A new report from Georgetown’s Center on Education and the Workforce (CEW) finds that liberal arts colleges offer a greater return on investment (ROI) in the long-term than most other types of higher education. These findings—which build on CEW’s November 2019 report ranking the ROI of U.S. colleges and universities—come amid decreasing public confidence in the affordability and importance of college, and the closure of several small, liberal arts schools.
“As with many four-year institutions, financial returns from liberal arts colleges start low, but enrolling at one of these colleges is a good investment in the long term,” said Georgetown’s CEW Director Anthony Carnevale.
The CEW used data from the U.S. Department of Education’s College Scorecard to calculate the net present value—how much a sum of money in the future is valued today, taking into account costs, future earnings, and the length of time it would take to invest and earn a certain amount of money over a fixed horizon—of the United States’ 210 liberal arts colleges. Researchers found that liberal arts graduates will not see gains as quickly as graduates of trade or business schools: 10 years after graduation, liberal arts students will have an ROI of $62,000, which is 40 percent lower than the median across all colleges. But over a 40-year time horizon, that number rises to $918,000, which is 25 percent higher than the median ROI.
By this metric, liberal arts colleges have the third-highest long-term value among 14 institution types in the Carnegie Classification system, trailing only the top two tiers of doctoral research institutions.
Liberal arts prepares students to adapt to the future of work
The critical thinking skills, adaptability, and flexibility that a liberal arts education provides are “more valuable than ever,” Lynn Pasquerella, president of the Association of American Colleges and Universities, told Inside Higher Ed. While other institution types can prepare students for today’s entry-level work, “employers are looking for employees who can advance in the profession” well into their careers, into jobs that have not yet been invented, she said.
STEM majors, geography, selectivity, and family income affect ROI
The report calls attention to several characteristics correlated with variations in ROI among liberal arts schools. Schools with higher graduation rates, for instance, tend to have higher ROI, as do schools with robust STEM programs and schools in more affluent areas. Some STEM professions are more lucrative, so even particular majors can affect ROI. Students are likely to search for jobs near their schools, so schools situated in regions like New England and the Mid-Atlantic, where incomes are higher than in the Southeast and Southwest, have higher ROI, although Carnevale notes that the report doesn’t take into account the cost of living.
In addition, schools with higher selectivity and lower proportions of Pell Grant recipients had higher ROI. Experts say this finding corroborates previous findings that high-income students tend to attend elite schools and obtain high-income jobs.
“The value of the report is that it shows the persistent economic challenges for the students who have been underserved,” said Pasquerella. “The disparity for the institutions with high numbers of Pell students is a cause for concern.”
Colleges consider how they frame the value of liberal arts to prospective students
Experts said the findings create an opportunity for colleges to explain the long-term value of higher education, while remaining sensitive to the high burden of student debt.
“To some extent it’s a tough sell,” Robert Kelchen, an associate professor of higher education at Seton Hall University, told The Chronicle of Higher Education. “The short term is when you’re paying your student loans.”
Others caution that students should not choose a school based on ROI alone. “Earnings prospects should matter, but it’s not necessarily the first thing,” said Douglas Webber, an assistant professor of economics at Temple University. “These are averages … and these are projections. The single most important thing about the college that you go to is that you wind up graduating.”