College Planning: Is the ROI in the College or the Major?

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In the 1990s, a college rankings list initiated an arms race that would last for decades. Year after year, the colleges that dominated the top 20 of the list represented less than 2% of all new college enrollments. That same list convinced students and parents to chase something that was unattainable for all but the most elite students – SAT’s over 1450. Consultants were hired, kids crammed for “the test,” second mortgages were taken out and everybody was on board. A degree from an elite college was a guarantee of future success. It was the ultimate lock on your kids’ future.

We analyzed college rankings over decades and ironically, SAT scores at those institutions are almost perfectly correlated with the ordering of the college ranking lists. It begs the question: Are the elite colleges creating winners – or are they picking them?

Requiring students to have an SAT score over 1450 to even be considered for enrollment is evidence that the elite colleges are basically picking all-star teams. Employers know this, and many of the top tech firms actually recruit freshman from elite colleges! What the recruiters know is that the computer science departments at those colleges have done a great job of identifying the best math students in the country, and all of these kids already know how to code. The same is true for artificial intelligence (AI).

Colleges started hiring luxury branding consultants to justify their 7% annual tuition increases. Stories about colleges offering climbing walls and campus sushi bars are now legendary for all of the wrong reasons. It took over 20 years for families to begin realizing that they were chasing something that didn't matter. When Hollywood celebs are buying entry into a system, surely the signaling function to employers is broken. And it is.

Exceedingly few employers care about the label on the diploma. They're looking for technical skill sets. Employers aren’t searching resumes for the keywords like “Harvard” or “Princeton.” They’re sorting recent graduates by academic major. We know this because we provide them with recruiting data. They are looking for science, technology, engineering and math (STEM) skills that match the job they're trying to fill. What they’re not looking for are soft majors: liberal arts and humanities. The fact that starting salaries for STEM grads are typically 2.5-times higher than those with soft degrees tells you what the labor market values.