BiggerPockets Money Podcast - 251: Is College Worth the Cost? This 30,000 Variable Study Says "Sometimes..."

Episode Date: November 22, 2021

Is college worth it? For the first time in history, we may have a definitive answer to whether or not your specific degree and school choice provides a positive ROI. We know that ROI isn’t the only thing that matters when choosing a degree, but when looking at higher education through a financial independence lens, it’s definitely the highest value. Looking through census, employment, and Department of Education data is number crunching crusader, Preston Cooper. Preston and his team over at The Foundation for Research on Equal Opportunity put together the most extensive research on college degree ROI ever created. Preston’s findings allow you to parse through over 30,000 degrees and school choices so you (or your child) can make the best decision on where to get a bachelor's degree. Preston discusses the discrepancies between nonprofit and for-profit university degrees, whether or not high-cost schools equal a higher payday through life, and why even going to Harvard doesn’t secure a high ROI. Want to know the true value of your degree? Tune in and check out Preston’s full study! In This Episode We Cover How much you could benefit, in general, from getting an undergraduate degree The degrees that have the highest lifetime ROI Degrees that offer little-to-no or negative financial benefit Whether investing in real estate or a college degree is more worth it  The biggest criticisms of Preston’s study and how he combats them  Dave, Mindy, and Scott’s ROI on their respective degrees  And So Much More! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money podcast, show number 251, where we interview a absolute rock star Preston Cooper, a research fellow from the Foundation for Research on Equal Opportunity and talk about the ROI of a college degree. And my research has shown that the choice of what you're going to major in in college can literally make millions of dollars worth of a difference to your financial position throughout life. This is one of the most important financial decisions that you can make in your entire. lifetime. And I'm very excited to share the results with all your listeners. Hello, hello, hello. My name is Mindy Jensen. And joining me today are two co-hosts, the inimitable Dave Meyer, vice president of numbers and data and all things, nerdery for our bigger pockets. And my intrepid co-host, Scott Trench, CEO of Bigger Pockets. Dave, thank you for joining us today. Thank you. It's, you know, it's about time. I've been waiting for an invitation to be on the

money show for, I don't know, 250 episodes. So I'm glad to have finally gotten the call here. I can't believe we haven't had you on the show yet because I am the president of your fan club. And I love you. I am so glad you're on the show. Not in that way. Well, thank you. I mean, my money habits are probably not what your audience is interested in. So I'm glad that we can't. It's true. You brought me in to talk about college degrees and data, which is much more in my wheelhouse. Dave's sandwich budget is, uh, makes him, it's out of control. It's really, it's really getting to be too much.

I just, I like heating. Scott and Dave and I are here to make financial independence less scary, less just for somebody else. To introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you're starting. That's right. Whether you want to retire early on travel the world, go on to make big time investments in assets like real estate, or reconsider whether college is right for

you or determine the ROI of college in general. We'll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams. Scott and Dave, we have the most fun guest ever today. Preston Cooper has written a massive spreadsheet. Is that the right way to say it? Written a spreadsheet? Gather data.

The most amount of data I have ever seen on a spreadsheet in one spot. Compiled this data. All about the return on your cost. college investment. And he goes in the first few minutes of this episode are him just describing how he came about all the different data sets that he put together. And they are fascinating. I'm making it sound like this is a boring episode and you will want to listen to this episode 47 times. This is one of my favorite episodes we've ever recorded on the Bigger Pockets Money podcast. I was not surprised.

As soon as I read the article a few weeks ago, I knew we had to get Preston on the show because this is game-changing, life-changing, life-changing society-shaping type work that Preston has put together here. And the sum output is, I think you've got a data set

that Preston's compiled, available at freeop.org, and we will link directly to the article, a summary of the article that just has the, hey, type in your college and degree, and you'll see the ROI of it there. And then also the raw spreadsheet if you want to play with those. We'll link to all of those things in the show notes at biggerpockets.com slash money show 251. But fundamentally you've got a data set there that I think is about as professionally and thoughtfully constructed to account for all the caveats that we as financial analysts or listening to the show or at least ones on the show today would want to put in there.

and I think it's something you can trust. And so to corroborate that, we, you know, Dave, what do you think about the value of the spreadsheet? Is it, is it a trusted tool? Absolutely. I'm completely in awe of what he did. You know, before I worked at Bigger Pockets, I worked in education technology and higher education specifically. And what Preston has created is something that was talked about as like a dream, you know, when I worked in this space. And the way he's constructed and the data he's using it seems just incredibly sound from a methodological standpoint.

And I honestly couldn't be more impressed by both his data and his ability to talk about it and make it really easily understandable and actionable at the same time. So the too long didn't read, TLDR version of this is go to freeop.org and access the material for free to help you or your loved ones make. a decision that at least factors in the ROI of your college degree and know that you've got a pretty sophisticated analysis backing that to at least directionally may help you make a good decision. The long version is the fun one though, and that's we're about to get into in a few moments here. And we'll spend an hour and 20 minutes here talking with Preston about the methodology that we put together specific degrees that may make sense or not make sense. The impact of subsidies from governments and donors and all that kind of stuff.

And then a little bit of discussion on policy, which I thought was really fascinating. I don't think we get too political. Don't worry with that. I think it's a really well-constructed worldview on that. And then finally, we hear the ROI of a couple of our degrees. So we'll learn about Mindy's fashion degree, fashion design. Super awesome choice. with this.

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Preston Cooper, welcome to the Bigger Pockets Money podcast. I am so excited to talk to you today. Thank you, Mindy. I'm happy to be here. Let's give everybody listening a quick overview of who you are and what you do. Sure. So I'm Preston Cooper and I am a research fellow at the Foundation for Research on Equal Opportunity. We're a non-profit, nonpartisan public policy research organization based in Washington, D.C. and I am their higher education fellow, and I've just completed a report calculating the expected return on investment for over 30,000 different bachelor's degrees. So you can go to our page and look up the value of a college degree, not just each individual major, but each individual major at each individual school. That's so awesome. And I just want to chime in here that I was just

telling everyone before the show a couple weeks ago, maybe a week or two ago, I was having a couple of beers and, you know, having a nice quiet night in, nerding out on personal finance, which is, of course, one of my favorite pastimes. And I think I came across your work or someone sent it to me or there was a link somewhere. I just spent, I read the, I spent 40 minutes reading the study and kind of going into it. I was like, we got to get pressed it on the show. So I couldn't be more excited here to have, have pressed it on. So thank you for putting together to study and doing that. A little bit more, could we get one more layer deep on your background. Are you an economist? What is your, what is the nature of your profession that gets you

into this kind of line of work? Sure. So I'm, I'm an economist by training, but I am focused mostly on public policy. We're focused on advancing public policies that are, that are going to help people, particularly people, you know, below the median income. And one of the best ways that we believe that we can help people is helping them make better decisions about their financial futures. And my research has shown that the choice of what you're going to major in in college can literally make millions of dollars worth of a difference to your financial position throughout life. This is one of the most important financial decisions that you can make in your entire lifetime. And I'm very excited to share the results with all your listeners. Awesome. So love it. That's the context. How did you kind

of start this, how did you begin approaching this study with that goal in mind? Can you just walk us through the study and how you built it? Of course, yes. So a couple years ago, the Department of Education released this massive novel data set where they told you the earnings that college graduates will receive one to two years after graduation, not just for each individual school, but for each individual school and each individual major. So we had a huge data set of over 30,000 bachelor's degree programs. But the problem was, is that this data was basically just an earnings number in the first couple years after graduation. And we know that those first couple years after graduation are not always a great guide to what you're going to be making when you're 40. Usually, if you're 40,

you're going to be making a lot more than somebody who's 23. So what I decided to do in this study is I decided to extrapolate those earnings out over the entire career. And I also calculated what we call, you know, the counterfactual earnings. Basically, if you had never gone to college, if you'd been the same person of the same kind of ability and motivation and family background, but you'd never gotten that college degree, what would your earnings have been in that case? And then we can basically take the difference between those two numbers,

both the earnings with the degree and the earnings without the degree, to calculate the estimated financial value of each of these 30,000 bachelor's degrees. Then you subtract the cost of college, you know, the tuition that you have to pay, and the time you have to spend out of the labor force while you're getting that degree.

And we have what we call the ROI, the return on investments, which is the lifetime net boost in earnings that you can expect to get from each of these degrees. And we found that if you graduate on time, it's going to be about $300,000 for the average degree. But that average is very misleading because there are some degrees which are going to be worth millions of dollars, and there are some degrees which are not going to be worth anything at all. So can you walk us through some of those key assumptions in there,

maybe with a specific example, if possible, where we're talking about somebody who's getting a degree versus their identical self without the degree. What is, what is, what is, what is, a representation of that that we can fit from a story concept into our minds to understand this. Of course. So I can use the example of myself. So I went to Swarthmore College, which is a little liberal arts college outside of Philadelphia, and I got a undergraduate degree in economics. And so the way that we calculate this is we go to the Department of Education website and we look up what is the earnings at age 23 and 24 for someone with a bachelor's degree in economics from Swarthmore. That's the only data that they have

of that Department of Education website. And then what we do is we see how much more or how much less does a Swarthmore economics major make relative to the average economics major? And we found that it's about 60% above

the average economics major is what a Swarthmore graduate in economics will make. So I'm glad I think I chose the right college. And then we basically say we have census status is showing what an economics major is going to make at every single point over their entire life cycle.

So we know what an economics major makes at age 30, we know what an economics major makes at age 40, and we also know the distribution of what those economics majors are earning. And we can calculate, so if a Swarthmore economics major earns X percent above the average at age 23, we can also assume that maybe that Swarthmore Economics major is also going to earn X percent above the average at age 30 and age 40.

And so we can trace out this path of what that Swarthmore students' lifetime earnings are going to look like over the course of the entire major. Excuse me, over the course of the entire lifetime. And then the next step is figuring out, well, what would they have earned in the parallel universe where they don't go to college? And I apologize if I'm getting kind of metaphysical here, but that's really the only way to assess it is that what would you have earned in that parallel universe? because we can't just compare the earnings of a typical college graduate to the earnings of a typical high school graduate because the people who choose to go to college and the people who only have a high school degree are not always the same. They have different kinds of skills. They might have different levels of motivation.

They might come from different family backgrounds. It's going to be an apples to oranges comparison. So what we do is we also go back to census data and we take a look at that subset of high school graduates who look, kind of similar to college graduates. And we use those earnings as a base. And we also make an adjustment what we call the ability adjustment factor. So we use a much more detailed data set, which records people's SAT scores and standardized test scores to basically figure out what portion of that gap between what a college grader earns and what a high school grader earns is explained by the differences in ability and family backgrounds and you know in uh these these various factors that aren't

related to education and how much is actually attributable to the degree we throw that in and we can adjust with the counterfactual learnings those parallel universe earnings uh for the uh for for these unobservable factors for this for this ability for this family background so now we have the earnings we have the counterfactual it's basically i just take a quick laugh here because you are a legend that is that is phenomenal That is a phenomenal, well, like a perfect way, I think, to frame that or as close to perfect as economics allows with that. So fantastic and bravo. Sorry for the interruption with that.

Thank you. Yeah. Well, I'm excited that I can kind of kind of get into the weeds here because, you know, I've come down a couple of different podcasts and they usually say, yeah, skip over all that methodological junk. Let's just get through the results. And so you guys, you guys actually care about, you know, what the nitty gritty, the economics behind this is. So this makes me really excited, so thank you for that. Results are only as good as the study here. That's awesome.

Keep going. Tell us more about that. Sure. So now we're here at the, we have the earnings. We have the counterfactual earnings. The final kind of ingredient in this cocktail is the cost of tuition and the opportunity cost of going to college. So tuition is a fairly easy number to get.

We take tuition after financial aid, so after applying the Pell grants and the scholarships or the typical student is going to get from the school. And so we're just focused on what the end cost is for the students. And then what we also have to estimate is the opportunity costs. So if you're going to go to college, most people are not going to be working full-time while they're in college. There might be a few people who are doing that. I don't know how they're doing that.

They're heroes. But most people are not going to be working full-time. And so we have to figure out, well, what is the value of all those wages you're giving up for those four years while you're in college or sometimes five or even six years. Sometimes people people take five or six years to graduate. And so we can go, well, we can go back again to the census data. We can figure out what are typical wages for for 18, 19, 20 year olds, do the same adjustments that we did before for for ability, for demographics, or family background. And we can figure out, well, what is that opportunity cost of getting the college degree? And it actually turns out that

that opportunity cost is usually going to be more than the cost of tuition. That, you know, a typical high school graduate with the profile of somebody who's going to college is probably going to be making $25,000, $30,000 while they're in college. I mean, that's not an excellent salary, but it's also not nothing. And so that's definitely, you know, a cost that people have to take into account when they're considering whether to pursue a college degree because a college degree that's only going to boost your earnings, your lifetime earnings, by a tiny. little amount might not be worth that opportunity cost of spending four years out of the labor

force. So it's something that we definitely have to take into account. And I think we often don't take into account enough when we're talking about college ROI. So that's, you know, those are the different components, the different moving parts. We put them all together. We take average life, we take expected lifetime earnings. We take expected counterfactual earnings and subtract that. We take, we take tuition and opportunity costs, subtract that. And we also do an adjustment for for present value. So you guys are a personal finance podcast. I assume that you all, your listeners will be somewhat familiar with the concept of present value, but basically this is the idea that a dollar today is worth more than a dollar tomorrow because you can invest

that dollar and you can get a return in the markets if you're, if you invest it. So we adjust, we basically discount all future cash flows to all the earnings you're going to get, all the counterfactual earnings, the tuition payments, yada, yada, yada, all this stuff. We discount it at a real discount rate of 3%. So if you figure 2% inflation, that's a nominal discount rate of about 5%. And that's probably about midway between what you're going to be getting on a treasury bond and what you might be getting in the stock market. And that's basically saying, well, what is the next best alternative use of the money that we're putting towards tuition, of the money that we wouldn't be earning since we're going to college and we're not going into the labor force? And so that's something that we have to take into account because if you can get a better return on your investment just by sticking your money in the stock market rather than investing it in a college education, that's something we also want to take into account.

And so that's something that we do take into account in the study. We put this all together and then we then we basically have the results. So that, oh, go ahead, Dave. I just want to know how long this, I just want to know how long this took you because it's just like so casual. You're like, oh, yeah. And then we just have these results that everyone has wanted for the last 50 years, and you just produce this. So I just have to know how long this took you. Well, you know, the short answer is it took me about six months to put this all together,

but the long answer is it probably took me about five or six years of actually studying the various data sources out there to figure out where can you get all this data. I sometimes describe it as the parable of the blind man and the elephant that where the blind man can't see the whole. elephant, but he can feel different parts of the elephant and realize this is an elephant we're talking about. It's kind of the same way when we're talking about college R-A-Y, that there are these data sources out there. There's scattered in various places. You know, there's the Department of Education data, there's the census data, there's the tuition data, and none of it really gives us the complete picture. And so we have to kind of figure out how to put it all together and what assumptions we need to put it all together. And that's what I was very excited to do

with this project is putting the data from all these disparate data sources together and coming up with some estimates that I hope will be pretty useful to students and their families. So we're truly able with this data set to say, here is the ROI at a discount rate of 5% for this, right? It's a 3% real, 5% nominal. So that would be, I would just put 5% in my model, for example, right? Yep. If I'm doing that.

Okay. And how that works across a number of different majors with that. One question before we get into the next layer deep here with that is, suppose that, you know, I'm a bigger pockets money listener and I'm used to real estate. And I think I can get a 10 to 15% IRA on my investment properties. Would there be a mechanism? I mean, obviously that would change the profile of some of the degrees to a certain extent. But how would you recommend someone who's listening and thinking about that for themselves or their children as a framework to compare the ROI of college versus investing? How would that change the landscape do you think from your perspective?

Of course, yeah. So, you know, the choice of a 5% discount rate is, of course, going to be somewhat arbitrary. And I thought that was a good one because it's kind of midway between a treasury bond and midway between what the stock market is going to return you. But, you know, everyone out there is going to have different financial circumstances. They're going to have different investment opportunities out there. And maybe taking a second mortgage out on your house in order to pay for your kids' college education is not going to necessarily make sense for you. You know, that's something that people have to think about individually.

And so one of the features that we have on our website, one of the things you can go look at is you can decompose ROI into its component parts. So you can see what the earnings are. for at each stage of the life cycle. You can see what the counterfactual is. You can see what the tuition numbers are. And if you're the person who's kind of person who's really inclined to play around with spreadsheets, you can take all that data.

You can download it from our website. You can do your own ROI calculation. You can put in a different discount rate if you want. You can put in 10% or 15% if that's the return you think you want to get. And if that's the use of the data that you want to make, you know, more power to you. But yeah, I do want to underscore that point, which is a very good one, that everyone's financial circumstances are different. And the ROI results that we've put out, they should be a tool. They should be a guide.

They shouldn't be the be all and the end all. You know, individual circumstances are going to matter. So it's becoming apparent to me that I'm going to find a very, I find it very difficult other than the source data to argue with any of the methodology or framing of your approach here. And all of it's customizable if I want to change those different types of assumptions with that. What are some criticisms or some callouts or some parts of the study that may be, that may not be complete or that the viewer needs to be aware of when looking at it? Of course. So I think the trickiest part of the study really is estimating those counterfactual earnings, those parallel universe earnings. So the data that we have on basically what we call the unobserved characteristics of students, you know, what is their ability?

How good are they at schoolwork? How motivated are they? You know, all these factors that are both correlated with the decision to attend college and with labor market outcomes later down the line. You know, a student who's more motivated to complete college might also be more motivated to get that high-paying job. And it's very hard to disentangle those kind of things. So what we've done is we've used a much more limited data set called the National

Longitudinal Survey of Youth, which tries to track all these, what we call these is unobserved factors. And we produced basically estimates of the portion of the college earnings premium that's due to these unobserved factors. But you know, you could quibble with our methodology. You could, you could say that, you know, maybe you're not including the right factors. Maybe there are things that the National Longitudinal Survey of Youth is not asking about, that they should ask about that might have an effect on ROI. Maybe another kind of criticism would be, you know, people at the, you know, the very top, you know, people of the kind of ability college distribution, the people who are going to the very top colleges, you know, the people

are getting 1,600s on their SATs. There's not really a great comparison group for them because, you know, everybody at that level of ability who's getting 1,600 SAT score is going to be going to college or almost everybody, so you can't really figure out what the counterfactual should be there. It's going to be kind of guesswork. You know, all this stuff is kind of educated guesswork. All of it does require assumptions. I think that the assumptions we've made are the best ones that we can, given the available

data. But I think, you know, reasonable people can disagree about what the right way to adjust for these kind of things is and, you know, what factors you should take into account. But I will also say that it's rather uncommon kind of in the ROI literature to adjust for these things at all. So, you know, if you go to just the Department of Education's website, all you're getting is the average earnings for people at 23, 24. There's no adjustment for the counterfactual. There's no adjustment for the cost of tuition. There's definitely no adjustment for these unobservables. And so I think that

our estimates are getting a lot closer to the truth than the data that it was, that has been out there before. And if somebody thinks that they can do better, you know, this is not sarcastic at all. More power to them. I would love to see more analyses of this data. more attempts to get closer to what the true ROI of a college degree is. I would love to see more people who might be smarter than I am try to make those adjustments and try to get closer to the truth. I hope you know that I'm asking these questions to bring out what is clearly your total mastery of this area in a way that has not been paralleled before previously. So these are all Like the fact that you're able to go through those different types of things and call those out is phenomenal.

And yeah, like any study, there's going to be differences with this. But I hope that those listening can tell this is a master at work. And this is really comprehensive with a lot of this stuff. And it's a really good tool to go and check out the study here. I do want to call it two things that are not part of the data, but that you played out actually in your article that are caveats to some of this. One is the completion rates for the degrees. you mentioned that this assumes that you actually finish the degree. And in some cases, there's a drop-off which can change the ROI of the degree.

If 20% of students don't finish it, that can change it, I believe. And the second one, I think, was that like some degrees like biology do not translate to good economics on their own, but are rather setting the stage for a medical degree or something like that. And so those are things to keep in mind if you're going to go and peruse the dataset after this. and you don't want to read the full article that outlines all those different types of things. I think those are two great callouts that you put, I think, in your article with that that I wanted to mention there. Yeah, absolutely. So, you know, if you look on our website, freeop.org, that's F-R-E-O-P-P.org, you can see our estimates of R-O-I for all these bachelor's degrees.

And we actually provide both a completion-adjusted estimate and a non-completion-adjusted estimate. So the non-completion-adjusted estimate is basically assuming that everything goes right for you. So assuming you graduate in four years, you know, you get the degree, you don't drop out, everything goes right. It's, it's, everything's, everything's fine. And you start working immediately at age 23. And so that's, you know, that's the dream scenario. And some people are going to end up in that scenario. And so they should have an estimate of ROI.

So we produce that estimate. But we also produce an estimate that's adjusting for those completion rates. So we say, if you go to college, there's a risk you're not going to finish. There was a risk that you're going to. already thought of that way. There's a risk that you might take five or six years to finish, which is something that people do often. And this is going to change the estimated ROI.

And so we also do that completion adjusted ROI, which is what is basically the expected value of the degree taking all these risks into account. And so depending on your interests, you might be interested in either the non-completion adjusted or the completion adjusted, and that's why we provide both. And I also want to just talk about that biology point that you brought up. earlier, which is definitely an important one. So we are looking at returns strictly based on the bachelor's degree. So we know that a lot of these degrees, particularly biology, are mainly valuable because they're preparing you for a graduate degree. Most biology students believe that

they're going to go get a medical degree. That's their end goal. And so biology on its own doesn't look that great because we're only taking into account the bachelor's degree. We're not taking into account the graduate degree. And that, I think that's still an informative point for students because, you know, it tells students that if you get a biology degree and then you don't go to the medical school track, you don't go to the graduate school track, then you're really up the creek. You know, if you get a biology degree without the grad degree, that is not a great outcome. And we find that most students who are doing that, who are getting the biodeegree without going on to medical school are going to come out behind. The cost of college is not going to be worth the benefit they're

getting from that. So that is, you know, one caveat that I do want to mention. But we are planning to do another report similar to this on graduate degrees that'll come out sometime next year. And so if you are interested in the graduate degree track, then you can both look at the undergrad degree and the grad degree and you can figure out overall is this track that I'm planning going to make financial sense for me. I love that. Overall, is this track that I am planning going to make financial sense? for me. That is huge. And just to go back a moment, people who are looking can find fault in anything. It took you like seven solid minutes to describe all the detail that is in this report and how you came about it. You don't come across to somebody who is like, yeah, I threw some

numbers together on a spreadsheet. If you open up that spreadsheet that you shared, it is just this giant wall of text and, well, data that is like, but there's trends. And going through. it, you can see, oh, wow, an engineering degree is a pretty good degree to get. This degree in anthropology, not so much. Unless I have this deep burning desire to be an anthropologist, maybe I should choose a different degree. And I want to encourage anybody who's listening to this show, go and look at this data because it's fascinating, even if you're not a data nerd. I'm not really a data nerd. I looked at that spreadsheet. I'm like, nope, close it back up. And I went back to your more easy to read website information.

But there's a ton of information there. And if somebody wants to go in and tweak all of those little things, I think they're picking nets. I think that this is an amazing piece of, like, giant wad of data that people can take and use to choose not only the college that they're going to, but the actual subject that they're going to study. Because there's stupid degrees out there. I'm so sorry to offend anybody who studied fashion design. I studied fashion design. That's a completely worthless degree. I worked in fashion design one year.

As a receptionist, didn't even need my fashion degree to go do typing in the front office for a fashion designer. And it was not my burning passion. I just thought it might be interesting. If I had had this study, I probably wouldn't have studied fashion design. Do you guys talk about fashion design in your report? Did that make the cut? Yeah, well, let's see. I can look it up right now.

I have the spreadsheet here in front of me, so fashion design. So, yeah, so there's a lot of design degrees out there. And it looks like that most of them are, I am sorry to say, that are not going to have great R-O-WI. But they're all. Shocking. Shocking. Oh, my goodness. What a surprise.

Brand new information. But there are a few out there that actually do seem to have, do seem to have decent returns. So one that I just pulled up right now is the Fashion Institute of Technology in New York, which I believe is one of the top schools for fashion designers. The design degree there is going to give you an ROI of about $370,000. So that's above average. So, you know, there are diamonds in the rough out there for some majors like that. Overall, you know, I don't want to recommend that legions of people go into fashion design because that's probably not going to work out. But if you're someone who is really, really passionate about fashion, if this is something that you're just absolutely

100% committed, I want to do this with my life. There are programs out there which will get you a decent ROI. But if you're someone who is saying, you know, fashion might be cool, I don't really know, and I'll just go to some random college and I'll figure out my major later, fashion might not necessarily be the choice that you want to consider there. And so that's, you know, that's kind of one of the points I want to impress upon people that, yes, overall engineering is going to be better. Yes, overall music and arts are going to be worse.

But there are exceptions to this trend. And, you know, if you look hard enough in our spreadsheet, you know, you can find those diamonds in the rough. You can find those programs that are kind of bucking the trend for their major. Thank you, Mindy, for bringing that up. That's actually ended up being a perfect example of a great use case for this. If you are interested in one of these professions that may not have, or one of these degrees that may not have the best ROI, maybe there is a school out there that produces a great one for you with that. So thank you. That's a perfect example.

Thank you. Yeah. I remember, so one of the degrees that, that kind of somewhat surprisingly, came out as not very great ROI is psychology. So I think about 40 to 50 percent of psychology programs are going to have negative ROI once you account for completion and all these things. So most psychology students are going to end up behind for having gone to college. But once again, there are exceptions. I believe, you know, the programs, I can look it up right now. it was at Colgate and Colby College's. Those seem to be having some, yeah, Colgate University ROI is about 800,000. Colby College ROI is about 700,000.

You know, those are pretty good ROI. That's well above the average. But that is not the norm for the majority of psychology programs. So once again, I would say if you have a high school student who is very, very passionate about psychology and really, really wants to do this as a career, There are programs out there which are going to be good for you, but that's not going to be the case for the majority of psychology programs. And I would say that if you're not that passionate about the psychology field and you might just be doing this because it's kind of a popular major and you're not sure what else to major in, that might not be the best reason that you might not be getting a great bang for your buck on your college education if you're not deliberately choosing one of the best programs in the country. Could you walk us through a couple of more outliers?

Well, because you're, I'll just through a couple more examples that you think are illustrative or helpful or that were surprising or maybe confirm things that people already knew. What are some of the big takeaways that you have that you'd like to share? Absolutely, yeah. So, you know, there's a lot of talk you see in the media, you know, the U.S. News World Report rankings about, you know, the top colleges. Everybody wants to rank institutions. So, and it's always the same institutions that are at the top of these lists. It's Harvard, Yale, Princeton, Columbia, you know, you could basically print the, same list every year probably and nobody would notice the difference. So one, so one kind of

interesting thing about that is that, yes, there are a lot of programs at Harvard, Yale, Princeton that are going to have high ROI, but there are also a lot of programs at those schools that are that are not so great. And, you know, even at the top universities in the country, even at Harvard, there are programs which have negative ROI, you know, the anthropology program, the ethnic and gender studies program at Harvard. You know, these programs are, on average, the students are coming out behind, which is something that, you know, people don't often think of, think about. They think, you know, if I got into Harvard, then I'm set for life. You know, I'm, I don't necessarily have to worry about what I major in. And that's not necessarily the case that just because you got into Harvard,

it doesn't necessarily mean that you're going to have a great ROI in your degree. It still matters what you major in. And the flip side of that is that schools which, um, we, we, which do not make the rankings commonly, which do not have these highly selective applicant pools, which are not at the top of the U.S. News and World Report, can often have really good programs that people just don't know about. So I was studying one today. There's the Iowa State University has an 87% acceptance rate.

So it's accepting almost everyone who applies. It's not a selective college by any means. It has nine programs, which have an ROI above $1 million. dollars. It is, most of these are in engineering and computer science, which is not terribly surprising, but still, you know, this is a college in Ames, Iowa that is not on the U.S. News top rankings, that is not a highly selective college, but is still doing really well for its students. And the other piece of this is that Iowa State is a really big university. You know, it's moving a lot of students from the lower, from the lower middle income categories.

into the upper, upper income categories through these programs that it has, because it's, it's producing a lot of, a lot of engineers, a lot of computer scientists, a lot of people who are going to go on to earn six-figure salaries. And, you know, it's really doing more for upward mobility than most of the Ivy League is, you know, it's creating more millionaires than Harvard, Yale, and Princeton put together. And so that's, you know, one thing that I, I really want to impress upon people is that the brand name of the school is usually not the best guide to R-O-Y. Sometimes it aligns, sometimes that brand-name colleges are going to offer good programs, but that's not a guarantee, and that sometimes you're going to be disappointed on

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Are there any other characteristics you could share? Yes. Well, the biggest factor is the major. So about half the variation in ROI is going to be explained solely by the majors. So, you know, schools that are offering a lot of engineering, computer science, economics, nursing, business degrees, those are the degrees that are really going to get people higher ROI. So schools that are offering those majors are usually going to have the best outcomes on average. You know, that being said, the characteristics of the school overall matter too. And one of the biggest factors is graduation rate. So, you know, this is one of the biggest risks for a student who's considering college is the risk that they're going to drop out of college, that they're not going to finish the degree. And then

they'll be on the hook for some of the tuition, but they won't be getting most of the benefits of the degree. And we actually see that the vast majority of people who default on their student loans are people who did not finish their degrees. You know, that this is, this is really the big, when we talk about student loan crisis, you know, this is really where the crisis is coming from. It's coming from the people who have the debt but no degree. So this is just a very big risk that I, that I want to make sure people are aware of when they're considering college that, you know, a lot of students drop out, about four and ten students don't finish college. But the choice of institution can make a big difference here, that there are some institutions which simply do a lot better by their students at providing

supports, at providing, you know, good matching of students to programs, at providing, you know, the kind of welcoming environment that will help students get across the finish line. And there are some students which, excuse me, some schools which, which don't do well on those metrics. And so when we're talking about what is the impact that the institution has rather than the major, it's really graduation rate. That's really the most important factor that the, that the institution can contribute. And so that's, yeah, that's another thing that people should take a look at. What is the graduation rate of the institution that I'm attending?

Usually, you can find it just by Googling, you know, Iowa State graduation rate. It'll be right there on the Department of Education homepage. So, yeah, that's a huge factor that I hope people will consider. Do you find that the institution matters more or the degree matters more in terms of graduation rates? So one of the one of the shortcomings is that we do not have degree level completion rates. We only have institution-level completion rates. So we basically, we kind of have to assume that the completion rates are going to be the same for all majors at an individual college, which might be a reasonable assumption. We're still not sure.

There's actually has not been a lot of great research on this. This is, if there are any, you know, PhD students listening, this would be a great topic for you to research. But this is, but yeah, we basically have to assume that the graduation rates are the same across all majors. But it does seem to be the case that things that the institution does do have a fairly big effect on graduation rate. And so we think that's a reasonable assumption. And Preston, what about the difference between for-profit and non-for-profit institutions? Because you hear a lot of bad stuff about for-profits in the news. Does that come out in your research as well?

Yes. So we looked at ROI by sectors. And we found that about 50%, 55% of programs at four-profits. that for-profit colleges are going to have negative ROI. So, and the average overall programs is about 28%. So, for-profit colleges are definitely worse than the average. And this also goes back to the graduation rate issue, that for-profit colleges usually have really abysmal graduation rates,

that they're not offering the supports that students need to get across the finish line. And that's really the biggest contributor to the low ROI for for-profit colleges. That being said, I don't want to create the impression that all, everything is fine and dandy at the public and private nonprofit institutions as well, because about 25 to 30 percent of programs at those schools will also have negative ROI. So just going to a, excuse me, going to a public or private nonprofit college is not going to guarantee you a return on your investment, but it can increase your odds of getting that return on your investment a little bit better. What are some large or popular degrees that have negative RIs that may surprise some folks?

Yeah. So I mentioned psychology earlier, and psychology is the most popular single major in the entire United States. We have more psychology majors than anyone else, I believe. And that is a fairly low R.O.I major. As I mentioned before, 40 to 50 percent of psychology programs do not pay off when you're taking to account graduation rate. And even if you assume that every, that you complete on time in four years and you have 100% chance of completion, I believe it's still about 35, 40% of psychology programs are not going to pay off. And I've often thought of psychology is, it's sometimes like a default major because, you know,

psych 101 classes are big. Often people will have, you know, a few site classes under their belt when it comes time to decide, you know, what to major in. And so I think that psychology ends up being the default. major for a lot of students, they think, oh, this might have some labor market applicability. Sometimes it does. Most of the time it doesn't. That usually it's not necessarily going to provide a great return for students. And so that's one of the reasons I worry about psychology ending up as kind of this default major sometimes. That it often is a much lower return major than people anticipate.

I think students have gotten it through their heads now that, you know, majoring in studio art is not going to lead to great ROI. But I think that there are a lot of majors where that hasn't necessarily sunk in yet. And I think psychology is one of those. Yeah, I was super surprised that psychology had such a low ROI. I also will say that I think you're right. It's a great default major, just like business, just like general liberal arts. Where there's, and the people who are taking that aren't necessarily the right people to be in.

Let's see. How do I phrase this without offending people? They're not the people who college is the best choice for them. On episode 44 of our podcast, we interviewed Tini and Crawford. It took him six short years to get his associate's degree, which is a two-year degree because college was not the right choice for him. And he struggled through it. He finally got it.

He quit and went and became an electrician. And now he's out on his own and crushing it as an electrician. He didn't need to go to that school. And I think he majored in graphic design at some point. and other, like, random things, but it was like, it was just default majors. It wasn't something that he was passionate about. And I think there's this, there's this discourse since I was in high school saying, oh, after high school, you go to college.

That's what you do. Grass is green. The sky is blue. You go to college after high school. And college is filled with people that shouldn't really be there because that's not the best choice for them. I love the information on this, this study that you did, because, you can use it as a search.

Oh, maybe I'll study psychology. Oh, wait, that's not such a great choice. There's nothing else I want to study. Maybe college isn't where I'm going to go. Or did you do anything on anything like the trades? Do you have any idea on how much that it costs to get into the trades versus what you can make? Because I know the trades right now, there is a mass shortage of electricians and plumbers and all things related to real estate and development.

And I mean, right now they're paying people to come learn the trade and then work for them for a year. And it seems like we're not pushing people enough in that direction. Yeah, I totally agree that I think that we as a society have have undervalued the trades and have undervalued alternative post-secondary education pathways to the bachelor's degree. And this is a policy choice that, you know, we have put a lot of our funding eggs in the bachelor's degree basket. And with the result that, you know, traditional four-year colleges are going to get a lot more public funding on a per-student basis than alternatives such as trade schools, such as apprenticeship

programs, and, you know, alternatives to the bachelor's degree, which, as you mentioned, might have an extremely high return for students. You know, we do have a shortage of electricians. We do have a shortage of advanced manufacturing skilled workers. We do have a shortage of plumbers. And, you know, alternatives to the bachelor's degree, like apprenticeships, like trade schools, could really help fill that gap. And given those shortages, there are very high earnings, very high wages for some of the people in those trades right now, making them an extremely viable option for people who might not think that college is the best fit. We didn't look at that in this particular study. It's something that I definitely want to examine in the future. But the data that I've seen

that exists out there suggests that, yes, a lot of apprenticeships are. are going to provide that significant boost in earnings that a lot of students are really after in their in their post-secondary education and that it is often going to be a much better option for students than a college degree if the college degree you're considering is, you know, a mid-level psychology degree rather than an engineering or computer science degree. You can't compete with the engineering degrees. Nothing can compete with the engineering degrees for ROI. But, you know, not everybody wants to be an engineer. I can't do that engineering stuff. I can't do that advanced math, but for... I bet you'd be pretty good at it.

Thank you. I appreciate that. But for a lot of students, you know, who are not going to be engineers, you know, the trades, the apprenticeship programs are often going to be a better option. But I will say the federal and state governments do kind of have their thumb on the scales in favor of the traditional four-year bachelor's degree. And that's where they're putting a lot of the funding for post-secondary education. instead of those alternatives.

I have like four questions now with this. So we don't have to go through all of them. But how does a parent make best use of this? What policy would you hope changes or think should change with this as a result of the learnings from this study? Those are two completely separate different questions. But you can answer them whatever you want with those. Absolutely.

Well, I think the number one impact that I hope comes out of this is that it'll be a tool to empower students and their parents and their families when they're, they're making decisions about college. I hope that, you know, people, that students will be able to use this tool to figure out, well, what is the ROI of various degrees? What can I expect to earn? And what, is this going to be worth my time and my money to get this degree? So that's the number one impact. If, you know, that's the only impact that came out of this, even if Congress did nothing, even if state governments did nothing. If people can still use this information to help inform their decision making, I would, I would be overjoyed. I would love that.

You know, at the, in terms of, you know, policy solutions, you know, what I would advocate for is that most of the, most of the student loan market, most of the, you know, college financing funding is coming from the federal government. 90% of new student loans are initiated by, are originated by the federal government, you know, the, which means that taxpayers have a huge stake in what these earnings are, what the outcomes. of these college degrees are. And as, as, you know, my research has shows, there's, there are a lot of degrees out there which taxpayers are funding, which you guys are funding, you know, which I'm funding too, which are not necessarily showing great ROI. And so I would like, you know, Congress to maybe scrutinize these programs a little bit more. I'm not saying that we should defund all the arts degrees, but I'm saying that, you know, maybe, maybe there should be a better system of carrots and sticks for institutions to to offer programs that are offering higher ROI and maybe deemphasize

some of the, um, deemphasize some of the programs that aren't showing, showing great ROI. And one way you could do this, which is a popular, uh, a policy idea, both on the left and the right is what we call risk sharing. And basically, this is the idea that if students fail to pay back some of their student loans, the college would be on the hook for some of that. Um, and so that they would have to pay back the federal government, a portion of the, the, the, the, the, the, that the federal government is not getting because students are unable to pay their loans. And we know that when students are unable to pay their loans, it's usually either because they dropped out of college or because they have a degree that just wasn't worth it.

And so this is going to be kind of a financial incentive for colleges to both, one, raise graduation rates and two, offer degrees that might be more worth the money than the ones they're offering right now. Preston, this is a really interesting take. And I'm curious what you think about the role of writing. tuition in these programs because I've seen data that suggests that in the last like 30 or 40 years, college tuition has grown 4x actual inflation. So this is, to me, seems like a somewhat recent phenomenon where 40 years ago, it was much easier to generate, to get a degree that actually

had a positive ROI. Where today, because tuition is rising so quickly and has, outpaced inflation and earnings so rapidly that things are probably going to get worse without any other sort of change. So I'm just curious if you have any thoughts on tuition and how this is going to proceed in the future if tuition keeps rising at this rate. Are there going to be any degrees that can produce a positive ROI in the future? Yeah, well, that's a great point that you bring up. And tuition costs, that's one third of our ROI calculation. You know, that's a huge, huge part of it that's making a difference to whether these programs are going to show positive earnings outcomes. And just to give kind of people the lay of the land on this, for most of

the 20th century, the premium that a college graduate earned over a high school graduate was rising. But around 2000, that started to flatten out. And so it's been stock around 65% for the last 20 years or so. So the college premium is no longer rising. If the college premium is no longer rising and tuition is still rising, then like you said, it is a mathematical certainty that ROI is going to go down over time. And we didn't analyze this over time. This is just a snapshot. So this is basically just my impression based on the data. But you're right that the cost of college is going to be a huge factor in this. And, you know, there are a lot of degrees that are going to be worth it if tuition is lower, but are not going to be worth it if tuition is higher.

That being said, I don't think that the rising cost of tuition should lead us to discount the earnings outcomes, which is really doing most of the heavy lifting in ROI. You know, that an engineering major is going to be getting much higher ROI than an anthropology major at the same school, even if those two students are paying the exact same tuition, because the earnings is still doing much of the heavy lifting. The tuition is going to make a difference, of course, and that is going to turn some programs from positive ROI to negative ROI, But I do want to emphasize the earnings is really what's doing the heavy lifting.

What do you think is going to happen in the future with this? I mean, we're painting a picture here, and you just did it for us about for 50 years. It was better. It was increasingly beneficial to be a college graduate versus not have that. It's now becoming that that gap is narrowing every year since 2000, just what you're saying, on average. We haven't done the study. We don't know that for sure, but we can infer that, extrapolate that from what you just said with that. What's going to happen next?

Do you think the ROA is going to continue to just get worse and worse and worse and worse and people are going to keep flooding into it? Do you think that student enrollment patterns are going to change? Some of these degrees will change. Students will shift from college to trade schools. Not what do you want to happen from a policy perspective, but what do you think is going to happen on our current trajectory? Of course. Well, I want to bring up a really interesting development that's going on right now. So historically, we've seen that when recessions happen, college enrollment tends to spike.

And the reason for this is that when the labor market is really weak, people take refuge in higher education. They say, I'm going to go back and get a degree and try to increase my value in the labor market while, you know, this economic storm is happening. So hopefully when the dust settles, I'll be able to get a better job. That is actually not happening right now. So we saw this huge spike in unemployment with the pandemic. You know, the number of jobs that was lost in the pandemic, you know, that hasn't fully recovered. yet college enrollment actually has not spiked in line with the historical trend, which is something that surprised me, actually.

You know, I wrote a piece two years ago saying that, oh, you know, the pandemic is probably going to cause a spike in college enrollment, and I was wrong, Mea Coppa. But it's a very interesting development going on right now because, you know, we've seen that wages at kind of, you know, the lower end, lower to middle end of the spectrum are rising because we kind of have, we have a labor shortage right now. And people are,

people are recognizing that they can get greater value for their labor services in the market. And they're saying that, you know, maybe going back to college isn't necessarily the best option for me. And they're saying that, you know, maybe other options are. You know, maybe I should try to get another job right now, build skills on that job and use that to get higher wages later on. Maybe I should go to apprenticeships or trade school. Apprenticeships, by the way, are spiking. You know, apprenticeships are up about 60, 70 percent just over the past 10 years or so. It's a very positive development. A lot more students are choosing to pursue apprenticeships

and not necessarily traditional higher education. A lot of students are choosing to pursue that. Some are choosing to pursue trade school, which I think is a positive development. We should be pluralistic with regards to post-secondary education. We should recognize that a bachelor's degree is not the best option for everybody, and it's not even the best option for most people,

and that there are these other alternatives out there, which can really lead to, you know, great economic outcomes, which can really provide a secure path to the middle class that I'm glad students seem to be considering right now. Preston, there was something that I think you mentioned in one of our chats prior to recording here about other expenses that go into education outside of tuition. And that was a minor point, but you said an important one in your article. Could you expand on that point? Sure.

Sure. So almost all students who are attending higher education are getting some kind of subsidy that they're usually not going to be covering the full cost of their education. So at the average public university, the average public university is spending about $21,000 per student on education. For a year or per year? Per year. So and the average in-state students, undergraduate student, is only going to be charged about $4,000 in tuition after aid on average. So students are getting lots of subsidies from financial aid. The school is getting subsidies from the state government usually. And also, you know, graduate students and foreign students are usually going to be cross-subsidizing those domestic undergraduates somewhat. So students are usually not covering the full cost of their education. And so we were curious when we did this study, how many of the programs which are showing positive ROI are just showing that positive ROI because they're getting a massive

subsidy. You know, if tuition costs reflected the full underlying cost of education, what would ROI look like? And so we ran that analysis, and we found that the share of programs with negative ROI jumps from about 28% to 37%. So that's about 10% of programs out there, which are only showing positive ROI because they're getting a big subsidy from either the government or from graduate students or from foreign students, from some source. And we can debate, you know, what the morality is of that and what that means. You know, one camp would probably say, you know, higher education is a public good and we should, we should subsidize it to some degree, not overwhelmingly so, but to some degree.

And it's fine if there are some programs that are showing modestly negative ROI. And there's probably another camp that's saying, well, you know, a lot of these programs only look good because they're getting, they're getting a subsidy from the government. And, you know, maybe that's not the best path to be setting students on. If we're dumping all these money into the programs, and they're not at, actually benefiting our economy more broadly through, through higher wages. And so that's a debate we can have, but I do want to, do want to impress upon people that, yes, there are a lot of programs out there which are only getting, which are only showing

a positive ROI because of the subsidy they're getting. For students, I'm not sure if this is, you know, an immediate consideration that you should take into account, you know, if you should take all the financial aid you shouldn't get, you should be calculating ROI solely based on the tuition that you have to pay, not on what broader society is paying for your education. But if you're a policymaker, or you're another stakeholder, if you're on the board of trustees, or if you're in a college administration, or if you're just another stakeholder in higher education, you might be interested in the fact that a lot of degrees are only showing a positive return because they're subsidized. Preston, you make a great point,

and I think students should probably just look at the exact way you just described it. But have you heard from any of the other players about your study? Have you heard, heard from any people who are subsidizing these degrees like donors or state governments, or have you heard any reaction from colleges themselves about your study? Sure. Well, you know, the colleges that look pretty good on the study are obviously very happy about it. You know, the colleges that don't look so great on the study, you know, might be, might be, not saying so much about it.

Yeah, we're going to have to put you into witness protection or something. Exactly. calling you and threatening you. But it is kind of funny that, you know, at most colleges, most colleges can boast at least one good degree program and one really bad degree program. And so that's, you know, why some colleges might not necessarily say want to trumpet this study from the heavens

because their engineering program might look really good, but their anthropology program might not look so great. And so that's, you know, that is, but that is underscores what I think is, you know, the central point of this study, which is that it's not just the choice of school that matters. It really is the choice of major. That's about half the return is going to be explained by that choice of major, not by the choice of school.

And that the very same school, very same student body, very same tuition paid can have massively different returns just based on what you choose to major in. This is just a side question, but has anyone ever asked you a question you couldn't answer really well? Well, probably occasionally, yes. Just this one. This is the first question. I remember a couple months ago I was testifying before Congress, and I got a question from a member of Congress who shall remain nameless.

And I started to answer it, and then she interrupted me and wouldn't let me answer the question and said, well, so you're saying, isn't it true that you just want to kill puppies, you know, or whatever? But that's probably when I couldn't answer a question because I wasn't allowed to. But that's neither here nor there. Does this work that you're doing on higher education regularly puts you in front of policymakers like this? Yes. I mean, this is something that policymakers are super interested in, you know, as they should be, because we're funding higher education at the federal level to the tune of about $150 billion a year.

This is a not insignificant part of the federal budget. So, yes, I am encouraged by the fact that there are do seem to be policymakers who are interested in this work on R.O.I. And I'm also encouraged by the fact that there is a bipartisan interest in an accountability agenda, that we recognize that not all the programs that we as taxpayers are funding are good ones. Not all programs are ones that we should necessarily be giving that government funding stamp of approval to. And there is more interest in kind of in reining in the federal grant and loan programs, making sure that we're, not lending money to students who might not be able to pay it back because they're not going to a great program and making sure that we as taxpayers, not just students, but taxpayers as well, are getting a good bang for our buck when we invest in higher education. And that brings me to just one other point that I wanted to mention is that it's not just students who are going to benefit if we start thinking about ROI more.

It's also all of society because let's think about what function do wages and salaries serve in the economy. wages and salaries are a signal of where we need skilled labor. Higher wages for engineers are not just an accident. Higher wages for engineers are the economy screaming at us. We need more engineers. We have to build buildings. We have to build roads and bridges. We have to do all the stuff that requires engineers.

And we're going to pay for engineers. And that is the signal that the economy is sending to say, you know, please, universities, please train more engineers, please students, major in engineering so that we can hire you and pay you a bunch of money to build, buildings and roads and bridges for us, you know? That is, that is what the economy is, is telling us. And so when students are, would take into account ROI more, and when they, they pursue these, these fields that are really in demand in the labor market right now, we all benefit because we all get more buildings. We all get more bridges from the, the more skilled engineers that are being

trained by this system. So that's, you know, when, when we talk about ROI, it's not just students who should be listening. It should be everybody because we're all going to benefit if students take into account R.O.I. Absolutely. I love it. Preston, is there anything else that we should cover here? Mindy or Dave, do you have any other questions before we kind of begin wrapping up the show here? No, I think the questions that I was going to ask were already answered by Preston and his amazing command of this information and this, the delightful way he's sharing this story. I opened up that Excel spreadsheet. I was like, no, I don't want this information.

It's really, it's so much. But you are explaining this in a way that is both fascinating. I have a kid that's going to college in a few years, and she wants to study occupational therapy. She's going by, oh, Boston University is the best occupational therapy program. So I'm going to go there. Well, let's go into Preston's database and see, is that the most, is that the best ROI on, on that degree, is that the best school to go to for that degree? Because occupational therapy is,

and I'm not an occupational therapist, I don't know, but I'm assuming that you basically learn the same stuff at all the colleges. So if you can go to a college that may be the second or third ranked program, but has the highest ROI, that's a better way to look at it than just what has the best program. Yeah, I totally agree that, you know, this is a, this is a new way of looking at at colleges that does not necessarily always align with, you know, the rankings that you'll see in U.S. news. And it's, it is purely focused on the financial returns. That's another caveat I want to mention that financial returns should not be the only consideration, you know, the joy factor also matters, the campus environment also matters. But financial returns should be a huge part of

the consideration, you know, even if it's not the only one. And I think that, you know, if students decide that, you know, I want to go get that degree in the arts, that's a very important. That's a valid choice, you know, you parents might not approve, but it's still a valid choice. You know, it's a free country. You can do that. But you should know how much that decision is going to cost you. You should know how much in lifetime earnings you're going to be giving up for pursuing an arts major as opposed to a major that maybe has more career value. And so, yeah, it's not the be all and all. Financial returns are not the only consideration, but they are a huge part of it. And at the very at least you should know what the returns are before you make your decision.

Yeah, I think that's a really great point. The Washington Post recently published an article based on a lot of the information in your data. And they had some pretty raw information there. A bachelor's degree in anthropology from Ithaca College cost $132,000, on average. And two years later, graduates are earning $19,000 a year. You could be earning more than $19,000 a year, not going to, college and it would take you seven years of solid income just to pay off your degree. And I think that a lot of people who were studying anthropology probably didn't consider that going into this.

And I've, I've, I've, uh, I've, uh, I've just looked up, uh, anthropology to Ithaca college in our database. And, uh, we find it's, um, a negative $345,000 ROI. So that's part of that is the cost of tuition and the opportunity costs, but also part of that is that, um, I think for some of these programs, actually the earnings that you'll get coming out of it are lower than the earnings of that the counterfactual earnings. They're lower than the earnings of that counterfactual high school graduate. So, yeah, I mean, that's the kind of program that, you know, even if you do have kind of a social benefits justification for it, I'm not sure if that's something we should be, we should be considering or so we should be funding. It would be, maybe it would be fun to do a quick analysis or ROI of our degrees. Sure. Oh, that's a good idea.

Mindy, would that be our, would that be fun? Yeah. Go nuts. I think that would be a lot of fun. As I was telling Mindy earlier, we don't have every degree in the database because if it's a small enough cohort of graduates, it's going to be, the data is not going to be there for privacy reasons. So I can't guarantee that all of your degrees are going to show up, but I hope they will. All right. So Vanderbilt University, economics. I am looking at an R.O.I. adjusting for completion at underlying spending of 1.2 million. All right. Nice.

And for those listening, we will put a link to the 35-minute read or 40-minute read comprehensive analysis of a study. That will probably rehash a lot of what we talked about here on the show. We'll put a link to this sub-article that has the easily accessible table in it. And we'll put a link to – well, actually, that article, that second article will also have a link to the full downloadable spreadsheet that you can access on that. So all those will be available on biggerpockets.com slash money show 251. You can also go to freeop.org and I'm sure you're able to find it there.

And that's F-R-E-O-P-P.org. Look at Dave's face. Do you have the Excel spreadsheet open, Dave? Yeah, I'm just having fun over here, Wendy. I know. You're like, you're so excited. Kid in a candy shop. And Dave is...

I'm trying to find my degree. Dave is typical of our listeners. They're all huge spreadsheet nerds, which I say with love. Yeah. I'm a huge spreadsheet nerd too, is this probably obvious. So, yeah, the spreadsheet is there available for download. I couldn't tell. Yeah.

And what I love about that, like that's like, like you just made the whole thing available for free to everyone. Raw data, easily customizable table, write up, all of that. That's just, like, I love your intention. with this study and what you're hoping to achieve with it. It's just it's good for our country. It's good for people who we're trying to make these decisions. So thank you for this work. And I can tell you you're clearly passionate about it. Thank you. I am. Yes. And this is all publicly available data that I've calculated this based on. So I believe that, you know, people should have access to this

information that, you know, we as taxpayers, we're paying to collect the data. And so we should be able to analyze it and release that publicly in a way that's accessible to everyone. Dave, what was yours? So I went to the University of Rochester as an undergraduate, and I studied political science, which, you know, as a data analyst, has been really useful to me. And the before adjustment ROI is nearly 670,000. So pretty positive. Oh, that's above average. Okay. So I balanced you guys out with my negative a million or whatever. It doesn't even show up. My degree, my college. Which was too high, Mindy. It just couldn't calculate it. The number was too big.

And Preston, what was yours? So I was a Swarthmore economics graduate. And so my ROI after completion adjustment is about $1.6 million. So pretty decent. Although I work for a nonprofit, so I might be a little below average. But that's fine. You know, I'm doing what I love. So, yeah, but it's, it's, I went to a great school.

You know, I'm, I'm very pleased with my education. And the data seems to. agree with me. So I'm happy about that. Although one funny story, I just want to mention since we're on this subject. When I first published this story, somebody responded to me on Twitter and saying, saying, it's very important to look at medians, not averages when you're talking about this, which is what we do. We look at medians, not averages, because I was a geography major at UNC, and ours was like, the ROI for our major was like a million dollars. That didn't make any sense. And it turns out when Michael Jordan went to UNC, he was a geography major.

nature. That's incredible. So it looks good when you look at the average, but maybe that's not necessarily something attributable to the degree. It seems like a good Dwayne Johnson joke time. Yeah. Yeah. Well, Preston, when you do the graduate degree study, I would be really interested to see

that. This is not my podcast, but I'm going to speak for Scott and Mindy and invite you back on here. because I think that's really going to be interesting. Because personally, I just know that when I was an undergrad, I had no idea what I was doing. I sort of picked a major out of a hat. But when I went to graduate school, I thought about the ROI much more seriously. And I'd be very curious to see if that is borne out in the data. Absolutely.

Yeah, you'll be the first to know when that comes out. Awesome. Yeah, we will love to help share the word about that particular study. We're also here and available whenever you decide to solve health care in the future as well. Well, I'll leave that to my colleagues here at Freeop. We don't just study higher education. We also study health care. We study housing.

We study criminal justice, lots of different policy issues. So, you know, I can't let the show end without plugging my great organization and all the wonderful work that my colleagues do. So if you're interested in health care, check them out. It's perfect. So where can people find out more about you? We have Freeop.org. We just heard about all of those resources. How can people follow anything else that you're doing?

Twitter, any other areas where they can learn more about you? I'm on Twitter at at Preston Cooper 93. And I think my Twitter quality is mostly good, although I do do some late night tweeting sometimes. So you'll have to deal with that. But yeah, you can follow our work at freeop.org. You can sign up for email updates there. And I also write a column for Forbes every now and then.

So you can look me up Forbes, Preston Cooper, if you Google that, my stuff should show up. Awesome. Well, Preston, this has just been phenomenal. It's truly a privilege to hear about how the study was conducted, have access to, not to mention, have access to it as a decision-making tool when contemplating the biggest financial decision people are making up to that point in their lives, maybe the biggest financial decision they ever make in their lives.

So it's really, really powerful work, and you are just so clearly a master of the space, understanding the nuances there, thinking about all the caveats. Thank you so much for taking the time to complete it, write it up, and then share it again here on our podcast. We really appreciate it. Thank you for having me on. This is a great conversation. This was delightful, and I'm so appreciative of your time. And yes, Dave is not a regular co-host here, but he will be back when you released that grad school study, because I'm fascinated by that, too. And this was really easy to understand, even if you're not a data nerd like these other two guys on the show.

Thank you so much. Appreciate that. Thanks, Preston. Thanks. Thanks very much, guys. Okay, that was Preston Cooper, who just blew your mind for an hour solid straight. He is fantastic in every sense of the word. Dave, what did you think of the show?

Well, I'm amazed because Scott said that it was one of his top three to five best episodes. And while I would love to say that's because it's the first time I'm on the money show, I think I'm just completely in awe of Preston. I'm glad we let him go because I probably could have asked them questions for two more hours. But I just think this is, honestly, it's an amazing tool for anyone, you know, whether you're a parent or a student or just someone interested in public policy and where taxpayer dollars are going. This is a tool that everyone should play around with and take a look at. Yeah. As a mom of a future college student, she's a freshman in college right, or in high school right now.

So she's thinking about college. And this is great to be able to show my daughter, hey, this plan or this program at this school might not be the best choice. This program at a different school is going to give you a better return on your investment. Let's look at that. It's not so much the number one school versus the number eight school. It's which one is going to make you the most money. What is going to be the best investment for you? And I'm so excited to share this with her and talk to her about this and start this conversation.

and she has a personal finance class that she has to take in high school starting this year. She has to take it. I want to share this with the teacher of that class and be like, you need to talk about this in your class. You need to and talk to the high school counselors. Like this is such a powerful tool. I was blown away the moment I read that article. And oh my gosh, I was so excited about the, the, you know, we need to get pressed in a podcast here because he was, he was phenomenal in presenting all of this stuff. This is an immensely complex subject. He broke it down for us

bit by bit in a way that we could all understand with that. He answered every question that I kind came into with because I didn't realize he used a 5% discount rate, for example. I was very interested in that. Oh, and great, you don't like the 5% discount rate. Here's the model. Go change the number. That's the perfect answer to that type of inquiry with that. And I mean, loved it, loved it. This is like one of my favorite things to go to talk about this, the ramifications and stuff like this. So couldn't be more grateful to Preston and the work that they're doing at Freeop. And again, go check it out one more time.

BiggerPockus.com slash Money Show 251 where you'll find all those links or you can go direct to freeop.org. And from there, follow the cascade of the links to one, find the article that is the banner article that has the very in-depth analysis. And then the summary is the tables and the actual raw data set. But we'll link to all those in their show notes as well. Yeah, this was definitely the, not the last time you hear Preston Cooper on this podcast. As long as he wants to come.

I think he will. I think he was delighted to answer questions. Did you hear him say that we asked him some questions that other people have, but did he, like, really enjoyed nerding out with you guys? Well, I'm glad because I certainly did enjoy nerding out with him. Okay. Scott and Dave, should we get out of here? Yeah, thanks for having me, guys.

This is fun. Oh, this is definitely not the last time you will hear from Dave Meyer either. Oh, oh. Okay, from episode 251 of the Bigger Pockets Money podcast, he is Dave Meyer. The other guy is Scott Trench. I am Indy Jensen saying got to bail, blue whale.