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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: When Ryan McMullen was a senior in high school, he

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Speaker 2: had dreams of working in international relations. So when it

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Speaker 2: came to choosing a college, he was looking for an

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Speaker 2: academic program that would set him up for success. But

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Speaker 2: even he admits there was something else guiding his search.

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Speaker 3: I was also conscious of the reputational and brand value,

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Speaker 3: and that was also something at the forefront of my mind.

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Speaker 3: A lot of my peers ended up matriculating at a

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Speaker 3: lot of private and a lot of ivys, and that

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Speaker 3: was also kind of a factor as well, just thinking

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Speaker 3: about the stamp of approval that you get by being

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Speaker 3: associated with an institution like that.

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Speaker 2: Ryan had a few schools in mind. One was an

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Speaker 2: IVY league, the University of Pennsylvania. Another was Georgetown University,

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Speaker 2: his dream school, but he didn't get into those. He

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Speaker 2: did get into the other schools on his list, penn State,

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Speaker 2: University of Pittsburgh, and George Washington University. In the end,

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Speaker 2: he went with what he considered his next best option.

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Speaker 3: I basically went to the school that I got accepted

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Speaker 3: to that most resembled my dream school. So I ended

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Speaker 3: up going to George Washington, and it honestly didn't feel

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Speaker 3: like a decision so much. I don't really know that

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Speaker 3: I gave fair consideration to some of the other options.

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Speaker 2: Ryan figured going to a prestigious school would be his

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Speaker 2: ticket into a dream job, but one thing he didn't

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Speaker 2: fully wrap his head around at the time was the

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Speaker 2: price tag. Now, almost five years after graduating, that's all

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Speaker 2: he can think about. Today. He's making about six figures

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Speaker 2: at a consulting job, but there's another number that hangs

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Speaker 2: over him, the one hundred and forty five thousand dollars

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Speaker 2: of student loan debt he took on. He's been paying

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Speaker 2: it off month by month in installments that are higher

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Speaker 2: than his rent.

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Speaker 3: Every major life decision that I've made since graduating college

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Speaker 3: has been informed and in some capacity dictated by that

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Speaker 3: loan balance.

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Speaker 2: GW did end up having a great international relations program,

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Speaker 2: but Ryan still says if he could go back in time,

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Speaker 2: back to senior year, back to that college decision, he's

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Speaker 2: not sure he'd have picked the same school.

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Speaker 3: It's not fun, especially when you grow up in an

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Speaker 3: area where people have pursued those alternative options. I grew

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Speaker 3: up around folks that went to the military, or went

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Speaker 3: through vocational training, and it looks like they came through

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Speaker 3: it with flying colors. You know, they're established, they are settled.

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Speaker 3: It's frustrating to see that the reality that I desperately

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Speaker 3: want for myself was possible without having gone through this path.

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Speaker 3: I'm paying severely for something that I didn't need.

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Speaker 2: Today on the show show, it's college admission season and

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Speaker 2: a lot of students are gunning for a brand name university.

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Speaker 2: But if they're looking at college as an investment in

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Speaker 2: their future, what metrics should they really be looking at.

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Speaker 2: A new Bloomberg analysis suggests that, given the ballooning costs

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Speaker 2: of higher education, prestige doesn't always pay off. From Bloomberg News,

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Speaker 2: this is the big take. I'm Sarah Holder. A lot

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Speaker 2: of people are in the process of making the same

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Speaker 2: decision Ryan once made, Where should they go to college?

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Speaker 2: Paulina Cacero, a personal finance reporter for Bloomberg, recently tried

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Speaker 2: to help answer this question using a classic financial method

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Speaker 2: calculating college's return on investment based on future earnings, and

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Speaker 2: she says that if you're purely looking at that financial

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Speaker 2: ROI Ivy League schools do pay off, but popular second

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Speaker 2: choice private schools, the ones a lot of students who

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Speaker 2: are gunning for ivy's turn to next don't pay off

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Speaker 2: off nearly as much.

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Speaker 4: For high school seniors that are trying to make this

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Speaker 4: really difficult decision. If you didn't get into your ivy

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Speaker 4: of choice, a public school is actually the safer bet.

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Speaker 4: While there's a whole bunch of elite private schools out

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Speaker 4: there that are often a plan B for students when

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Speaker 4: they don't get into their top choice school, we found

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Speaker 4: with our data that the ROI is the same at

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Speaker 4: public schools, which are a fraction of the cost. So

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Speaker 4: you know, at a time when some of the country's

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Speaker 4: most expensive schools have sticker prices stretching past ninety K

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Speaker 4: and people want to go there because they think that

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Speaker 4: they'll have great employment opportunities and career opportunities, you actually

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Speaker 4: probably should just go to your seat school.

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Speaker 2: To calculate return on investment, Bloomberg worked with the Georgetown

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Speaker 2: University Center on Education and the Workforce. Francesca Maglione, a

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Speaker 2: personal finance reporter who teamed up with Paulina on the story,

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Speaker 2: walked us through how the math works.

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Speaker 1: They data from College Scorecard, which basically takes data from

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Speaker 1: graduates that took on federal aid or accepted federal aid.

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Speaker 1: What Georgetown does is that they want to give people

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Speaker 1: a dollar amount when it comes to thinking about their college.

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Speaker 1: So what they do is that they take how much

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Speaker 1: people paid for college, and then they take their earnings

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Speaker 1: ten years after they enrolled in college, and they subtract

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Speaker 1: those numbers, and that lands you at a dollar amount,

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Speaker 1: which is basically, this is how much your college degree

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Speaker 1: is worth in real time.

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Speaker 2: I mean, you dug through a lot of this data,

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Speaker 2: you looked at so many colleges across the country. What

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Speaker 2: did you find?

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Speaker 4: So unsurprisingly, the eight traditional IVS institutions that have big

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Speaker 4: endowments and a really powerful alumni network that people think about.

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Speaker 4: Those get the average graduate a really high ROI of

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Speaker 4: two hundred and sixty five thousand. But realistically, most people

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Speaker 4: don't get into the IVY league. So when you start

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Speaker 4: looking at these other elite private schools that often become

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Speaker 4: a plan B for students when they don't get into

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Speaker 4: their top choice, return on investment actually drops a lot

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Speaker 4: so degrees from what we call hidden IVS have a

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Speaker 4: typical ROI of one hundred and thirty five thousand. Ten

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Speaker 4: years later, Paulina says, hidden ivs are schools that offer

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Speaker 4: a broad liberal arts education like Skidmore, Vassar, Oberlin, Wake Forest,

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Speaker 4: and Tulaane. That's actually less than those who graduated from

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Speaker 4: public universities, which offer an ROI of one hundred and

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Speaker 4: forty eight thousand, and So we're throwing a lot of

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Speaker 4: numbers at you, but if you think about it, these

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Speaker 4: are striking gaps when you consider that many students choose

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Speaker 4: the next most prestigious school they were admitted to over

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Speaker 4: a local state college. I think people assume when you

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Speaker 4: go to that brain name college, there's this intangible value

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Speaker 4: of going there. It's going to open career opportunities, it's

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Speaker 4: going to open doors that you might not have had

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Speaker 4: access to, and that people tend to think comes with

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Speaker 4: higher pay. And while college graduates from prestigious universities do

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Speaker 4: tend to get higher pay than maybe those less prestigious universities,

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Speaker 4: the cost of actually going is now eating away at

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Speaker 4: that ROI.

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Speaker 2: Francesca, what about major in college? How does that factor

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Speaker 2: into this ROI?

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Speaker 1: Yeah, so that's actually something that we really started to

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Speaker 1: think about when we looked at the top performing schools

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Speaker 1: when you think about ROI, and so although Georgetown's data

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Speaker 1: is just by institution level, it doesn't go into program level.

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Speaker 1: The schools with the highest ROI were schools that you've

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Speaker 1: probably never heard about, the Colorado School of Mind, the

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Speaker 1: Albany College of Pharmacy and Health Sciences, and other pharmacy

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Speaker 1: and tech schools, And so we started to think about

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Speaker 1: why are these schools really high up. The reason is

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Speaker 1: these technical majors, these schools that have more of a

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Speaker 1: direct career path into the labor force end up having

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Speaker 1: a higher ROI because their graduates really get a job

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Speaker 1: right away. And so that kind of led us to

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Speaker 1: try to evaluate what schools are maybe not performing as

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Speaker 1: well and why might they be not doing as well,

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Speaker 1: and that led us to liberal arts schools. Liberal arts

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Speaker 1: schools are great. People love them. They're very intellectual, but

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Speaker 1: they don't have as big endowments to provide as good

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Speaker 1: financial aid as maybe an ivy would. And what happens

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Speaker 1: in many cases is that Liberal arts graduates end up

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Speaker 1: going to graduate school where they take out loans. These

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Speaker 1: schools are really expensive, but they feel like that's the

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Speaker 1: next step that they have to do after receiving their

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Speaker 1: liberal arts education, right.

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Speaker 2: I mean I could imagine the liberal arts colleges might argue, like,

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Speaker 2: isn't the value of an education measured by more than

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Speaker 2: just the monetary benefits you get later through income. What

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Speaker 2: would you say to that?

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Speaker 1: Yeah, I think that's something we really talked about, the intangibles.

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Speaker 1: You know, we're really trying to put a number on

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Speaker 1: an answer that is really personal for many people. And

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Speaker 1: I think that when looking at this data, we're trying

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Speaker 1: to talk to people that really have to think about

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Speaker 1: their finances when thinking about college. You know, a liberal

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Speaker 1: arts can give you great skills, can help you think critically,

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Speaker 1: maybe you will get an amazing alumni network. But if

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Speaker 1: you took on so much debt to go to college,

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Speaker 1: it might not end up paying out.

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Speaker 4: You know, today we're seeing millions of Americans buckle under

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Speaker 4: the burden of one point seven trillion dollars in student loans.

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Speaker 4: For some people, it takes as long as twenty years

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Speaker 4: to pay off that debt. So that financial burden is

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Speaker 4: forcing people to delay important financial milestones like buying a home,

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Speaker 4: starting a family. And in fact, the Federal Reserve Bank

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Speaker 4: of Saint Louis found that while college graduates do enjoy

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Speaker 4: higher salaries, the wealth building advantages of college has declined

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Speaker 4: for recent graduates. This growing amount of debt is forcing

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Speaker 4: people to really consider the value of a college degree.

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Speaker 2: When we come back, we hear from Ryan again about

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Speaker 2: how that debt is shaping life post graduation, and Paulina

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Speaker 2: and Francesca help us understand how the value of a

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Speaker 2: college education continues to be a moving target on paper.

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Speaker 2: Ryan McMullen, who you met earlier, is living a version

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Speaker 2: of the American dream. He has a six figure income,

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Speaker 2: he has job security, and he lives in a major city.

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Speaker 2: But for him, the decision to take on debt to

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Speaker 2: go to an expensive college like George Washington, has put

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Speaker 2: other dreams on hold.

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Speaker 3: I'm probably living somebody's dream somewhere out there. It's not mine.

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Speaker 3: And if your goal was to live in a major

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Speaker 3: city and work in a shiny office building, you probably

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Speaker 3: do need to go to college. To be honest with you,

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Speaker 3: I was referred into my current position by somebody I

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Speaker 3: went to school with, somebody that I met through school.

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Speaker 3: I'm very thankful for that, and this certainly wouldn't have

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Speaker 3: happened without that connection. I think equally, you could make

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Speaker 3: the argument that had I not gone there, I wouldn't

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Speaker 3: necessarily need this job, right, it was a manufactured necessity

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Speaker 3: because of the debt burden that I'd taken out.

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Speaker 2: Ryan says if he didn't have loans, his life might

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Speaker 2: look very different. He wasn't the same person when he

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Speaker 2: was a high school senior stressing about which big name

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Speaker 2: school would be the best on a resume. Like anyone,

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Speaker 2: his dreams now are a little different than they were then.

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Speaker 3: I just want to be, you know, settled in a

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Speaker 3: suburb and you know, drive to soccer practices like much

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Speaker 3: of the country does, and for that, you know, that

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Speaker 3: being my goal. I don't think I'm anywhere close to that.

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Speaker 2: Paulina and Francesca say many people they've spoken to are

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Speaker 2: feeling pressure to make sacrifices like these. College has long

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Speaker 2: been framed as an inevitable step to success, but increasingly

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Speaker 2: people can't afford not to think about the return on investment.

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Speaker 2: Just this week, Biden announced an attempt to forgive student

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Speaker 2: loans for tens of millions of borrowers after an earlier

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Speaker 2: effort was blocked by the Supreme Court. But students making

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Speaker 2: decisions about schools today can't necessarily count on that future relief. Paulina,

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Speaker 2: can you say more about how much college costs and

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Speaker 2: why that starts to matter so much more today?

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Speaker 4: Definitely. I think that it's important to note that college

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Speaker 4: is often one of the biggest financial decisions that most

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Speaker 4: people will make in life, and people are making that

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Speaker 4: decision at eighteen. So I think a lot of the

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Speaker 4: people that we spoke to thought they were making a

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Speaker 4: calculated decision by taking on more debt to go to

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Speaker 4: a prestigious school. But I think the gravity of how

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Speaker 4: much that debt will impact them doesn't quite you know,

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Speaker 4: hit home. And part of that is because, you know,

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Speaker 4: I think the last few years, graduating from college has

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Speaker 4: almost become a prerequisite to achieving the American dream. Right.

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Speaker 4: A lot of Americans and people beyond were raised to

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Speaker 4: believe that higher education will guarantee a higher paying job,

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Speaker 4: grant you, you know, greater stability and a better quality

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Speaker 4: of life. And for many people it does. But you know,

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Speaker 4: I think the rising cost of college is really changing

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Speaker 4: that you know, conversation and to the scales, like when

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Speaker 4: you look at the data, how do you.

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Speaker 2: Think this perspective that you guys are sharing on the

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Speaker 2: return on investment from college could shift the way we

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Speaker 2: think about the value of a degree.

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Speaker 1: Yeah, I think that's kind of what led to us

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Speaker 1: coming up with this idea. We were talking to a

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Speaker 1: bunch of families, students, college counselors that kept saying people

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Speaker 1: are obsessed with the brand name, with getting into these

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Speaker 1: really prestigious schools, no matter the costs, and so we

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Speaker 1: kind of wanted to answer the question does prestige pay off?

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Speaker 1: Do people really see a difference if they choose the

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Speaker 1: brand name over their public school or their state university.

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Speaker 1: What we're trying to do with this project is provide

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Speaker 1: a tool for people to think about this in a

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Speaker 1: more strategic way of being. Like, yes, if you look

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Speaker 1: at the Ivy's prestige does pay off, but then it's

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Speaker 1: kind of dropping off at a very significant rate when

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Speaker 1: you start to look at just elite colleges and you

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Speaker 1: start to look at public flagships which offer really goodhar

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Speaker 1: roi is when compared to other private schools as well.

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Speaker 4: Yeah, so I think a lot of people base their

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Speaker 4: decision off of these ranks, Like everyone is obsessed with

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Speaker 4: school ranks, But you know, after a certain point, it

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Speaker 4: gets really murky. There's no guarantee that going to a

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Speaker 4: brand name college is going to guarantee success. It's a risk.

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Speaker 4: And I think that the whole point of this is

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Speaker 4: to show that, like people can make a calculated risk.

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Speaker 4: And I think people were already kind of making these

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Speaker 4: doing this calculus, trying to do it by themselves. But

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Speaker 4: we wanted to aggregate like real data and answer these

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Speaker 4: questions for people, and we thought it was valuable to

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Speaker 4: look at what is the average person graduating from a

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Speaker 4: specific institution, what do they get out of it?

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Speaker 2: It seems like this is another tool in the toolbox.

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Speaker 2: People are already weighing so many different things. It's such

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Speaker 2: an overwhelming decision for so many people, and this might

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Speaker 2: help them understand better what they're getting into.

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Speaker 4: Its super complicated calculus.

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Speaker 1: Yeah, And I think it's not that we're telling people

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Speaker 1: don't go to college, it's not worth it. It's more

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Speaker 1: there's ways that you can go about this in a

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Speaker 1: smarter or more informed manner that might set you up

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Speaker 1: for success in a better way that maybe just thinking

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Speaker 1: about these intangible aspects that people honestly way more than

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Speaker 1: anything when looking at colleges.

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Speaker 4: I think what's really hard is like something that we've

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Speaker 4: heard from a lot of the high school seniors is like,

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Speaker 4: when you have worked so hard in high school to

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Speaker 4: get to a certain place, to become the best Ivy

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Speaker 4: League or whatever college candidate that you can, it's hard

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Speaker 4: not to want to pick the most prestigious school. People

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Speaker 4: associate that as like a testament to their work and

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Speaker 4: to everything that they've achieved thus far, and they think

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Speaker 4: it will continue to do so in life. But hopefully

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Speaker 4: we can equip people with the numbers be like, hey,

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Speaker 4: this is not the only thing that you should consider,

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Speaker 4: But it's really hard not to think that way when

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Speaker 4: you are in the moment and thinking of like, oh

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Speaker 4: my god, my senior year is so awful. I spent

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Speaker 4: all this time working on my essays and working so

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Speaker 4: hard to get these grades. It might be like kind

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Speaker 4: of earth shattering to not be able to go to

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Speaker 4: your top choice school as a high school senior. But

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Speaker 4: I when faced with a lifetime of paying off student

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Speaker 4: loan debt, it may be better to just come to

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Speaker 4: terms of that like earlier on than having to deal

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Speaker 4: with paying this off for the rest of your life.

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Speaker 2: Thanks for listening to The Big Take podcast from Bloomberg News.

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Speaker 2: I'm Sarah Holder. This episode was produced by Thomas lu

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Speaker 2: It was edited by Aaron Edwards and Jennifer Bissell Linsk.

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Speaker 2: It was mixed by Ben O'Brien. Naomi Shavin is our

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Speaker 2: senior producer. Our senior editor is Elizabeth Ponso. Nicole beemster

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Speaker 2: Bor is our executive producer. Sage Bauman is Bloomberg's head

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Speaker 2: of podcasts. Please subscribe and review The Big Take wherever

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Speaker 2: you listen to podcasts. It helps new listeners find the show.

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Speaker 2: Thanks for listening. We'll be back tomorrow.