year, Payscale.com came out with its college ROI rankings.  I wrote about these rankings here: College ROI – Only 150 Colleges in the Country are “Worth It.”  Really?  Everyone, including President Obama has been talking about measuring college ROI and using it to gauge what is a “good college.”  But, I believe choosing a college is about more than just gauging college cost against potential salary.  I wrote about that back in May in Is College Choice All About Return on Investment? 

Most of the high scoring colleges on any of the ROI lists I have seen are either Ivy League schools or schools with a strong focus on engineering and technology.  Are all students destined for careers in engineering or technology?  No, of course not!  Some are meant to be teachers, some are meant to be artists or musicians, others are meant to be journalists, and many other careers that don’t have high salaries.  What would the world be like if everyone tried to go into the same career fields?  Can all students get into the Ivy League?  No, acceptance rates are hovering around 7 – 10% of applicants.  For that matter, do all students want to attend Ivy League schools?  No, they don’t!  The idea does not appeal to everyone.

A couple weeks ago, The Daily Beast published a list of 20 colleges with the worst return on investment.  I was shocked to see great schools on the list.  Schools, in fact, that are very highly ranked by US News and other college rankings:

• Oberlin College – US News #25 National Liberal Arts College
• Illinois Wesleyan University – My oldest daughter’s second choice school, US News #65 National Liberal Arts College
• Elon University – US News #1 Regional University in the South
• Mount Holyoke College – US News #38 National Liberal Arts College
• The College of Wooster – US News #65 National Liberal Arts College (tie)
• Ursinus College – US News #82 National Liberal Arts College
• Knox College – US News #82 National Liberal Arts College (tie)
• St. Olaf College – US News #52 National Liberal Arts College
• American University – US News #75 National University
• Beloit College – Two college search experts I know have sons who go there, US News #59 National Liberal Arts College
• Lawrence University – US News #59 National Liberal Arts College

As you can see, most of the schools on The Daily Beast list are liberal arts colleges.  They are also schools with a high sticker price.

Here is The Daily Beast’s worst ROI ranking method:  “The Daily Beast first limited the universe of schools to only those that graduate at least 75% of students within six years. Our thinking: a degree is not valuable if you don’t get it, and schools that don’t have a good track record of graduating students aren’t offering a reliable return on a student’s investment regardless of cost or potential future earnings. We then calculated a net price based on the percent of students who graduate within four, five, and six years to create an average net price for all students who graduated within six years; this figure was worth a third of the final ranking. The last two-thirds of the ranking was devoted to starting and mid-career salary of graduates, according to Payscale.com.”

According to The Daily Beast, the average net price of the 20 worst ROI colleges ranged from $22,000 – $31,000 per year and the average starting salaries were in the $30,000 – $41,000 range.

In contrast, the schools on The Daily Beast Best ROI list had average net price per year of $11,500 – $30,000 (yes, even Ivy League schools with huge sticker prices) and average starting salaries of $50,000 – $73,000.

Wouldn’t all students like to come out of college making over $50,000?  Of course they would!  The truth is, there aren’t that many careers out there with starting salaries above $50,000 with only a 4-year degree and not everyone will get admitted to the schools on the list, like Harvard, Stanford, Columbia, Princeton and MIT.

So is a college with a low average return on investment worth it?  I don’t think there is an easy answer.  Every student needs to find a “right” place.  So much more should go into that determination than just where can he or she go that will provide the potential for the highest starting salary.  There are many studies that tout the importance of a liberal arts education for a well-rounded education, and money isn’t everything.

On the other hand, if my child had an acceptance offer from a school on the worst ROI list and one from a school on the best ROI list, and both were going to carry a fairly equal net price, I would definitely encourage her to pick the school on the best ROI list!

What do you think about this?  Are the colleges on the low ROI list worth it?