A college education can be viewed as an investment in an opportunity for a productive and meaningful life. The uncertain (rising) cost of college and debt incurred by students to finance an education leads to a conversation about return on investment (ROI) – a term very familiar to Finance and Insurance majors. What are the risks and returns to a Finance or Insurance undergraduate degree at Illinois State University?
In general terms, the ROI of a Finance or Insurance major depends on the tuition cost of attending Illinois State ("sticker" price) net of any scholarships earned, the time to degree completion, the debt incurred to finance the degree, and the income earned after graduation.
Because it accounts for average scholarships and grants awarded per student, use the net price listed at collegerealitycheck.com to estimate Illinois State University's net cost for one year at $13,700 (national average net price: $18,200). How likely is a scholarship or grant in the department? About 7% of Finance majors and 19% of Insurance majors were awarded scholarships in 2015. About 50% of Insurance majors are also Finance majors.
The average time‐to‐degree for freshmen Finance or Insurance majors is the same as the ISU average time‐to‐degree of 4.4 years. Time to degree completion varies depending on academic success, the frequency of changing majors, graduating with multiple majors, and work commitments outside college. Degree programs in the department are the most popular in the College of Business for second majors and minors.
To estimate the likely debt incurred to earn a bachelor's degree at Illinois State and the annual cost of borrowing over ten years, again turn to collegerealitycheck.com. The ISU average total debt at graduation is estimated at $18,750 (national average est.: $14,100). The Illinois State University student average annual debt payment is estimated at $2,600.
A final component of ROI is earnings after graduation – a signal of the value of a degree. Based on a department survey of graduating seniors in May 2016, nearly 84% of Finance and/or Insurance majors had accepted a full-time job at graduation, adjusted for those not seeking employment. The average reported starting salary at graduation was $53,600.
The present value of $53,600 in annual income growing at 2% per year over a 10-year student loan repayment period, discounted at 5% per year, is $457,200. This clearly exceeds the ISU four-year net tuition cost ($54,800) and the out-of-pocket net tuition plus average total debt payments ($62,050). The risk in the ROI earnings stream is that an alumni experiences unemployment or underemployment for an extended time after graduation, especially in the situation of student loan debt.
Evaluating a college or major is complex because different students expect different outcomes from the college experience, perhaps not just ROI. The college experience in turn is affected by what students bring to college, how students change, and where students think they are going. The ROI discussion also looks mainly at the return and risk to an individual student, not to societal benefits like improved public health and a graduate's tendency to be involved in civic life as a culturally-aware voter. Development of these "soft" social skills is one of the best aspects of the American higher-education system yet is difficult to value.
Dr. Gary Koppenhaver, Chair