ROI Comparison: Public vs. Private Colleges
Find your perfect value college
It’s important to consider if the degree provides a good return on investment (ROI) for your future. In addition to deciding on a major, you must carefully pick between private and public colleges and universities.
Public colleges are thought to offer higher ROI because they’re cheaper than private colleges. But is this really true? Not at all!
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Although public colleges may have lower tuition and fees, they might offer a limited number of financial aid and scholarship opportunities. Meanwhile, some private colleges can provide more generous financial aid packages.
But this doesn’t also mean that private colleges should be your top priority for a higher ROI. It’s always on a case-on-case basis.
Before pursuing a college, you first need to understand the differences in ROI between public and private colleges. In this article, we will explore all the crucial factors affecting ROI in Higher Education, from tuition costs and financial aid to post-graduate outcomes.
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Understanding ROI in Higher Education
Return on Investment (ROI) in higher education looks at how much a college degree boosts your earnings over your lifetime compared to what you spend on your education. If the increase in your earnings is greater than the costs of attending college, then you have a positive return on investment.
A bad ROI can happen for many reasons:
- A poor choice of major.
- High levels of student debt.
- Attending the wrong institution.
Here are a few factors to consider when determining a degree’s ROI:
- Tuition costs: The amount you pay for your education.
- Financial aid: The received amount of aid that reduces the overall cost of education.
- Graduation rates: The measure of how many students complete their degree programs.
- Post-graduation earnings: The average salaries of graduates in a specific school or field.
All these factors can contribute to long-term financial outcomes.
Tuition Costs and Financial Aid
Public institutions typically offer lower tuition rates, especially for in-state students. For the 2022-23 academic year, average tuition was about $9,750 at public colleges and $38,421 at private colleges, according to NCES data.
If you’re an out-of-state student, you’ll have to pay the higher out-of-state tuition, which typically applies to public colleges. Out-of-state tuition averages $27,437, which is usually higher than in-state tuition.
Both public and private colleges offer students federal financial aid. However, private colleges usually have more funds for grants and scholarships thanks to their larger endowments. They also often provide bigger tuition discounts.
For instance, the average tuition discount for full-time 2022-23 first-year students at private nonprofit colleges reached a record high of 56.2%. This finding comes from a recent study by the National Association of College and University Business Officers (NACUBO), as reported by Higher Ed Dive.
Yet, this is still not to say that you should instantly choose private colleges. It’s important to compare each school’s tuition and financial aid offerings to ensure ROI and that you don’t bury yourself in student loan debt.
Graduation Rates and Time to Degree
Here’s an overview of the six-year graduation rates for public and private colleges from the NCES 2022-23 data.
- Public, Four-Year: 67.4%
- Private Nonprofit, Four-Year: 77.5%
- Private For-Profit, Four-Year: 46%
Efficient graduation rates at private nonprofit colleges can lower overall costs, as students pay less in tuition and living expenses. In contrast, while slightly behind, public colleges still offer a substantial graduation rate, often with lower tuition costs than private institutions. However, the low graduation rate at private for-profit colleges raises concerns about their value, as students may incur high debts without completing their degrees.
Post-Graduation Earnings
There are notable differences in the value of degrees earned from public and private colleges. One report from College Scorecard indicated the following economic benefits:
- Public, Four-Year: $765,000
- Private Nonprofit, Four-Year: $838,000
- Private For-Profit, Four-Year: $551,000
The top private colleges with the highest long-term value are the eight Ivy Leagues, where graduates can expect their degrees to be worth over $2 million!
However, it’s important to note that students at private colleges typically borrow more than twice the amount of money compared to those attending public colleges. While private colleges usually do better than public ones over 40 years, the situation is more complex. They’re also known to have lower admission rates.
Yet, if you opt for a Science, Technology, Engineering, and Math degree, it’s best to apply to private colleges. For instance, engineering graduates from MIT earn starting salaries of $76K–$124K per year. On the other hand, graduates from public universities may have starting salaries ranging from $60K to $80K. The key is to research each institution of interest thoroughly.
Student Loan Debt
When a student takes on more debt, it reduces their ROI because the actual costs of earning the degree are higher. People with large debts often find it hard to make big purchases, like buying a home or a car, and it can also make starting a family more difficult.
Here’s a quick overview of average student loan debt by institution as published by the Education Data Initiative:
- Public College: $28,631
- Private College: $42,095
Let’s look at the debt-to-income ratios of a bachelor’s degree in engineering at MIT and the University of Texas at Austin.
Type | Tuition Per Year | Average Student Loan 2022-23 | Average Starting Salary | Debt-to-income ratios | |
MIT | Private | $59,750 | $29,024 | $97,000 | 29.9% |
UT Austin | Public | $10,554 (in-state) $19,320 (out-of-state) | $18,856 | $77,000 | 24.5% |
While MIT graduates take on higher debts due to the higher tuition costs, they also benefit from a significantly higher starting salary. This means that MIT grads have a greater income potential, which can help them manage their loans more effectively in the long run.
Career Services and Networking Opportunities
Career services are an important tool for navigating the job market and increasing ROI. These services include resume workshops, networking opportunities, interview coaching, job placement assistance, and more.
- A NACE survey found that 70% of employers prefer hiring through referrals.
- LinkedIn research indicates, 80% of professionals see networking as key to career success.
Public and private colleges have their own merits. For instance, public colleges have broader access to resources and larger alumni networks but may feel less personal. On the other hand, private colleges often prioritize building strong personal connections between their students and large companies.
Campus Resources and Facilities
Unlike public colleges that receive state funding, private colleges rely solely on tuition, donations, and endowments. Unless you aim for Ivy League schools or other highly prestigious colleges, you’ll likely have a better experience at large public research universities.
Public universities like those in Michigan, Ohio, and Wisconsin receive millions in state funding each year to cover facilities and student services. Small private colleges, on the other hand, have tighter budgets, which makes it harder for them to keep their facilities up to date.
Students at universities with dedicated activity centers often feel more connected to their campus community. This connection motivates them to continue their studies, as they receive the support they need.
Geographic and Demographic Factors
Where your school is located can also affect your ROI in several ways. Both public and private colleges in urban areas can offer more job opportunities and larger markets. The downside is the cost of living.
Rural colleges might have fewer internships and networking options, but they usually have a lower cost of living. This often means that attending these colleges can be more affordable overall.
If you want a more culturally rich and diverse learning environment, look into urban colleges. But you need to prepare for the cost and competition. On the other hand, if you’re looking for strong community engagement, affordable rural colleges create close-knit environments where students often form deep connections.
Personal and Professional Development Opportunities
Not all public colleges focus on getting students involved in all sorts of activities. They usually have bigger budgets, so there are a ton of clubs and organizations to choose from, plus lots of research projects backed by state funding.
On the flip side, private colleges tend to be smaller and offer a more personalized experience. You often find tight-knit communities there that really encourage you to dive into unique initiatives and research.
Conclusion
Although the ROI can depend on what type of college you choose, it’s often reliant on your personal goals. ROI doesn’t involve money only. It’s a combination of experiences, skills, and connections you gain.
Consider how a school and program matches your career goals, the networking opportunities you’ll have, and how it can help you grow personally. It might be helpful to talk to an academic advisor or life coach for guidance as you figure things out.
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Aya Andrews
Editor-in-Chief
Aya Andrews is a passionate educator and mother of two, with a diverse background that has shaped her approach to teaching and learning. Born in Metro Manila, she now calls San Diego home and is proud to be a Filipino-American. Aya earned her Masters degree in Education from San Diego State University, where she focused on developing innovative teaching methods to engage and inspire students.
Prior to her work in education, Aya spent several years as a continuing education consultant for KPMG, where she honed her skills in project management and client relations. She brings this same level of professionalism and expertise to her work as an educator, where she is committed to helping each of her students achieve their full potential.
In addition to her work as an educator, Aya is a devoted mother who is passionate about creating a nurturing and supportive home environment for her children. She is an active member of her community, volunteering her time and resources to support local schools and organizations. Aya is also an avid traveler, and loves to explore new cultures and cuisines with her family.
With a deep commitment to education and a passion for helping others succeed, Aya is a true inspiration to those around her. Her dedication to her craft, her community, and her family is a testament to her unwavering commitment to excellence in all aspects of her life.