Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: When Ryan McMullen was a senior in high school, he
Speaker 2: had dreams of working in international relations. So when it
Speaker 2: came to choosing a college, he was looking for an
Speaker 2: academic program that would set him up for success. But
Speaker 2: even he admits there was something else guiding his search.
Speaker 3: I was also conscious of the reputational and brand value,
Speaker 3: and that was also something at the forefront of my mind.
Speaker 3: A lot of my peers ended up matriculating at a
Speaker 3: lot of private and a lot of ivys, and that
Speaker 3: was also kind of a factor as well, just thinking
Speaker 3: about the stamp of approval that you get by being
Speaker 3: associated with an institution like that.
Speaker 2: Ryan had a few schools in mind. One was an
Speaker 2: IVY league, the University of Pennsylvania. Another was Georgetown University,
Speaker 2: his dream school, but he didn't get into those. He
Speaker 2: did get into the other schools on his list, penn State,
Speaker 2: University of Pittsburgh, and George Washington University. In the end,
Speaker 2: he went with what he considered his next best option.
Speaker 3: I basically went to the school that I got accepted
Speaker 3: to that most resembled my dream school. So I ended
Speaker 3: up going to George Washington, and it honestly didn't feel
Speaker 3: like a decision so much. I don't really know that
Speaker 3: I gave fair consideration to some of the other options.
Speaker 2: Ryan figured going to a prestigious school would be his
Speaker 2: ticket into a dream job, but one thing he didn't
Speaker 2: fully wrap his head around at the time was the
Speaker 2: price tag. Now, almost five years after graduating, that's all
Speaker 2: he can think about. Today. He's making about six figures
Speaker 2: at a consulting job, but there's another number that hangs
Speaker 2: over him, the one hundred and forty five thousand dollars
Speaker 2: of student loan debt he took on. He's been paying
Speaker 2: it off month by month in installments that are higher
Speaker 2: than his rent.
Speaker 3: Every major life decision that I've made since graduating college
Speaker 3: has been informed and in some capacity dictated by that
Speaker 3: loan balance.
Speaker 2: GW did end up having a great international relations program,
Speaker 2: but Ryan still says if he could go back in time,
Speaker 2: back to senior year, back to that college decision, he's
Speaker 2: not sure he'd have picked the same school.
Speaker 3: It's not fun, especially when you grow up in an
Speaker 3: area where people have pursued those alternative options. I grew
Speaker 3: up around folks that went to the military, or went
Speaker 3: through vocational training, and it looks like they came through
Speaker 3: it with flying colors. You know, they're established, they are settled.
Speaker 3: It's frustrating to see that the reality that I desperately
Speaker 3: want for myself was possible without having gone through this path.
Speaker 3: I'm paying severely for something that I didn't need.
Speaker 2: Today on the show show, it's college admission season and
Speaker 2: a lot of students are gunning for a brand name university.
Speaker 2: But if they're looking at college as an investment in
Speaker 2: their future, what metrics should they really be looking at.
Speaker 2: A new Bloomberg analysis suggests that, given the ballooning costs
Speaker 2: of higher education, prestige doesn't always pay off. From Bloomberg News,
Speaker 2: this is the big take. I'm Sarah Holder. A lot
Speaker 2: of people are in the process of making the same
Speaker 2: decision Ryan once made, Where should they go to college?
Speaker 2: Paulina Cacero, a personal finance reporter for Bloomberg, recently tried
Speaker 2: to help answer this question using a classic financial method
Speaker 2: calculating college's return on investment based on future earnings, and
Speaker 2: she says that if you're purely looking at that financial
Speaker 2: ROI Ivy League schools do pay off, but popular second
Speaker 2: choice private schools, the ones a lot of students who
Speaker 2: are gunning for ivy's turn to next don't pay off
Speaker 2: off nearly as much.
Speaker 4: For high school seniors that are trying to make this
Speaker 4: really difficult decision. If you didn't get into your ivy
Speaker 4: of choice, a public school is actually the safer bet.
Speaker 4: While there's a whole bunch of elite private schools out
Speaker 4: there that are often a plan B for students when
Speaker 4: they don't get into their top choice school, we found
Speaker 4: with our data that the ROI is the same at
Speaker 4: public schools, which are a fraction of the cost. So
Speaker 4: you know, at a time when some of the country's
Speaker 4: most expensive schools have sticker prices stretching past ninety K
Speaker 4: and people want to go there because they think that
Speaker 4: they'll have great employment opportunities and career opportunities, you actually
Speaker 4: probably should just go to your seat school.
Speaker 2: To calculate return on investment, Bloomberg worked with the Georgetown
Speaker 2: University Center on Education and the Workforce. Francesca Maglione, a
Speaker 2: personal finance reporter who teamed up with Paulina on the story,
Speaker 2: walked us through how the math works.
Speaker 1: They data from College Scorecard, which basically takes data from
Speaker 1: graduates that took on federal aid or accepted federal aid.
Speaker 1: What Georgetown does is that they want to give people
Speaker 1: a dollar amount when it comes to thinking about their college.
Speaker 1: So what they do is that they take how much
Speaker 1: people paid for college, and then they take their earnings
Speaker 1: ten years after they enrolled in college, and they subtract
Speaker 1: those numbers, and that lands you at a dollar amount,
Speaker 1: which is basically, this is how much your college degree
Speaker 1: is worth in real time.
Speaker 2: I mean, you dug through a lot of this data,
Speaker 2: you looked at so many colleges across the country. What
Speaker 2: did you find?
Speaker 4: So unsurprisingly, the eight traditional IVS institutions that have big
Speaker 4: endowments and a really powerful alumni network that people think about.
Speaker 4: Those get the average graduate a really high ROI of
Speaker 4: two hundred and sixty five thousand. But realistically, most people
Speaker 4: don't get into the IVY league. So when you start
Speaker 4: looking at these other elite private schools that often become
Speaker 4: a plan B for students when they don't get into
Speaker 4: their top choice, return on investment actually drops a lot
Speaker 4: so degrees from what we call hidden IVS have a
Speaker 4: typical ROI of one hundred and thirty five thousand. Ten
Speaker 4: years later, Paulina says, hidden ivs are schools that offer
Speaker 4: a broad liberal arts education like Skidmore, Vassar, Oberlin, Wake Forest,
Speaker 4: and Tulaane. That's actually less than those who graduated from
Speaker 4: public universities, which offer an ROI of one hundred and
Speaker 4: forty eight thousand, and So we're throwing a lot of
Speaker 4: numbers at you, but if you think about it, these
Speaker 4: are striking gaps when you consider that many students choose
Speaker 4: the next most prestigious school they were admitted to over
Speaker 4: a local state college. I think people assume when you
Speaker 4: go to that brain name college, there's this intangible value
Speaker 4: of going there. It's going to open career opportunities, it's
Speaker 4: going to open doors that you might not have had
Speaker 4: access to, and that people tend to think comes with
Speaker 4: higher pay. And while college graduates from prestigious universities do
Speaker 4: tend to get higher pay than maybe those less prestigious universities,
Speaker 4: the cost of actually going is now eating away at
Speaker 4: that ROI.
Speaker 2: Francesca, what about major in college? How does that factor
Speaker 2: into this ROI?
Speaker 1: Yeah, so that's actually something that we really started to
Speaker 1: think about when we looked at the top performing schools
Speaker 1: when you think about ROI, and so although Georgetown's data
Speaker 1: is just by institution level, it doesn't go into program level.
Speaker 1: The schools with the highest ROI were schools that you've
Speaker 1: probably never heard about, the Colorado School of Mind, the
Speaker 1: Albany College of Pharmacy and Health Sciences, and other pharmacy
Speaker 1: and tech schools, And so we started to think about
Speaker 1: why are these schools really high up. The reason is
Speaker 1: these technical majors, these schools that have more of a
Speaker 1: direct career path into the labor force end up having
Speaker 1: a higher ROI because their graduates really get a job
Speaker 1: right away. And so that kind of led us to
Speaker 1: try to evaluate what schools are maybe not performing as
Speaker 1: well and why might they be not doing as well,
Speaker 1: and that led us to liberal arts schools. Liberal arts
Speaker 1: schools are great. People love them. They're very intellectual, but
Speaker 1: they don't have as big endowments to provide as good
Speaker 1: financial aid as maybe an ivy would. And what happens
Speaker 1: in many cases is that Liberal arts graduates end up
Speaker 1: going to graduate school where they take out loans. These
Speaker 1: schools are really expensive, but they feel like that's the
Speaker 1: next step that they have to do after receiving their
Speaker 1: liberal arts education, right.
Speaker 2: I mean I could imagine the liberal arts colleges might argue, like,
Speaker 2: isn't the value of an education measured by more than
Speaker 2: just the monetary benefits you get later through income. What
Speaker 2: would you say to that?
Speaker 1: Yeah, I think that's something we really talked about, the intangibles.
Speaker 1: You know, we're really trying to put a number on
Speaker 1: an answer that is really personal for many people. And
Speaker 1: I think that when looking at this data, we're trying
Speaker 1: to talk to people that really have to think about
Speaker 1: their finances when thinking about college. You know, a liberal
Speaker 1: arts can give you great skills, can help you think critically,
Speaker 1: maybe you will get an amazing alumni network. But if
Speaker 1: you took on so much debt to go to college,
Speaker 1: it might not end up paying out.
Speaker 4: You know, today we're seeing millions of Americans buckle under
Speaker 4: the burden of one point seven trillion dollars in student loans.
Speaker 4: For some people, it takes as long as twenty years
Speaker 4: to pay off that debt. So that financial burden is
Speaker 4: forcing people to delay important financial milestones like buying a home,
Speaker 4: starting a family. And in fact, the Federal Reserve Bank
Speaker 4: of Saint Louis found that while college graduates do enjoy
Speaker 4: higher salaries, the wealth building advantages of college has declined
Speaker 4: for recent graduates. This growing amount of debt is forcing
Speaker 4: people to really consider the value of a college degree.
Speaker 2: When we come back, we hear from Ryan again about
Speaker 2: how that debt is shaping life post graduation, and Paulina
Speaker 2: and Francesca help us understand how the value of a
Speaker 2: college education continues to be a moving target on paper.
Speaker 2: Ryan McMullen, who you met earlier, is living a version
Speaker 2: of the American dream. He has a six figure income,
Speaker 2: he has job security, and he lives in a major city.
Speaker 2: But for him, the decision to take on debt to
Speaker 2: go to an expensive college like George Washington, has put
Speaker 2: other dreams on hold.
Speaker 3: I'm probably living somebody's dream somewhere out there. It's not mine.
Speaker 3: And if your goal was to live in a major
Speaker 3: city and work in a shiny office building, you probably
Speaker 3: do need to go to college. To be honest with you,
Speaker 3: I was referred into my current position by somebody I
Speaker 3: went to school with, somebody that I met through school.
Speaker 3: I'm very thankful for that, and this certainly wouldn't have
Speaker 3: happened without that connection. I think equally, you could make
Speaker 3: the argument that had I not gone there, I wouldn't
Speaker 3: necessarily need this job, right, it was a manufactured necessity
Speaker 3: because of the debt burden that I'd taken out.
Speaker 2: Ryan says if he didn't have loans, his life might
Speaker 2: look very different. He wasn't the same person when he
Speaker 2: was a high school senior stressing about which big name
Speaker 2: school would be the best on a resume. Like anyone,
Speaker 2: his dreams now are a little different than they were then.
Speaker 3: I just want to be, you know, settled in a
Speaker 3: suburb and you know, drive to soccer practices like much
Speaker 3: of the country does, and for that, you know, that
Speaker 3: being my goal. I don't think I'm anywhere close to that.
Speaker 2: Paulina and Francesca say many people they've spoken to are
Speaker 2: feeling pressure to make sacrifices like these. College has long
Speaker 2: been framed as an inevitable step to success, but increasingly
Speaker 2: people can't afford not to think about the return on investment.
Speaker 2: Just this week, Biden announced an attempt to forgive student
Speaker 2: loans for tens of millions of borrowers after an earlier
Speaker 2: effort was blocked by the Supreme Court. But students making
Speaker 2: decisions about schools today can't necessarily count on that future relief. Paulina,
Speaker 2: can you say more about how much college costs and
Speaker 2: why that starts to matter so much more today?
Speaker 4: Definitely. I think that it's important to note that college
Speaker 4: is often one of the biggest financial decisions that most
Speaker 4: people will make in life, and people are making that
Speaker 4: decision at eighteen. So I think a lot of the
Speaker 4: people that we spoke to thought they were making a
Speaker 4: calculated decision by taking on more debt to go to
Speaker 4: a prestigious school. But I think the gravity of how
Speaker 4: much that debt will impact them doesn't quite you know,
Speaker 4: hit home. And part of that is because, you know,
Speaker 4: I think the last few years, graduating from college has
Speaker 4: almost become a prerequisite to achieving the American dream. Right.
Speaker 4: A lot of Americans and people beyond were raised to
Speaker 4: believe that higher education will guarantee a higher paying job,
Speaker 4: grant you, you know, greater stability and a better quality
Speaker 4: of life. And for many people it does. But you know,
Speaker 4: I think the rising cost of college is really changing
Speaker 4: that you know, conversation and to the scales, like when
Speaker 4: you look at the data, how do you.
Speaker 2: Think this perspective that you guys are sharing on the
Speaker 2: return on investment from college could shift the way we
Speaker 2: think about the value of a degree.
Speaker 1: Yeah, I think that's kind of what led to us
Speaker 1: coming up with this idea. We were talking to a
Speaker 1: bunch of families, students, college counselors that kept saying people
Speaker 1: are obsessed with the brand name, with getting into these
Speaker 1: really prestigious schools, no matter the costs, and so we
Speaker 1: kind of wanted to answer the question does prestige pay off?
Speaker 1: Do people really see a difference if they choose the
Speaker 1: brand name over their public school or their state university.
Speaker 1: What we're trying to do with this project is provide
Speaker 1: a tool for people to think about this in a
Speaker 1: more strategic way of being. Like, yes, if you look
Speaker 1: at the Ivy's prestige does pay off, but then it's
Speaker 1: kind of dropping off at a very significant rate when
Speaker 1: you start to look at just elite colleges and you
Speaker 1: start to look at public flagships which offer really goodhar
Speaker 1: roi is when compared to other private schools as well.
Speaker 4: Yeah, so I think a lot of people base their
Speaker 4: decision off of these ranks, Like everyone is obsessed with
Speaker 4: school ranks, But you know, after a certain point, it
Speaker 4: gets really murky. There's no guarantee that going to a
Speaker 4: brand name college is going to guarantee success. It's a risk.
Speaker 4: And I think that the whole point of this is
Speaker 4: to show that, like people can make a calculated risk.
Speaker 4: And I think people were already kind of making these
Speaker 4: doing this calculus, trying to do it by themselves. But
Speaker 4: we wanted to aggregate like real data and answer these
Speaker 4: questions for people, and we thought it was valuable to
Speaker 4: look at what is the average person graduating from a
Speaker 4: specific institution, what do they get out of it?
Speaker 2: It seems like this is another tool in the toolbox.
Speaker 2: People are already weighing so many different things. It's such
Speaker 2: an overwhelming decision for so many people, and this might
Speaker 2: help them understand better what they're getting into.
Speaker 4: Its super complicated calculus.
Speaker 1: Yeah, And I think it's not that we're telling people
Speaker 1: don't go to college, it's not worth it. It's more
Speaker 1: there's ways that you can go about this in a
Speaker 1: smarter or more informed manner that might set you up
Speaker 1: for success in a better way that maybe just thinking
Speaker 1: about these intangible aspects that people honestly way more than
Speaker 1: anything when looking at colleges.
Speaker 4: I think what's really hard is like something that we've
Speaker 4: heard from a lot of the high school seniors is like,
Speaker 4: when you have worked so hard in high school to
Speaker 4: get to a certain place, to become the best Ivy
Speaker 4: League or whatever college candidate that you can, it's hard
Speaker 4: not to want to pick the most prestigious school. People
Speaker 4: associate that as like a testament to their work and
Speaker 4: to everything that they've achieved thus far, and they think
Speaker 4: it will continue to do so in life. But hopefully
Speaker 4: we can equip people with the numbers be like, hey,
Speaker 4: this is not the only thing that you should consider,
Speaker 4: But it's really hard not to think that way when
Speaker 4: you are in the moment and thinking of like, oh
Speaker 4: my god, my senior year is so awful. I spent
Speaker 4: all this time working on my essays and working so
Speaker 4: hard to get these grades. It might be like kind
Speaker 4: of earth shattering to not be able to go to
Speaker 4: your top choice school as a high school senior. But
Speaker 4: I when faced with a lifetime of paying off student
Speaker 4: loan debt, it may be better to just come to
Speaker 4: terms of that like earlier on than having to deal
Speaker 4: with paying this off for the rest of your life.
Speaker 2: Thanks for listening to The Big Take podcast from Bloomberg News.
Speaker 2: I'm Sarah Holder. This episode was produced by Thomas lu
Speaker 2: It was edited by Aaron Edwards and Jennifer Bissell Linsk.
Speaker 2: It was mixed by Ben O'Brien. Naomi Shavin is our
Speaker 2: senior producer. Our senior editor is Elizabeth Ponso. Nicole beemster
Speaker 2: Bor is our executive producer. Sage Bauman is Bloomberg's head
Speaker 2: of podcasts. Please subscribe and review The Big Take wherever
Speaker 2: you listen to podcasts. It helps new listeners find the show.
Speaker 2: Thanks for listening. We'll be back tomorrow.