The cost of an engineering degree . . . to the college, not the student

Amy Merrick | Jul 17, 2017

Sections Economics

As US college tuition soars, students, parents, and policy makers are pressuring universities to demonstrate the value of a college degree. One way to show the benefit of a diploma is to report graduates’ earnings, which vary by major and the prestige of the school. The emphasis on future salaries may be one reason fewer students are earning humanities degrees.

Whatever the return on investment for students, gauging the ROI on taxpayers’ investment in higher education requires measuring not just salaries, but the cost to schools of educating students. Though undergraduates often pay the same tuition rate whether they’re taking a philosophy seminar or a chemistry lab, the cost of educating individual students can vary widely depending on their major.

Engineering degrees, for example, tend to provide high financial returns to graduates and also cost universities a lot to produce, according to research by Yale’s Joseph G. Altonji and Chicago Booth’s Seth Zimmerman. Other majors, such as business and computer science, have relatively low costs for schools while offering relatively high future salaries for graduates. Understanding the typical costs and outcomes for different majors could give additional guidance to public universities that are weighing how to maximize their budgets, given shrinking funding from state governments.

Altonji and Zimmerman reviewed publicly available information on the costs of producing graduates in various fields from the Florida state system of 12 four-year universities for the 1999–2000 through 2013–14 academic years. They also analyzed administrative records of educational and early-career outcomes for 57,711 high-school graduates who enrolled in the state university system in the year after their high-school graduations. The researchers tracked the earnings of those who remained in Florida through early 2010, when the oldest students in the sample were 32 years old, and the youngest were 26.

The degrees that performed best in early-career salaries, on a per-dollar cost basis, were business and computer science, the researchers find. Graduates from these fields in their first years out of college earned 60–80 percent more than students with education degrees, who served as a baseline. It was also relatively cheap for schools to educate business and computer-science majors: it cost a university in the Florida state system an average of $31,482 to provide a business degree, compared with $62,297 for engineering, the most expensive major. The average total degree cost was $39,184, including student payments and state appropriations.

Tuition does not cover total costs for any major in the Florida system, according to the researchers.

Tuition does not cover total costs for any major in the Florida system, according to the researchers. Most undergraduate students at Florida state universities pay the same tuition regardless of what they study. Business is the most popular major in the system, accounting for nearly one-quarter of all graduates—and also the type of course most frequently offered, accounting for 14 percent of all credit hours.

The college degrees that performed worst in the study were architecture and art, which “are fairly expensive and have relatively low earnings” in the first 5–10 years after graduation, the researchers write. Students with degrees in that group earned 20–30 percent less than education majors.

Altonji and Zimmerman interpret their results cautiously, given that their data cover only the early stage of graduates’ careers. “Two majors with similar average earnings over the immediate post-college period could have different long-run trajectories,” they note.

To estimate a longer-term view, they turned to a nationally representative sample covering 2009–12 from the US Census Bureau’s American Community Survey, which also tracks college graduates’ fields of study. They analyzed earnings to age 45. Here, the patterns were similar: business and computer-science degrees still provide a relatively strong value when comparing earnings to costs. But engineering, math, and health sciences appear to provide a better value than those majors did in the Florida data covering a shorter amount of time.

The findings could provide guidance for those college administrators who have considered whether to vary tuition rates by major. A growing number of US universities are doing so, though one study, from the University of Michigan’s Kevin Stange, finds that increasing tuition for high-cost engineering degrees disproportionately reduces demand from women and minorities, at a time when members of these groups are being urged to pursue education in STEM (science, technology, engineering, and math) fields.

Altonji and Zimmerman also point out that there can be intangible social benefits to fields that don’t produce large salaries for graduates. Financial rewards are not the only way to assess the value of a degree—but they are perhaps the easiest to measure.