Goldman Sachs Report Says ROI on College Falling


A new report by Goldman Sachs looked into the return on college investment and discovered that the average return on investment is decreasing. Compared to 2010 when graduates needed eight years to break even, the number has risen to nine years today with estimates that the number will grow further.

The Goldman Sachs report predicts that students graduating from college in 2030 will not see any return on their investment until the age of 33. For students graduating in 2050, the estimate is that they will be 37 years old before the break even.

In their report, Robert D. Boroujerdi and Christopher Wolf write that college choice considerably affects one’s future earnings and should be thus carefully considered. They argue:

“Graduates from the bottom 25 percent (of) colleges earn less, on average, than high school graduates.”

The same goes for students who decide to major in the Arts, Education and other social sciences, which the report characterizes as ‘negative return’ options. For such low-paying graduates, the Goldman Sach’s report says:

“For them, college may not increasingly be worth it.”

Lydia Frank echoes Goldman Sachs’ statement, warning that students need to carefully research and consider all of their options and choose those with the highest earning potential, CBS News says. Frank, who is the senior director at PayScale, explains:

“[C]ollege could be a poor financial investment if you don’t do some research ahead of time to understand earning potential for the field you’re interested in and weigh that against your potential student loan debt burden.”

The report contradicts recent data by the National Association of Colleges and Employers who in October reported that the hiring outlook is brighter as companies are planning to hire 11 percent more 2016 graduates to fill posts.

In their report, Boroujerdi and Wolf say that the modern marketplace requires more specialization than ever before, suggesting that education is not following along with the labor market in terms of worker specialization demand.

Goldman Sachs estimated the return on college education as the total net worth of grants and scholarships and the wages relinquished during one’s four-year studies, USA Today explains. These were measured against the wage premiums that graduates receive compared to high school graduates across the span of one’s working career.

The researchers explained that higher education is undergoing a significant change. With students heavily indebted and employees finding it hard to find skilled graduates, the companies are more open to the idea of hiring individuals with digital education credentials compared to traditional degrees. Already, tech giants like Google are creating nano and micro degrees to help students attain the level of education and specialization they expect from their future employees.

Education Department data reveals that top-ranking colleges, including Harvard and Princeton, offer the best value with graduates enjoying high earnings ten years after graduation. According to CNN Money, studying at a private college has an annual cost of $43,921. Public universities, on the other hand, come with a price tag of about $20,000 a year.