In a new, thought-provoking analysis of previously unreleased data, my colleague Mark Schneider calculates an estimated “return on investment” (ROI) for more than 500 colleges and universities. Using data from Payscale.com, Schneider finds that ROI increases with admissions selectivity and that public institutions offer higher returns than private ones.
Schneider analyzed the earnings of graduates from 500 American schools over a 35-year period, relative to tuition and fees.
So are private colleges a waste of money? Well, not really. The reason public colleges offer higher returns, of course, is because they’re cheaper (almost $20,000 cheaper) than equivalent private schools.
That doesn’t mean that public colleges are more effective or even produce higher-earning graduates; it just means graduates of these schools have paid less to become graduates. Therefore their salaries, which are the same as those of people who attended private colleges, offer a higher payoff.