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Why did you choose the college that you graduated from?

Did you look at the Princeton Review and make your decision based on which college had the best dorms, the best food, or the highest female to male ratio? If you did, you can freely admit it because you are not alone. The majority of college students put serious stock in these factors, as well as which majors are offered, classroom size, and student to faculty ratio.

A dozen college ranking systems have sprouted up in recent years and they look at an avalanche of data when evaluating colleges. Among all of these ranking systems however, there seems to be one piece of foundational data that is missing: Return on investment!

The new “Payback” survey by SmartMoney creates a payback ratio which is based on the average cost of 4 years of tuition, and the average salary of recent graduates (those graduating within the last 2 years), and mid-career alums (those out for 15 years). The higher the ratio between tuition sticker price and actual salaries, the better ranking the college received.

This ranking system gets at the heart of what Money for College Project is all about. The goal of attending college is to prepare yourself with an education and a degree that will benefit you financially in the future. You also need to manage your costs while in college and maximize your future earning potential. The “Payback” survey gives us a great reference tool to see which colleges actually succeed at preparing their graduates to make money in the real world without being saddled with enormous amounts of debt.

No Ivy Leagues at the Top?

I think it is really interesting to note that the first Ivy League college we see is Princeton University, and it comes in at No. 19 on the list. On this scale, the high cost of an Ivy League tuition does not actually give as high a return on investment within the first 15 years in the working force, as 18 other colleges. Very interesting. I would imagine that if we extended the time horizon out to 25 or 30 years, that many Ivy League colleges would jump up the list, but in the relatively short term, the Ivy Leagues are not the winners here.

I also do not see any medical schools listen here. Granted, the survey does not list any individual majors in their list, but we can assume that most medical schools and their exorbitant tuition and fees, did not make the cut.

Not a True Representation

While reading through the data, and Smart Money’s creation of their ranking system, it becomes quickly apparent that their data is a little skewed. Fortunately, in our case, the data is skewed in our favor. The average cost of tuition used in the survey was out of state tuition sticker price. This means that if you paid in-state tuition, or if you received ANY financial aid then your earnings ratio will be a lot higher.

Can you figure out your own payback ratio?

All you need is your cost of tuition for your 4 year education, and your current salary. Divide your current salary by your cost of tuition, add two zeros, and you have your score. My score is 800.

I’m not rolling in the big bucks, but I was fortunate enough to escape college with virtually no debt, and having financial aid pay for all of my costs. Once financial aid is factored in, you can begin to see the true weight of this ratio. It can be very powerful!