Daniel Nesbitt ’22
In a comprehensive report entitled “ROI of Liberal Arts Colleges: Value Adds Up Over Time,” Trinity College was ranked 10th among all liberal arts colleges for return on investment (ROI), ranked just below Amherst College in 9th and Bowdoin College in 8th. The report, released by the Center on Education and the Workforce at Georgetown University’s McCourt School of Public Policy, sought to ask “How do students who attend the 210 or so liberal arts colleges in the United States actually fare financially once they enter the labor force?”
The study found that the median ROI at liberal arts colleges is more than 25 percent above the median ROI of all colleges. To measure ROI, the authors used net present value (NPV), a measure the authors developed in an earlier study of ROI at more than 4500 institutions. NPV “can best be described as expected lifetime earnings minus the cost of going to college.” Using the 40-year NPV measurement, the authors were able to rank all schools with available data in terms of ROI. Harvey Mudd College had the highest 40-year NPV among liberal arts colleges at $1,851,000. For scale, Trinity’s ROI was found to be $1,335,000, while the median ROI among liberal arts colleges was $918,000.
While the study found that liberal arts colleges have high ROIs in general, they did exhibit greater variability in outcomes. For instance, the 25th percentile ROI for liberal arts colleges was almost exactly equivalent to the median ROI of all public colleges and universities while the 75th percentile ROI was just above $1 million, greater than most other types of colleges and universities.
This study also found that the ROIs at the most selective liberal arts were extremely high, almost comparable to that of doctoral universities with high research activity, indicating that liberal arts degrees are still valuable relative to other options. The study also examined other factors that are associated with ROI. For example, higher graduation rates were associated with higher ROIs at liberal arts colleges. Though there were some exceptions, this association held true for most liberal arts colleges studied. Another factor the study examined was the proportion of low-income students attending the college. Using the percentage of students receiving Pell Grants, the study found that “the lower the share of students who receive Pell Grants, the higher is that college’s ROI.
According to the study, geography also plays a key role in determining ROI, finding that “Colleges in regions where per capita earnings are greater have higher median ROIs than colleges in regions where per capita incomes are lower.” In other words, regions with higher incomes have colleges with higher ROIs. However, as the study notes, “Many of the small liberal arts colleges that are in financial danger or have closed are in New England.”