College's Holy Grail: Low Cost, High Returns

They're few and far between, but some schools deliver top-notch returns without breaking the bank. The reason: generous financial aid

The California Institute of Technology, an elite private engineering school, has the highest 30-year return on investment in the ranking and, for financial aid recipients, fairly modest costs California Institute of Technology

By Alison Damast

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(Corrects number of UC San Diego students receiving Pell Grants and clarifies that California's Blue and Gold Program is for UC students only.)

When Lauren Laurer graduates from Clarkson University this spring, she'll be able to count herself among the lucky few to graduate from college without any debt. Laurer, an aeronautical and mechanical engineering major from Rochester, N.Y., has paid only about $20,000 for an education worth almost $200,000, a feat achieved through a combination of tuition discounts, merit-based awards, and private scholarships awarded to her by Clarkson, a private school in Potsdam, N.Y. With no loan payments to worry about, Laurer is confident she'll be able to quickly recoup her $20,000 investment when she starts working in the engineering development program at GE Energy this July.

"I'm already starting with a salary that is above even the average and it is going to grow, so I'm easily going to make up that $20,000 within my first year," Laurer says. "My return on investment is only going to get better and better in the next 20 to 30 years."

A Clarkson graduate such as Laurer can expect to recoup the cost of her education and out-earn a high school graduate by nearly $1.3 million over the course of her working life, more than twice what a typical college graduate can expect, according to data from a study on college return on investment conducted by PayScale for Bloomberg Businessweek.The 30-year net return on investment for graduates represents the average earnings of a graduate, in excess of those of a high school graduate, after deducting the net cost of the degree.For all 693 schools in the PayScale study, the average ROI for graduates is $628,287 over 30 years, a figure that factors in financial aid grants.

But at several dozen schools across the country, students can expect to receive a much heftier return on investment, at a price that won't send the average middle-class family to the poorhouse. By cutting the cost of a college education—the "I" in ROI—financial aid plays an important role in generating the kind of returns that students like Laurer enjoy. Though many schools have sticker prices that can easily exceed $200,000, some have generous financial aid policies whereby the cost can be cut in half or more. Generous financial aid packages, coupled with a relatively inexpensive education and a strong return on investment, make these institutions especially appealing to middle-class families, says Al Lee, director of quantitative analysis at PayScale.

"There are some rich families out there, but generally speaking, the vast majority of people see college as a major investment for their future personal success," Lee says. "For the top schools, even if you take out a 10 percent loan, it is still a great investment because there are such huge earnings down the road for a typical graduate."

Variety of Discounts

Schools with impressive ROIs deploy a variety of means to make a college education more affordable for students, doing everything from slashing tuition to using endowment earnings to offer families more attractive financial aid packages.

At Vanderbilt University, a private liberal arts school in the No. 43 spot for 30-year net ROI including financial aid, graduates have a median income of $77,100 and go on to earn more than $1.1 million more than high school graduates. The annual cost of attendance is nearly $55,000, but the school offers students an average annual aid package of $31,857, according to PayScale. By the time the average financial aid recipient graduates, she's received a nearly 63 percent discount on her education, paying a net cost of $77,150.