The Undergraduate College Education in USA: Schools with Best and Worst ROI

This study examined the ROI, total 4-year education cost, graduation rate and average loan amount for undergraduate education across schools in USA. The results indicate that students from Southwest region of USA enjoyed highest mean ROI (6.69%) along with highest median ROI (6.50%) with minimum standard deviation of 2.03% among all five regional analyzed over 20-yeasr period. Yale University reports the highest graduation rate of 98 percent in the nation. Georgia Institute of Technology (In-state) enjoyed highest ROI of 12.30 percent over 20-years period of study.


Archives of Business Research (ABR)
Vol.4, Issue 6, December-2016 money they can make straight out of school, others want a certain level of long-term career satisfaction. Neither is wrong." Studies like PayScale's help would-be students (and their parents) make more informed choices. As Americans start to realize how much a bad choice can hurt them, they will demand more transparency. Some colleges are providing it, prodded by the federal government. For example, the University of Texas recently launched a website showing how much its graduates earn and owe after five years. (The Economist: Higher Education-6).
In the past, college education used to lead to better, brighter, and financially lucrative professional careers. However, in the present times, undergraduate education may not act as a ticket to better careers but may also result in significant educational loans upon graduation. According to the Federal Reserve Bank of New York, 44 percent of recent college graduates are underemployed --working in jobs that don't require their degree --as of 2012 (PayScale College ROI Report: Best Value Colleges: www.payscale.com/college-roi) In spite of numerous articles printed in magazines, academic journals lack the analytical research on this topic. Therefore, this study is an initial step to analyze ROI and other factors relevant to students' educational goals from an academic point.

DATA AND METHODOLOGY
The data is collected from information collected by Payscale.com's list of ROI rankings. Payscale.com website provides useful information on ROI and other factors important to college graduates. PayScale.com administers the largest real-time salary survey in the world with more than 150,000 new survey records added every month. The database of more than 54 million total salary profiles is updated nightly to reflect the most detailed, up-to-date compensation information available. Payscale.com data collection is strongly correlated with the size of the pool being considered, representing the diversity of the general workforce.
Both in-State and out-of-State educational institutions are included in this study. The following four variables (factors) are analyzed in this study:

All schools in USA
The results of the analysis across all schools in USA are shown in Table 1 which shows that the mean annual ROI for undergraduate education in USA is 5.39 percent over the last twenty-year period with a standard deviation of 2.64 percent. The median annual income over the same period is found to be 5.50 percent.
The graduates from Georgia Institute of Technology (In-State) earned the highest annual ROI of 12.30 percent per year for 20 years, while Jackson State University, Mississippi (Out-of-State) graduates earned an average ROI of -10.30%. Comparison of total 4-year cost of education reveals that students at University of Chicago (Private) spent a total of $245,000 while the total of cost education ($46,500) at Elizabeth City State University of North Carolina was the cheapest among all schools in USA.
Yale produced highest graduation rate of 98 percent for the undergraduate students, while students at Baker College Flint MI were graduating at the lowest rate of 11 percent during the study period. The students at Clemson University (Out-of-State) took the highest loan of $51,600 during their undergraduate educational life. On the other side, students at Colgate University (Private) were able to graduate with a minimum average loan of $9,600 only. Table 2 (Panel A) shows the results for schools in Midwest Region. Data for 319 schools is used and incomplete data of 13 schools is excluded in this group.

Schools in Midwest Region
The findings of this study indicate that the mean annual ROI for undergraduate education in Midwest region is 5.19 percent over the last twenty-year period with a standard deviation of 2.51 percent. Both these percentages are below the national average indicating that mean ROI is lower than national average with a tighter probability distribution. The median annual income is 5.35 percent which is slightly smaller than the national average.
The graduates from South Dakota School of Mines and Technology (In-State) earned the highest annual ROI of 11.94 percent per year for 20 years, while Ashland University (Private) of Ohio's graduates earned an average ROI of -3.30%. In this group of schools, students at University of Chicago (Private) had to spend 4-year education cost of $245,000 (which is also the highest in USA), whereas students at Missouri Southern State University faced the cheapest 4-year educational expense of $58,900.
The highest graduation rate of 95 percent was reported by University of Notre Dame (Private), while students at Baker College Flint MI were graduating at the lowest rate of 11 percent during the study period (which is also lowest in USA). The students at Kettering University (Private) of Michigan had to take the highest educational loan of $45,600. But, the students at Drury University (Private) of Missouri took the lowest loan of $16,160 during their educational life.

Schools in Southeast Region
This study's results for schools in Southeast region are reported in Table 2 (Panel B). Data for 323 schools is used and incomplete data of 18 schools is excluded.
The results shown in this project suggest that the mean annual ROI for undergraduate education in Southeast region is 4.98 percent over the last twenty-year period with a standard deviation of 3.02 percent. While mean ROI is lower than national average, the standard deviation is higher national norms. Thus, according to findings of this study, mean ROI of this group is lower than national average with much wider distribution indicating relatively poor performance of the group. The median annual income is 5.19 percent which is smaller than national average.

Schools in West Region
This study's results for schools in West region are reported in Table 2 (Panel E). Data for 178 schools is used and incomplete data of 11 schools is excluded.
The results shown in Table suggest that mean annual ROI for undergraduate education in West region is 6.09 percent over the last twenty-year period with a standard deviation of 2.79 percent. While mean ROI is higher than national average, the standard deviation is also higher than national norms. Thus, according to findings of this study, mean ROI of this group is higher than national average with much wider distribution. Median ROI for the group is 6.08% which is also higher than national average. A closer look at

CONCLUSION
The results of this study indicate that students from Southwest region of USA enjoyed highest mean ROI (6.69%) along with highest median ROI (6.50%) with minimum standard deviation of 2.03% among all five regional analyzed over 20-yeasr period. Colleges in West region are second to colleges in Southwest as per ROI ranking. Students of colleges in Northeast region had to pay the highest educational cost ($152,577) over the period of study but they also enjoyed the highest graduation rate of 63.22% among five regions. Yale University reports the highest graduation rate of 98 percent in the nation. Georgia Institute of Technology (In-state) enjoyed highest ROI of 12.30 percent over 20-years period of study.