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What College Offers the Best Return on Investment? The Answer Is Still Elusive

Harvey Mudd College, a small, STEM-focused, liberal-arts institution in Southern California, is the college with the highest “return on investment,” as determined by PayScale’s annual “College ROI Report,” released on Tuesday. Just like last year.

And just like last year, that ranking isn’t as meaningful as you might think.

As we discussed in a previous blog post, PayScale’s annual ROI rankings fall victim to some of the pitfalls of calculating the value of a college degree based on future earnings alone.

For example, PayScale includes salary data from only those individuals who don’t go on to earn graduate degrees, a practice that hurts the ROI calculation for institutions—and majors, like psychology, history, and business—with many students who continue on to graduate school.

That’s why PayScale’s overall ROI rankings always appear more generous to colleges with large numbers of majors in the STEM fields, like Harvey Mudd, where a bachelor’s degree alone can lead to a high salary, and less generous to universities with many humanities majors, who may need an additional degree to earn a higher salary. The company has some good reasons for doing that, but it’s worth noting before looking at the numbers.

To PayScale’s credit, the company this year has vastly improved the ROI report’s presentation, which for the first time allows users to create their own rankings by, for example, state or institution. It’s also easier this year to create ROI rankings based on major, although there are still a limited number of options, which include arts, computer science, education, humanities and English, and social work and criminal justice.

PayScale has also added some nice interactive charts, which highlight the correlation between the number of STEM-degree recipients and a college’s return on investment, for example, and the connection between institutions with fewer Pell Grant recipients and higher graduation rates and ROIs.

While the focus of PayScale’s report is college outcomes, one easily overlooked component of the report is how the company calculates the average cost of attendance. Rather than looking at the average net price, a figure with plenty of problems of its own, PayScale adjusts average net price based on the percentage of students who graduate in four, five, or six years.

This is far from a perfect measurement of the cost of attending a particular college, and it still suffers from the inaccuracies of average net price. Still, it’s an interesting method that I haven’t seen elsewhere and that could contribute to the conversation about how to measure the cost of college, just as this annual ranking has added to the conversation about how to measure its value.

The contentiousness of that conversation is one more thing that hasn’t changed this year—and probably won’t change when the rankings come out next year either.

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