A report from Franklin & Marshall College presents new evidence that shows a positive and strong return on students’ investment when comparing the cost of a liberal arts education with the ultimate salary they can earn.
“Higher education certainly is about building a foundation for a fulfilling life, but its economic dimensions are inescapable,” said Alan Caniglia, vice president for strategic initiatives and the acting vice president for finance and administration, who is the author of the report.
An education at a small private liberal arts college offers an attractive financial rate of return on investment (FROI), which is highly competitive compared to other types of financial investment, said Caniglia, an economics professor.
The analysis focuses on the most elite group of small private liberal arts colleges, but the methodology can be extended to other sectors of higher education.
According to the report, F&M and 28 of the top 50 liberal arts institutions showed an estimated positive annual rate of return above inflation while their FROIs ranged from 0.03 percent to 5.3 percent.
The vast majority of these top institutions have financial rates of return of about 2 percent or more above inflation per year, a return that seems at least reasonable in most circumstances; the annual rate of increase of the S&P 500 has averaged about 4 percent per year since 2000 before adjusting for the approximately 2 percent per year average inflation rate over this period.
“While there are vital non-financial returns on investment such as learning and quality of life, the report offers at least a partial answer to questions of whether education at a small private liberal arts college is worth the cost,” Caniglia said.