The future of higher education?

Two public four-year institutions, Maine Maritime Academy and the U.S. Merchant Marine Academy, rank in the top 10 colleges with the best long-term returns, while two four-year private colleges, St. Louis College of Pharmacy and Albany College of Pharmacy and Health Sciences, made the top 10 for short-term and long-term returns.

The report ranks 4,526 colleges and universities by return on investment.

Here is one article, with a graphic for the top ten, you will note that Harvard, Stanford, and MIT still do fine.  Babson is underrated, as it does much better over longer stretches of time.  Here is the Georgetown report.


Meh. The report claims to calculate the Net Present Value of an education at each college based on 40 years of earnings data.

Which would be extraordinary and unprecedented, to have those data.

But on page 22 of their appendix on methodology and data, they admit that they don't have 40 years of earnings data, all they have are the 10-year earnings data that the College Scorecard publishes each year.

And they fill in the missing 30 years by simply using the 10-year figures. No raises are assumed, nor increases in income due to earning a graduate degree.

So one might as well just go straight to the source, the College Scorecard (updated each year by the Education Department) and use their 10-year earnings statistics.

The College Scorecard has good quality data (they have access to IRS data), but is severely limited because they only measure incomes for 10 years -- from *entering* college.

So for most students seeking a bachelors degree, we're looking at best at the first six years of earning data after they graduated.

So the College Scorecard (and these Net Present Value calculations) tell us very little about the students' post-college earnings; they only tell us about their early career earnings.

Students who get a graduate degree (which has a strong upward effect on subsequent earnings) won't have their higher earnings reflected in the College Scorecard unless they finish their grad program and get their eventual higher-paying job within that narrow six-year window.

Better research in recent years has been following workers' earnings for decades after leaving college and finds, among other things, that liberal arts majors' incomes catch up the the incomes of the STEM majors.

There are other problems with the report, such as their assumption that every student pays the full "sticker price" of tuition at college, when in reality increasing numbers of students get a grant or scholarship of some sort. But doing 40-year calculations while possessing only 10 years of data is the biggest problem.

This is so problematic I don't know where to begin. In my field (investment management), successful people get their big raises and promotions, as well as liquidity events, in their 40s and 50s if not later. Unsuccessful people don't, and may drop out of the field. A longitudinal study is needed and it takes a long time to conduct one - you have to wait 40 years to get the data on 40th-year-after-graduation incomes and wealth accumulation.

I like "liquidity events". Does that mean 'accession of big bundles of boodle'?

I know, I just love that too -- it sounds like drawing a lucky Monopoly card, "Rich Aunt Dies" or "Oil Discovered in Your Back Yard." It's joining my personal lexicon and I hope to have a "liquidity event" at the track someday soon.

Your field is in the extreme minority there. The vast majority of careers and their future income or hierarchial level have absolutely no relationship to merit or competency outside the extreme tails of behavior.

I wrote up Raj Chetty's college / income findings a few years: many of the same schools at the top like St. Louis Pharmacy, MIT, and Babson:

Keep in mind that a huge percentage of students at schools like Harvard and Stanford intentionally choose lower-paying careers, whereas presumably almost all the students going to pharmacy school want to be pharmacists, a relatively high-paying profession. It seems a bit apples-to-oranges to compare general education universities with those that specialize in high-paying professions. If you only looked at students who treat earning a high income as a priority, I’d bet the traditionally prestigious schools still come out on top.

It is accurate to say that people value and prioritize multiple criteria when considering a job or career and that earnings is just one of those criteria.

But to think that Harvard and Stanford grads are intentionally choosing lower-paying careers... that may be one of the dumbest thing I’ve ever heard.

I’ll grant you that some rich kids will do TFA for a couple years, but it’s not nobless oblige... it’s overwhelmingly because they didn’t get into the investment bank management consulting firm of their dreams on the first go-around.

So that is where History and Literature teachers come from: imvestment banks rejects.

Only about a third of Harvard graduates go into finance, tech/engineering, and consulting combined: Lots don't even apply to high-paying jobs and instead go into academia, teaching, government, or even regular middle-class jobs.

It's not dumb at all - in ancient history when I graduated from law school, Yale law graduate's earnings numbered skewed lower than many more less selective schools because more graduates chose government, public service, etc. It may still be true. And all those S. Ct. justices are probably pulling Harvard's, Yale's and Columbia's law schools numbers down! ;)

It is dumb. About as dumb as referencing an article titled “Nearly Three-Quarters of Harvard Grads Pursued For-Profit Jobs in 2018” to make the case that these students are somehow going after “low pay”.

Rusty, I’ll buy your experience, but this is a bit like the argument that teachers aren’t paid... what’s the npv of a lifetime appointment for an SCJ?

"Maine Maritime Academy and the U.S. Merchant Marine Academy"

This gives an unfortunate advantage yet again to coastal blue states. Maybe the pharmacy graduates can prescribe lots of opioids to flyover states.

Why isn't there a College of Chief Executive Officers so people can learn to become CEOs? Or a University of Hedge Fund managers? You know, the jobs that pay real money.

There is such a college, it's called "McKinsey and Company".

Don't forget Bain Capital

I'm skeptical. The merchant marine academy is on the list, but not West Point or the Air Force and naval academies? It is hard to imagine a better ROI, graduates receive a B.S., owe no tuition, are paid to attend, and are guaranteed a job at graduation.

I noticed this as well. And confirmed that nearly all fees are paid for by the government at the MMA:

well the USMMA is in fact one of the Federal Service academies, same as Coast Guard, West Point, Air Force, and Naval Academies.

Greater private-sector upside.

There's a shortage of merchant marine officers on both the Great Lakes and the open seas. Graduates of those academies have no problem finding employment. The problem is that they are away from home for long periods of time.

Peter Thiel pays you money for dropping out of school. That's like infinite return on investment.

“Even though we rank the net present value for all colleges with available data, we exclude from these rankings an important benchmark: the alternative to not investing in postsecondary education.” - the Georgetown report, page 19

A very large omission, I think. The appropriate comparison would be to a student who is accepted in college, but decides to go directly into employment. Except for some professions and maybe selected occupations, I think most occupational training can be gained while working. That was certainly the case in my field, actuarial consulting. An intelligent student can acquire the necessary skills largely by self study and mentoring.

You could argue that college helps young people mature, but I could have gone drinking with my friends anywhere.

I just checked the top 1

They offer 8 bachelors, 2 of them pre-med and pre-PA. It is expected that students go into a medical school which is a graduate school.

It's no surprise that people with 6 or 9 years of higher education in medicine have higher incomes when compared to 4 years bachelors. Not sure if the income results are controlled for masters and doctorates, unmentioned in the article.

University of Chicago is expected to be the first school in the nation to charge $100k per annum for tuition. Expect ROI to be be very poor. Milton Friedman eat your heart out.

The Univ of Chicago's tuition will exceed $100K soon enough, but I guarantee that the Hechinger Report is way off base in predicting it will happen by the 2025-26 academic year.

The report helpfully provides the raw data: the U of C is charging $57.6K this year (2019-20) and they're projecting $103.2K for 2025-26.

The U of C would have to average tuition increases of 10.2% per year over those six years to reach the projected level.

The Hechinger Report says they're using 2008-2018 tuition increases to project what the increases at the U of C and other colleges such as Harvey Mudd will be.

They need to re-check their 2008-2018 data and re-check their calculations. Schools like those haven't had 10% tuition increases since the 1980s, maybe 1990s. Most of the high-end colleges and universities have been increasing tuition at around 4% for years.

I know that to be true even without looking up the numbers but for the sake of completeness: for the 2007-08 academic year tuition at the U of C was $35,169. For 20017-18 tuition was $53,292. That's an average annual increase of ... 4.2%.

"University of Chicago $100,000" is no more realistic than that infamous book with the title "Dow 36,000". Those benchmarks will be surpassed eventually, but not nearly on the time scale the authors are claiming.

Pretty sure the number they're predicting to be $100k in six years is total cost of attendance, which does need only 4% annual growth from its current $80k level to reach $100k by 2025.

That would make sense -- but it's not what they say. What they say is this:

"The privilege of attending is costly, at $57,642 for the 2019-20 academic year. It’s already one of the most expensive colleges in the country. But in less than a decade, by 2025, students like Badalamente could expect to pay more than $100,000 per year".

If they meant to say that the Univ of Chicago has a total cost of attendance of around $80K, they would've (or should've) said $80K. But they said $57.6K, which is indeed what the U of C's tuition is this year.

I think the point of the study, and the reason Cowen linked it, is that Higher education is about to undergo a profound change as the market comes to realize that often the return on investment ain't so good, buyers seek a better return, and a new equilibrium is established. Or as I like to say, Goodbye, Columbus! I believe the change will benefit the colleges that have a more focused curricula (such as pharmacy colleges) while hurting colleges that have an unfocused curricula (such as the highly diversified all purpose university). Whether this change is good or bad is debatable, but markets are always right; well, better than throwing darts and hoping for the best. [An aside, GMU is ranked relatively high in the study (and relative to other studies that attempt to rank colleges based on value such as the Kiplinger's Best College Values). I'm not surprised, as GMU has a more focused curricula. While one may disagree with that focus, it appeals to some students and, more importantly, some potential employers.]

Here's an article on the flip side of the cost of college: how much a family is expected to pay according to the Free Application for Federal Student Aid, or FAFSA: It turns out that FAFSA is often wrong, way wrong, which comes as a shock to families after their children have selected colleges.

It's interesting to read comments that, if someone else pays the tuition, then the ROI should be higher. (Similar arguments are made about health care or housing affordability: subsidies are conflated with cost reduction.) These people believe that "free" college really is free. So, does that mean that colleges with wealthy student bodies have higher ROI because parents pay most of the students' tuitions?

I understand why people want to make those arguments. But, presumably, the subsidizer (taxpayer, charity, etc.) also cares about the subsidies' ROI. Does the NPV of a project depend on whether the project is financed with debt, equity, cash from under a mattress, or subsidies?

The article was measuring the student's ROI, not the overall ROI. A lot of the cost of any college education is filled by donations, endowment income, government support, etc. Correlatively, the article doesn't measure the positive externalities (if any) of scholarship and education, or the non-financial benefits of being educated, only the financial benefit to the student.

If they wish to improve return-on-investment, they might do something Allan Bloom suggested and cut the length of degree programs. Allow students favoring academics and the arts the option of a one, two, three, or four year course of study consisting of courses in one discrete subject. Ditto in regard to those students favoring vocational subjects, with 48 or 60 credit programs the mode but with the quantum of credit-hours consistent with the standards and practices of the profession in question. (You could have preparatory certificates for the most demanding professional schools (medicine, law, engineering) which would consist of academic courses).

This. When I was an undergrad, the typical course load for STEM track was 17-18 hours (including labs). The typical load for non-STEM was 15 hours, and excepting a handful of late epiphany conversions (e.g. from biochem to architecture), everyone expected to complete undergrad in four years. No one took less than 15 hours.

What I hear from recent students is that typical loads are 12 hours, and students are more or less encouraged by the schools to extend the undergrad period to 5 years or longer. And the schools do no seem organized (e.g. course availability) to facilitate on-time completion.

Considering the overhead cost (housing, deferred income) of even one more extra semester, this extended program is quite bad economic advice for the student (there are of course advantages to the schools).

Similarly, 4 years high schools could reasonable conclude with certificate degrees for quite a few trades, for students whose plans don't require BA/BS degrees.

It's interesting in general to compare how long it takes the military to train people; for example the Special Forces trains medics to very high standards in about a year.

I did a undergraduate degree under the old British system of three year specialist degrees. Cut out the general Ed year. Five years got a student done with Med school and on to their residency.

No mention of the Jones Act?

It matters. As I understand it, there are artificially few slots with artificially high wages. Less a college effect than a monopoly one?

No it does not matter. This is a fundamental misunderstanding of the Merchant Marine Act.

The Jones act makes goods marginally more expensive in Alaska, Guam, Puerto Rico, and Hawaii. That’s about it.

I have family who went through the California Maritime Academy. They have done very well indeed, and make significantly more than their Malaysian counterparts. That price difference is all about flagged shipping. Oil from Alaska is a big one.

One relative became a US Port Pilot and pulled down even more for similar political reasons.

Libertarians should recognize the role of government in creating scarcity here.

I’m glad you have an anecdote.

Data please. What percentage of tonnage in world shipping do you think is US port to US port?

Maybe you can ring your family for the answer.

Don't go to university unless you plan to burn it down.

I wonder when that might become good advice for The Young.

Hm, it's too wordy. Better: Don't go to university except to burn it down.

Back in the day when I was an undergrad, someone or a group burned down a branch of the Bank of America. Of course this was in the good old days of Vietnam war protests.

If anyone had sold investment plans with as little risk disclosure universities and professors do when selling investments in their education plans, and then the investments had soured, he would probably be trotting away to prison.

"The future of higher education": the future of post-secondary training.

There's six state Maritime Academies plus King's Point (USMMA). Student/parent ROI should be just about the same at Mass, SUNY, Great Lakes/Michigan, Texas and California as at Maine, and Maine, Mass, and SUNY (colloquially known as "Schuyler") seem to act as placeholders for each other on a lot of these lists.

KP numbers are a little different since its federal and there is a service obligation after graduation.

I was top 20 in my class at Mass in the mid-90s but probably wouldn't get in now with my high school grades. I definitely would not have been as successful going to another college. At UMass I'd probably be a seventh semester junior!

If the Jones Act gets taken out then the merchant marines will tank. Additionally, they previously benefited from the East Asian trade boom. While I don't think that's going away any time soon it's def going to be more political so their profession will be bumpy. Finally, the merchant marines have VERY strong unions.

It's a good buy but IMO more political than expected.

Most of my class was out of the US flag maritime industry in three or four years. Maritime grads have a huge presence in power generation, safety/industrial hygiene, logistics, etc.

The first time I went to an open house on campus there was a list of employers - Mass had an ordained priest and an editor at Playboy. I figured with that range of options I’d probably be ok.

Is this not a textbook case of ROI? Private colleges offer 10% more earnings 40 yrs into the career but the startup cost was initially higher than public colleges- I don't think anything stated is shocking. As for Ivy Leagues, their graduates choose the level of wealth they make.

The merchant marine academies put students with a very narrow choice of majors directly into relatively high paying jobs (at sea or in land based power plant or other jobs). Ditto for Pharmacy schools. They make a good surrogate for the ROI of these jobs but not much else.

I believe the Webb School of Naval Architecture is still free of tuition. In other fields Cooper Union just went back to no cost tuition.

In these cases both schools have large endowments relative to the student population. An endowment income based program tends to control costs since the school bears the risk, not the student. So perhaps government grants should be as restricted endowment contributions.

It would be better if they could split these up by program withing a school. I see my alma mater is in the top 30 for ROI, but it's because it's basically a purely engineering school. Of course it's going to be better than a school that offers a broader range of disciplines.

It would be much more interesting to see how, say, the engineering schools within various institutions compare against each other schools.

How does

MRU rank in the ratings?

Is there anything like this, but which accounts for the latent abilities of the incoming students? I assume this report is just using raw income unadjusted for the ability of the schools to recruit high- vs low-achieving students.

Yeah, that's probably the second-greatest weakness of this report, after the lack of data to do a 40-year calculation. Some of the differences are caused, not by return on investment, but the quality of the incoming students (meaning not just their academic quality but their SES as well: high SES parents tend to have children who achieve high SES).

Third-greatest weakness is probably their assumption that all students pay full tuition when in reality a massive chunk of students pay less than full price thanks to grants and scholarships.

This was going to be my comment. Adding a mean SAT score as a control would have been simple.

Why do they use the cost of the school as the denominator to figure return on investment rather than what students actually pay? At the elite schools, students who's families make under $75K don't pay tuition and those who make under $65K don't get charged room and board, either. The average indebtedness for all students at these schools is in the low #20K range.

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