Ok, money isn't everything when it comes to evaluating colleges but it's certainly a big thing as the cost of a college degree exceeds 6 figures for most families. As a result, these three letters, ROI (return on investment), seem to be creeping into the conversation for more and more college going students and their families. Calculating the I (investment) has typically been the easier part of the formula. Once you waded through the obtuse financial aid award letters and figured out the "out of pocket" or "net price" you could multiply by 5 and have a decent estimate. Note the use of the word "estimate" here as there's college cost inflation and the possibility of a 5th year that you have to contend with.

Recently, however the R (return) has come into focus with Georgetown's Center on Education and the Workforce releasing a report "A First Try at ROI: Ranking 4500 Colleges" which was followed soon after by a WSJ article (hoping this link is available outside paywall; if not see link to College Scorecard below along with instructions) that went a step further. Using data released the Dept. of Education's College Scorecard, the WSJ created an interactive that allows consumers to find first year salary information by major by college. It's tool allows for comparison of salaries by major within a college and also compares across colleges. 

Here's an example using Econ majors from University of California-Berkeley (WSJ site):

As you can see from the graph which maps college debt at graduation on the X-axis and Earnings one year after graduation on the Y-axis:

• Econ majors earn a median salary of $63,000 and have median debt levels of $13,250. Recall the oft-cited rule of thumb that student debt should be LESS than your expected first year salary.
• Also note that you can see how Econ stacks up against other majors at Berkeley. With the interactive, you can move the cursor over the dots to get additional detail. I know your curious, so the lowest first year salaries accrue to Film, Video and Photographic Arts ($16,300) while the highest first year salaries to Electrical Engineers (median of $116,600).

The second valuable piece of data here is comparing across colleges. Here's how Econ majors at Cal-Berkeley match up against other schools: 

As you can see from the chart, Econ majors at Cal-Berkeley do quite well when compared with Econ majors at other colleges. Duke University is atop this list with a median salary one year after graduation of roughly $90,000. 

A few caveats with the data:

• The data set ONLY includes students who received some form of federal financial aid. Note that about 70% of students graduate with federal student loans so it's a pretty robust data set. 
• It only measures median salary one year after graduation. Obviously, certain majors may have different career trajectories. While liberal arts majors may have lower median salaries one year after graduation that can obviously change as their career progresses. 
• Many students will change majors (I did:) so best for students to evaluate several majors when doing this analysis. 
• If you are not able to access the WSJ site, this information is also captured in the Dept. of Education's College Scorecard (someone please tell them to hire the WSJ's data visualization expert to create the same interactive for their site!). 
  • Type in the name of the school(s) you are interested in.
  • Go to FIELDS OF STUDY under each school.
  • You can then get specific information by major sorted by LARGEST MAJOR at that school, HIGHEST EARNING, and LOWEST DEBT

MIni-Activity for students (please send me ideas that you have too!):

• Pick three colleges that you are interested in. 
• Pick three majors that interest you
• Go to the College Scorecard site
• Complete this graphical organizer (draft form) by finding median salary and median debt levels by major

Questions

While reviewing your graphical organizer, answer the following questions:  

• Which of the three majors you evaluated seemed to have the highest median salary?
  • Was that major the highest earning at all three colleges? 
  • Why do you think that graduates with this major earn higher salaries?
• Now evaluate the colleges.
  • Did graduates at only one of the three colleges earn the highest salaries in all of the majors you selected? 
  • What was the difference in salary between the different majors at the schools? 
• Did any of the majors at the colleges you selected have student debt levels that were higher than the median salary? 
  • Do you think that having debt levels higher than one's starting salary might be problematic? Why? 
• Salaries and debt levels for a given major are one factor to consider for colleges. What other factors do you think are important? 

------------------

Looking for activities for your non-college bound students? Be sure to check out our Alternatives to 4-Year Colleges mini-unit here. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

More posts by Tim