Which College is the Best Financial Investment?

The White House just revealed a great new website to research colleges using aggregate data collected on colleges by both the Department of Education and the Treasury. The original goal for this site was to provide an explicit ranking system of colleges based on factors such as graduation rates and post graduation earnings - intense pushback from colleges stymied this goal but excitingly all the data is available for download so that we can try our hand at a ranking ourselves!

In particular, it would be very useful for prospective students to know which colleges offer the most bang for their buck, and a good approximation for this goal is to rank colleges by the ratio of student earnings after graduation to their debt at graduation.

Student Earnings to Student Debt Ratio

Debt versus earnings

Above is a plot of the aggregated median earnings of students six years after graduation at each of the 4,284 colleges in this data set versus the aggregated median debt at graduation.1 The red line indicates the point at which the yearly income matches the graduation year debt. The red square is the median earnings ($26,700) and median debt ($16,404).

Overall there is a spearman correlation of 0.48 between earnings and debt; interestingly though, there seems to be a decisive point around $30,000 where taking on more debt no longer results in increased earnings at all and in fact results in slightly decreased earnings.

Taking the ratio of these two axes we can then rank all the colleges by their earnings to debt ratio (a college's return on investment):

Click here (-) to collapse the table.

City State Enrollment E/D Ratio Earnings Debt
Alliant International University San Diego CA 146 26.15 52300 2000
Medical University of South Carolina Charleston SC 198 21.73 65200 3000
Ventura Adult and Continuing Education Ventura CA 122 17.31 19800 1144
United States Merchant Marine Academy Kings Point NY 1011 12.84 70600 5500
Harvard University Cambridge MA 7245 12.05 72300 6000
Hillyard Technical Center Saint Joseph MO 154 10.43 36500 3500
St Louis College of Pharmacy Saint Louis MO 693 9.90 115100 11625
Monmouth County Vocational School District Neptune NJ 156 9.49 33200 3500
Duke University Durham NC 6534 9.36 66900 7150
Automeca Technical College-Aguadilla Aguadilla PR 231 9.14 16000 1750

At the top of the list we see some of the usual suspects such as Harvard University but we also see some surprising candidates like Alliant International University. The full list of all colleges is available for download here. Another striking result in the full list is a large contingent of nursing and pharmacy schools with high ratios, suggesting that these fields might be especially financially rewarding yet accessible areas.

As with any analysis, there are many qualifications that apply to our result, such as the fact that these results do not include any students in graduate school six years after graduation2. Also, you may notice that some of the schools with a high earnings to debt ratio do not have a very high absolute earnings score (instead they have very low debt), filtering these scores for only colleges with earnings above, for example, $40,000 yields a list much more similar to US News' with many Ivy Leagues at the top spots.

We can also look at the distribution of these ratios across the US:

ratio scores across US

At least qualitatively, there do not seem to be any geographic hotspots of good or bad investment colleges.

We can also take a look at the worst return on investment colleges:

Click here (-) to collapse the table.

City State Enrollment E/D Ratio Earnings Debt
Benedict College Columbia SC 3203 0.43 17200 40000
Maharishi University of Management Fairfield IA 347 0.45 12700 27987
Arkansas Baptist College Little Rock AR 1189 0.46 15200 33179
Livingstone College Salisbury NC 1140 0.48 17400 36500
Central State University Wilberforce OH 2447 0.48 16900 35218
Southwest University of Visual Arts-Tucson Tucson AZ 254 0.51 23900 47186
Southwest University of Visual Arts-Albuquerque Albuquerque NM 261 0.51 23900 47186
Florida Memorial University Miami Gardens FL 1694 0.51 21100 41213
Allen University Columbia SC 644 0.52 16500 31980
Paine College Augusta GA 888 0.52 18100 34977

Another point to note is that it's possible some colleges simply have high income families enrolling their children, resulting in a low debt load (and also potentially explaining the high post graduation incomes). To control for this possibility we can do the same analysis as above but with only the debt taken on by students from families with less than $30,000 of income:

Debt for low income versus earnings

Strikingly, but perhaps not surprisingly, we see that low income family students take on qualitatively less debt than students in general. In particular though, the amount of debt taken on caps before reaching the danger zone that we saw in the overall scatterplot.

The top ROI colleges using this data are similar to before (spearman correlation of 0.76) but there are some colleges with major gains like Case Western Reserve and Princeton University (full list available here):

Click here (-) to collapse the table.

City State Enrollment E/D Ratio Earnings Low Income Debt
Case Western Reserve University Cleveland OH 3929 38.40 57600 1500
Medical University of South Carolina Charleston SC 198 32.60 65200 2000
Alliant International University San Diego CA 146 26.15 52300 2000
Ventura Adult and Continuing Education Ventura CA 122 22.09 19800 896
Duke University Durham NC 6534 16.73 66900 4000
American Public University System Charles Town WV 38606 16.55 54400 3287
Liceo de Arte y Tecnologia Hato Rey PR 1084 14.40 17500 1215
Oregon Health & Science University Portland OR 780 13.46 73400 5454
Princeton University Princeton NJ 5160 12.38 48300 3900
Macomb Community College Warren MI 14394 12.16 23400 1925

Do Selective Admissions Correlate with Better Financial Returns?

Another interesting question is if the admission rate or academic competitiveness of a school has any correlation with the earnings to debt ratio3: e.g. do schools with higher admission standards have a higher return on investment? To examine this question we can look at the scatterplot of average SAT scores and admission rates versus the earnings to debt ratio we calculated above:

Earnings versus SAT and admissions rate

As you can see in the plot above there is very little correlation between more selective admissions and college ROI until relatively high admissions standards (red lines are at 1300 SAT and 20% admission rate) where there suddenly develops a much stronger correlation. These data suggest that there could be a large difference generally in the cost effectiveness of college for students that go to relatively selective versus non-selective institutions.

Overall it's important to remember that in general college is a good financial choice, so this analysis is sorting out how a generally good choice can be made even better. Perhaps the most surprising and applicable findings here are how there is both a distinct cutoff for when taking on more debt stops yielding earnings returns and also what level of academic selectiveness really matters for having access to colleges that belong on any "best buy" list.

Have more ideas or suggestions about how to use this data? Drop a line at suggest@shorttails.io and maybe it can be added to this blog!

All analysis code available on Github here.

  1. These data are based on Title IV loans and the most recent six year earnings data available, the 2011 earnings for the 2005-2006 graduating class.

  2. If a college has many students that further pursue their education and then receive high salaries after post-baccalaureate studies they are not counted in this metric.

  3. The spearman correlation between earnings and average SAT score and admissions rate is 0.48 and -0.15 respectively.

Trevor Martin

PhD student working at the intersection of statistics and genetics at Stanford University. You can follow me on twitter: @martintrevor_

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