ROI calculator for higher education
Why isn’t there a tool where you can input a school and major and see the return on investment you can expect in terms of salary after graduation?
I’ve been obsessing about a product idea and mostly wondering why it doesn’t already exist: An ROI calculator of higher education.
Why isn’t there a tool where you can input a school and major and see the return on investment you can expect in terms of salary after graduation?
One of the greatest user acquisition tools in product history is the mortgage calculator. You input personal information and data about your potential home purchase into a widget on a homepage, and your mortgage rate with an easy signup flow follows. Shouldn’t colleges, especially in this time of mass disruption of higher-ed, be doing the same thing?
Individual colleges and universities advertise what careers their graduates have pursued and jobs with unions, like teaching, publicize salary bands based on seniority and state, but nowhere is there a central database that shares with the potential college customer what their income after graduation could be. It's the proof a lead needs to become a paying user. If this existed it would possibly be the largest lead source for colleges, universities, and alternative universities/ skills programs. In a COVID world where students are questioning the value of higher-ed more than ever, we need this product to help students prepare for the future.
So why doesn't this already exist? Turns out, there are a lot of reasons why.
The backstory
So far Georgetown University's Center on Education and the Workforce (CEW) has done the most work on trying to aggregate this data for associate-level programs. They get their data from the College Scorecard, an online tool from the U.S. Department of Education. “Researchers say having this data accessible could increase accountability among colleges” reported Education Dive. Duh. The only way Georgetown or anyone is able to get this data was thanks to an executive order under the Obama Administration to build said College Scorecard. This was the first federal effort to try to report to American families the value of their student's education in terms of wages.
The limitation of the College Scorecard is that it’s missing data from many colleges across many states. Why? Because it’s a state-by-state decision on whether or not education institutions have to report this data and whether states choose to collect it. Launch My Career launched in 2015, through partnerships with the U.S. Chamber of Commerce Foundation and Strada Education Network, to support states in collecting this data and so far only Utah and Florida have gone live. Not the same, but related, the College Board released Colleges Search this year to match students with the right college for their field of interest along with student aid, but no intel on what that college will get them in terms of end income.
So in the end, the data has some holes.
If this tool existed, the value it would create
The benefits of a national tool for students to assess the return on investment of pursuing a specific degree or credential would be:
Students wouldn't take out loans that would be impossible to payback
Students would target career fields that match their financial goals
Graduates could assess starting salary ranges to target
Students who can’t afford the financial effects of getting a liberal arts degree would choose another path
And most importantly
Colleges would be held responsible for getting students career-ready. Otherwise, their user acquisition rates would plummet
How to get there
Somewhat recently OnlineU released the 2021 Best Online Colleges & Degrees rankings, which are the first of their kind to use student salary and debt data from the government to highlight the best online colleges based on annual tuition and ROI score. The ROI score represents the percentile of the return on investment for the online programs at each school. For these rankings, program data was only used for schools offering online degrees in the subject.
Their methodology for those as obsessed as me:
For each school’s program-specific salary and debt, we calculated a 10-year return on investment (ROI) and compared it against the ROI of similar programs. Salary (from one year after graduation) was multiplied by 129.5%, based on PayScale’s research on salary growth, to approximate growth for 10 years. Debt was assumed to be paid over 10 years with the current interest rate for federal loans, 4.53%. For each school program, we calculated a z-score comparing its 10-year ROI with the average 10-year ROI for all other programs in the same field. The z-scores for the programs that are offered online at each school were averaged and schools were ranked from highest to lowest on this average z-score. Programs that did not meet our requirements (see below) were excluded from our rankings.
In order to do this, OnlineU has to do significant manual research and data collection and thus the tool is set up to be out of date quickly. And as I mentioned, this tool is for online programs only. But it’s a start.
The next step would be to connect job postings (on sites like Hired, Indeed, etc) that contain salary ranges with the data on LinkedIn of where applicants studied - and specifically where hired applicants studied. In order to match the specific data point of where a hired applicant went to school to the salary data point associated with a job, we could start with someplace like Greenhouse where data like that lives. Open source that information and we can get started!