“Some degrees are worth millions, while others have no net financial value”

A recent study of College ROI from the Foundation for Research on Equal Opportunity

That headline – “Some degrees are worth millions, while others have no net financial value” – is downright arresting. It comes from a recent summary from Preston Coopercovering a Foundation for Research on Equal Opportunity (FREOPP) analysis of college Return on Investment (ROI).  The report marks an ambitious attempt to improve on past work and takes several steps forward:

  • Earnings of college graduates are compared to a “Counterfactual”: Because college and high school grads are different in so many ways, comparing their incomes and attributing all additional earnings solely to holding a college degree is simplistic.  Cooper and FREOPP define ROI in a more sophisticated way, basing it on the earnings for groups of college graduates in excess of what they would have earned without a college degree – what they dub “counterfactual” earnings.
  • The analysis emphasizes that the choice of major, not just whether you go to college or which one you attend, affects earnings.  To estimate actual earnings by field/major, it uses the Department of Education’s College Scorecard by Field of Study, covering 30,000 Bachelor’s degree programs.
  • The risk of dropping out is accounted for.  The report views the decision prospectively – from the viewpoint of someone asking themselves whether it’s economically worthwhile to attend college – and avoids “survivorship bias”, where only those successfully graduating are counted.
  • The FREOPP study does an admirable job of cutting through to true net college costs. It considers only tuition and academic fees because room, board and other expenses are not incremental to attending college – students would need them anyway.  They then deduct nonrepayable aid of various types using IPEDS information.  We love it.
    • This is a major improvement over prior efforts using the IPEDS Net Price metric — something which systematically inflates the value of degrees from highly selective elite colleges, often decreases the value of community colleges, and distorts results generally — or those using full Cost of Attendance.

What are the findings?

  • Variability in outcomes is vast.
    • Cooper makes a bold statement: “The analysis reveals that a student’s choice of program is perhaps the most important financial decision he or she will ever make.”  He considers the choice of college important – but what is really, really key is that decision about their major.
    • Different degrees produce very different economic outcomes: “For students who graduate on time, the median bachelor’s degree has a net ROI of $306,000. But some degrees are worth millions of dollars, while others have no net financial value at all.”
    • “Individual programs at the same institution can produce vastly different earnings outcomes for their graduates. One of the most lucrative programs anywhere is the finance major at the University of Pennsylvania. Graduates of this program will have median [annual] earnings of over $288,000 by age 35, according to my estimates. But students at the exact same school who choose a major in film and photographic arts can expect earnings of just over $45,000 by age 35.”
  • The risk of dropping out is real and greatly diminishes the median value of a degree
    • That $306k ROI is only valid for the fewer than half of new college students who graduate on time.  “After accounting for the risk of dropping out [or taking extra time to graduate], ROI for the median bachelor’s degree drops to $129,000. Over a quarter of programs have negative ROI.”
  • The most lucrative majors?
    • Confirming conventional wisdom, engineering is a valuable degree: “Four in five engineering programs have ROI above $500,000”.
    • The best program in the country in financial terms?:  “The computer science major at the California Institute of Technology. Students in this program can expect an ROI of over $4.4 million.”  Of course, you need to be a near genius with an 800 Math SAT score to enter and complete the program!  The criticism here is that the control group may be non-existent or improperly matched.
    • If you’re curious what the 25 most economically rewarding majors are, the list is helpfully provided here if you scroll down.  The big surprise?   Maybe just how valuable a Carnegie Mellon computer science degree is.
  • Elite colleges on average have very good results but are no guarantee: “Elite schools such as Caltech and Penn dominate the list of highest ROI programs. But attending an elite school is not a golden ticket; some Ivy League degrees have negative ROI.”
    • Major selection can trump college reputation: “Several U.S. News juggernauts such as Harvard, Penn, and Chicago all offer at least one program that leaves its students financially worse off.  At Harvard University, students who major in ethnic and gender studies can expect an ROI of negative $47,000. The film and photographic arts program at the University of Pennsylvania has an ROI of negative $140,000.”
  • Biology majors need graduate degrees in the health care field for their Bachelor’s to have value: “A surprisingly high 31% of programs in life sciences and biology have negative ROI. The most likely explanation is that many students pursue these majors in preparation for a lucrative graduate degree in medicine. The ROI analysis in this report considers returns on the bachelor’s degree alone. If biology students don’t use their degree as a springboard for medical school, they will typically see disappointing returns.”
  • Only a minority of students majoring in philosophy, religion and the arts earn back the cost of their degrees by retirement.
  • Because of their high drop-out rates, the all-in ROI for for-profit school trails nonprofits: “After making the completion adjustment, 55% of programs at for-profit colleges have negative ROI, compared to 24% of programs at public institutions and 30% of programs at private nonprofits.”

The full table with all 30,000 majors is found here.  Cooper’s account of the methodology is here.



  • The FREOPP study estimates a lower value to a college degree than prior analysis, beyond emphasizing the variability and risk in that value.
    • The average College ROI figure cited – the $306,000 number – is calculated on a different basis than in other research.  FREOPP uses discounted earnings – e.g. the value of $1 in earnings say 10 years from now is less than if it is earned today.  The Georgetown Center on the Education and the Workforce’s recent report in contrast takes a more common approach and just tallies the earnings to find that college grads earn on average about $1 million more than high school grads over the course of their working lives – they don’t discount. Excess earnings in the area of $800k-$1.0 million are commonly cited and represent the difference in median earnings of high school and college graduates over a working life. Again, this $800k-$1.0 million is not discounted, unlike the FREOPP number.
    • We can’t convert the FREOPP numbers exactly without extensive additional work but it’s fair to say that nearly doubling FREOPP’s discounted number comes close to the undiscounted numbers used in much other coverage of this topic. So FREOPP’s $306,000 median ROI is equivalent to about $550-600k in the terms of the Georgetown study, cutting the commonly-cited college income boost of $800k-$1.0 million by about a third.
    • In general, we prefer the use of undiscounted numbers for several reasons, among them that the discounting process adds another layer of complexity over what is already a seriously complex analysis.
  • “After accounting for the risk of dropping out, ROI for the median bachelor’s degree drops to $129,000”.  To ballpark an annual impact, this places the median earnings boost at ~$6k annually over the course of a career.  Contrast this with our simple rule of thumb that the typical college grad earns $20-23k more annually than the typical high school grad. It’s much less.
    • To be precise: the typical teenager deciding whether to attend college can expect to benefit by ~$6k annually if the risk of dropping out or graduating late is accounted for. Other studies typically assume on-time graduation.
    • The gap between the $6k bump and the $20-23k median difference exposes the way two key assumptions in past analysis inflates conventional estimates of college ROI. The two assumptions: 1) all of the college earnings premium — increased earnings due to graduating from college — is due entirely to the degree; and 2) all incoming college students graduate.  When these factors are removed, somewhere between 2/3 to 3/4 of the lifetime college earnings premium disappears.
  • The data used in this analysis is centered around the 2015-2019 period, an exceptionally good one for the US economy and labor markets.  What would this analysis show if it instead used the period around 2010 right after the Great Recession, when labor markets were poor?  The ROI for many more programs would look not at all pretty.
  • The Swarthmore example used in the mythology review left us thinking that the FREOPP’s ROI amount is an overestimate, to be honest.  Look at the lower line in the chart below and ask yourself whether that’s realistic.  To us, it looks low.
    • Numerous high school grads earn decent incomes.  The US Census Bureau reported that 30% of workers with only high school degrees (11 million workers) earned over $50k annually. (2019)
    • The counterfactual Swarthmore graduate who doesn’t complete college would presumably stand a good chance of becoming one of those higher earners. So the counterfactual looks low, maybe inflating the college earnings premium.

  • Aside from the Swarthmore example, the general population sample without a college degree also looks low, which again would inflate the ROI value:

  • People who are unemployed, out of the workforce or are earning minimal amounts of money are excluded from the Dept. of Education’s dataset as well as the FREOPP control group.  We had pointed to this omission in our account of the NACE 2019 First Destinations report and think it’s a perpetual feature of writing on the topic, systematically distorting these analyses. Though we are uncertain whether omitting these groups increases or decreases the college premium, it’s an important unknown.
  • One of the FREOPP report’s qualities is how it takes into account changes in incomes over worker’s age.  For example, graduates of nursing and economics programs earn roughly the same at graduation but the economics grads show large growth in earnings as they mature while nurses earnings do grow – but less.

Cooper summarizes the three highlight findings in short phrases:

  • Major is the most important factor
  • Elite institutions can pay off — but not always
  • Many bachelor’s degree programs don’t make sense, financially.

Studies such as FREOPP’s never present the last word.  It will need to combed over and validated. And conceptual objections to the entire approach – such as the impact of career changes on ROI and how well-off students use their family connections to turbocharge their earnings – remain.  But the variability in economic outcomes, the new detail on outcomes by major, and the emphasis on a prospective view where dropping out of college is a real possibility, all advance our understanding.

Let’s end with a question: you are a high school student with some smarts and decent grades from a not particularly wealthy background.  You learn that going to college will increase the earnings of the typical graduate by about $6,000 a year over your career if you include the risk of dropping out or taking a long time to graduate.  Do you go?  Maybe, but it isn’t a slam dunk.