COST/ROI OF COLLEGE MAJORS

The inspiration for this post comes from the Visual Capitalist. Much of the data is sourced from their original article. Please check out their great work and insights.

I see the majority of the content on LinkedIn and find many of the charts/graphs to be incredibly interesting.

By no means should these calculations be the sole determinants of a major or career path, especially when comparing opposite ends of the career and income spectrum. If you are a college student, the metrics may be useful reference points for comparable majors or a deciding factor to choose between two favored careers.

If you are already into your career, the measures can be a means to justify your past decision.

These calculations and metrics are interesting nonetheless. Please visit the Google Sheets file to view the source data and the accompanying table/calculations. It may be fun to filter through the results. Because I am an investments/portfolio person, ROI determines rank.

Also, feel free to copy the data and adapt the calculations to your own preferences/curiosity.

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Calculating Cost of College

I used the median cost per year for a public institution as the basis for calculating this total. All majors received four years of $25,707 for a grand total of $102,228. This is used as the base cost of a four-year college degree.If there was an additional year or two for a graduate level degree, say as the additional year for most accounting majors, the same cost amount of $25,707 was applied for the extra year(s).

Although there is a moderate likelihood where many individuals from any major will go back to graduate school, it is true that some majors (even if it may not be entirely intuitive) typically “require” extra years of education. For example, nearly half of history majors and 45.3% of psychology majors will go on to graduate school. The opposite is true of communications majors where nearly 80% transition directly into the workforce.

In the event the degree requires specific, additional education (e.g., law school, dental school, and medical school) the median cost of the three or four year program was added to the base cost of the 4-year degree.

Calculating Early Career Income

This is the most simple step/calculation in the analysis. We will assume that a graduate will earn the starting/entry level salary for the first five years post college.

This is probably an oversimplification but serves as a good proxy for early career earnings.In this category, all of the engineering majors are standout performers. The high initial salary and the relatively short time in college are key elements.

A Career’s Cost-to-Income Ratio

Cost-to-Income = Total Cost of College / First 5 Years of Income

This is essentially an early career alternative to ROI and/or Payback Period. Both of these measures have flaws. What period of time and income measure should we use to calculate ROI? What percentage of income will be applied to determine Payback Period? Neither measure is entirely useless, but there are some inherent inadequacies. I still included both calculations in the spreadsheet.

I believe the cost-to-income is generally speaking, a less-flawed and worthy substitute.

If we compared all of the majors at this point, a few are standout performers. Again, the engineering majors (e.g., chemical, computer, electrical, mechanical, industrial and civil) hold most of the top spots (ratios ranging from .3254 to .3816 respectively). Computer science comes near the top (ratio of .3679). Other standouts in this measure and rounding out the top ten are nursing, construction management, and physician assistant (ratios at .3794, .3830, and .4152 respectively).

An interesting comparison comes into play when two majors may have comparable career outcomes. This is perhaps best illustrated by two majors, sociology and psychology.

Both have similar early career and lifetime earnings, but sociology has a lower cost due to fewer years in school. It is probably a fair assumption that a top performer with a psychology degree will earn more than a top performer with a sociology degree, although this is impossible to predict using the data provided.

Calculating Total Career Earnings

We’ll assume that the average college graduate will work for a total of 35 years. The income over those years will be allocated utilizing the following formula. (Majors with advanced, additional education will not include the five years of starting median salary to account for the extra years spent in school on average).

Starting Median for 5 Years + 75% of Mid Career Median for 10 Years+ Mid Career Median for 10 Years+ 125% of Mid Career Median for 10 YearsTotal Career Earnings

Once again, this may be an oversimplification. In doing research, the top 25% of performers/earners had significantly higher income than the median. We will assume that all readers of The Wealth Span are among this elite group and will outperform their average peer. Feel free to adjust these conservative estimates upward to account for your aspirations and abilities.

In many cases, this estimate is probably less than the actual expected lifetime earnings.

Here, the doctors and dentists are outpacing the field. In this rudimentary analysis, the more time required of the speciality (e.g, emergency physician) or additional speciality (e.g., cardiology and ophthalmology) required of certain doctors results in higher career earnings. More analysis is likely required to determine a more accurate cost of these specialties. Once again this is intended to serve as a general examination.

Other top performers in lifetime earnings are attorneys, economics, and again computer science.

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Some may view the choice of a career as entirely separated from the economic outcome of the career. There are important personal factors to consider. To a degree (double meaning intended) though, the metrics and data still matter.

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Is this too pragmatic a viewpoint? Do stats and measures have a place in deciding a major and career? What major’s metrics did you find most surprising? Where would you be most interested in expanding or exploring? Feel free to hit ‘Reply’ and share your thoughts!