The results are in. Out of more than 1,200 public and private college programs in the U.S., California's Harvey Mudd College is America's best. And I won't keep you in suspense -- the other nine of the top 10 bargains in the latest college rankings are (in order from best to less-best):
- Stevens Institute of Technology
- Colorado School of Mines (for students paying in-state tuition)
- Babson College
- Stanford University
- Georgia Institute of Technology
- Princeton University
- and Colorado School of Mines (this time, for out-of-staters.)
That's right. Colorado School of Mines is so nice, they named it (to the college rankings list) twice. So says PayScale.com, which in a just-released college rankings report crunching the numbers on institutions of higher learning, to find out which are the highest earning.
The value of knowledge
Does that sound a bit ... meretricious? Perhaps. In an ideal world, college should be a place for students to focus exclusively on learning, receive a well-rounded education, and expand their horizons. But the cold hard fact, says PayScale, is that U.S. college graduates today lug around a collective $1 trillion in student loans. According to the College Board, even a "moderately" expensive, in-state public university education now costs $23,410 a year. Private college students can easily pay twice that.
As such, PayScale argues students should carefully consider the cost of their education -- and the potential benefits over time -- when choosing a college. But how do you do that?
Here's how you do that
We all know that college graduates make more money than non-college graduates on average. That's a stone-cold fact. But we also know that college graduates are carrying around a heaping helping of student loan debt. The question is why? Shouldn't higher earnings help these students to pay off the debt, leaving college graduates both debt-free and, well ... rich?
Not necessarily. According to PayScale, it all comes down to a question of return on investment -- how much you earn over time with a college degree, versus how much money you spend to earn that degree.
In calculating its college rankings, PayScale focused on four-year undergraduate colleges, and assumed students attending these schools will graduate within the allotted four years. To determine costs, PayScale crunched the numbers on tuition (both in-state and out-of-state), room and board (both on-campus and off-campus), the cost of books, and even the variable of financial aid. They then added the "opportunity cost" of four years when college students might have been earning high-school graduate wages -- but didn't, because they were in college at the time.
Education costs, plus opportunity costs: That adds up to the cost of college -- the initial investment a student must pay before embarking upon a career of college-educated earning.
PayScale then dug through its years of research on how much graduates of various colleges earn, and tallied up the earnings advantages (compared to a high school graduate) over 20 years. The result was the gross "return on investment" of an average graduate from a given school. By comparing the second figure to the first, PayScale was able to calculate how much the initial "investment" in a given college is likely to grow annually over 20 years.
And what did they find out?
In addition to the headline news -- Harvey Mudd wins! -- PayScale came away with a slew of other interesting findings. For example, in the "top 10" college rankings shown above, the word "tech" appears six times -- and some of the other schools, like Stanford and Harvey Mudd, are also well-known for their technical prowess in fields such as engineering.
Indeed, "alumni who majored in engineering, computer science & math or business fields or ended up working in business/finance or computer and math careers have the best chance of seeing a 20-Year Net ROI above $1 million," says PayScale. And some of the best returns on investment come from "public Engineering schools" such as Georgia Tech, with graduates earning better annual returns on their investment than an investor in the Vanguard Total Stock Index (VTSMX), or S&P 500 (^GSPC -0.16%), or Dow Jones Industrial Average (^DJI 0.23%).
Price is what you pay, value is what you get
More generally, though, the big takeaway from the PayScale college rankings report is this: Buy cheap if you can, but don't be cheap.
Sure, from a plain dollar standpoint, there are a lot of "cheap" colleges out there. Virginia's Longwood University, for example, is one of the cheaper colleges in the field. But graduates of the college (on average) earn a poor return on their investment -- ranking 820th for net return on investment (assuming on-campus living, and no financial aid). North Carolina's Elizabeth City State University -- the "cheapest" school in PayScale's college rankings with a total on-campus education cost of just $46,500 over four years, ranks close to last in terms of ROI.
1,191st place, to be exact.
Conversely, University of Chicago has the misfortune of residing in the 10th most expensive city in these United States. Accordingly, its (on-campus) costs top the list at an astounding $245,000 for four years of education. Graduates of the university are so highly prized by employers, though, and earn so much after graduation ($458,000 more than their education costs), that University of Chicago nonetheless places 142nd in the college rankings -- in the 89th percentile.
So the moral of this story? When choosing a college, it's important to consider the cost, yes. But it's also essential that you consider the potential reward. And thanks to PayScale's unique new form of college rankings, now you have the tool to do that. You can access the college rankings report right here.