You’ve probably heard of ROI. It’s an acronym that stands for “Return on Investment.” Basically, ROI measures the dollars generated for every dollar spent. In theory, the higher the return, the better the investment. And that’s definitely true when it comes to college tuition and median pay after graduation.
For business majors, ROI doesn’t just cover starting salary. Investment conveys a long-term commitment—and that’s exactly what an education entails. When you choose a school, you’re evaluating your earnings potential years from now. Despite what you hear, the degrees from the schools with the biggest names and highest rankings won’t necessarily yield the highest ROI.
Those were the findings of PayScale’s 2014 College ROI Report. PayScale, a leading data warehousing firm, specializes in employee compensation. Using data collected directly from employee survey participants, PayScale ranked hundreds of business programs, based off total school cost and alumni earnings. While the University of California at Berkeley topped the list, some less-known schools posted the highest ROIs, including Saint Michaels College, St. Mary’s College of California and Lehigh University.
PayScale’s College ROI Report was derived from 1.4 million surveys from college graduates who hold only a bachelors degree. On average, each school profile encompassed 445 responses. PayScale’s figures reflect graduates who work full-time in the United States. Along with removing advanced degree holders, self-employed and project-based professionals were also excluded from the samples.
The rankings feature four data points: Graduation percentage, 20-year net ROI, cost, and annual ROI percentage. Graduation percentage was based off students who graduated from a given school within six years. 20-Year Net ROI is a projection stemming from a particular school’s graduate salaries from 1994-2013 (with earnings adjusted for current dollars). Cost, which includes tuition and room and board, is weighed on the actual time it took students to graduate. To calculate the annual ROI percentage, PayScale applied a complicated formula that incorporates the earnings differential less the weighted cost, along with factoring in average high school graduate wages and wage inflation. (For a complete description of PayScale’s methodology, click here).
PayScale users can also manipulate data based on financial aid and housing costs. For this exercise, Poets and Quants is producing rankings where students received financial aid and lived on campus.
Beating a Path to Berkeley
School profiles are divided by whether students come from in-state or out-of-state locales. With the University of California at Berkeley, that distinction made little difference. When it comes to 20-year net ROI for business majors, Berkeley’s in-state and out-of-state segments ranked #1 and #2. In fact, the only data point that distinguished these segments was that out-of-state Berkeley business majors bore nearly $98,000 more in costs during their undergraduate years.
Looking for other good investments? Here are the top 25 schools with the highest net ROI:
(Go to next page for table)