Choosing the Right College Can Be Life-Changing

How often do you make a decision worth a million dollars? Outside of buying a house (and in some cases choosing a partner), choosing the right college is one of the most impactful financial decisions a person can make.

Choosing a college is a million-dollar decision

So why is choosing a college a million-dollar decision? It comes down to return on investment or ROI for short. The ROI for a college education is measured by looking at the difference between lifetime earnings after graduation (relative to high school grads) and the cost of attending the school.

The math is pretty simple. According to the most recent data from Payscale, computer science graduates from MIT can expect to earn ~$3.5 million dollars more than a typical high school grad over a 40-year career, while a four year MIT degree costs just over $300,000 (without financial aid). Based on these figures, the ROI is $3.5M - $300K or approximately $3.2 million.

Once you understand this basic math, the financial implications of choosing the right college become clear. The ROI gap between a computer science (CS) degree at MIT (ranked #2 by US News) and a CS degree at Brigham Young University (BYU - ranked #89) is about $1 million. That should be a fairly intuitive result as MIT is widely regarded as the best university for technical fields in the U.S.

A less intuitive result is that gap between BYU (#89) and Villanova (#51) is also about $1 million in favor of BYU. Once you start to look into the data surrounding college ROI, these patterns start to show up all over the place. The ROI gap between economics majors at the University of San Francisco and the University of Denver (private colleges tied at #105) is roughly $1.1 million. Even for majors with lower graduate salaries like psychology, the ROI gap between Southern Methodist University (SMU - #72) and the University of Wisconsin at Madison (#38) is more than $500,000. Choosing the right college can be worth hundreds of thousands or even millions of dollars.

It’s not just about the money

Finances are just one piece of the college decision. Your child’s college will be the place where they live for the next four-plus years and transition from teenager to adult. Choosing the right college isn’t just about lifetime earnings or other financial metrics. There’s also a qualitative aspect to finding the right college that’s incredibly important to keep in mind.

To illustrate, let’s examine the disparate experiences of Sarah and Katie (anonymized to protect student privacy), both of whom graduated from a public high school in a suburban NJ town in 2018. After high school, Sarah enrolled at Cazenovia College, a small private college 18 miles southeast of Syracuse, while Katie enrolled at Syracuse University, a large private university in the city of Syracuse proper.

Sarah attended Cazenovia for her first two years of college. Despite good grades and a strong interest in her major, she felt that the resources and opportunities at the school were limited. Furthermore, Sarah found the social environment and campus culture to be cliquey and exclusive, which made it difficult for her to make friends and feel like part of the community. Eventually, she decided to transfer to Syracuse.

Meanwhile Katie found the social environment and campus culture to be welcoming. She was able to easily make friends and felt like she found a community who shared her interests. She was also able to take advantage of the school's strong alumni network, explore her interests in clubs, and enjoy a vibrant social scene and campus culture.

Sarah and Katie both graduated happily from Syracuse in Fall 2022 and Spring 2022 respectively. Syracuse was the right choice for both of them, but Sarah burned two years of her college experience and an extra semester to get there.

The US News rankings aren’t everything

In case it wasn’t already clear from the data presented earlier in this column, choosing the right college isn’t as simple as choosing the higher ranked school. To illustrate, let’s take a look at another case study (details once again anonymized for privacy) about a pair of students from suburban New Jersey. Josh and Brad both graduated from high school in 2013 with similar profiles, but Josh attended Drexel University (ranked #105 by US News) while Brad attended Lehigh University (ranked #51).

Brad and Josh both studied computer engineering and did well in their classes. But when it came to their career paths, Josh had a secret weapon. He took advantage of Drexel’s co-ops, a formal academic program that matches enrolled students with employers for extended internships that receive course credit. In his junior year, Josh did a 6-month business intelligence analyst co-op with Silicon Valley giant Oracle. Oracle doesn’t actively recruit summer interns from schools like Drexel, but it is willing to hire co-ops from Drexel specifically because of the longer duration of the co-op. After graduating, Josh moved into a full time sales engineer role at Oracle and then parlayed that into a sales engineering role at startup Asana

Meanwhile, despite attending Lehigh and achieving similar grades, Brad ended up interning at Akamai Technologies as a hardware engineer, and took a full-time role with Akamai after graduation. To be clear Brad ended up with a solid outcome: he currently has a six figure salary and is progressing well 5 years into his career. But Josh became a millionaire at age 26 after Asana went public in 2020.