The college class of 2011 just graduated into one of the worst job markets in recent history. Twenty-four percent of 2011 grads had a job offer in hand by graduation, compared with 51 percent of students graduating in the prerecession year of 2007. As these recent college grads move back in with their parents, and as student loan bills come due, many will wonder—was college worth the money?
The short answer is: probably. While studies of past recessions suggest that the unlucky Great Recession grads will do less well economically than those graduating during better times, they are still likely to earn more and have better job prospects than their peers who lack college credentials. The June 2011 unemployment rate for those with only a high school diploma, for example, was 10 percent, as opposed to 4.4 percent for those with a college degree. And earnings for college graduates were 66 percent higher in 2010 than for high school graduates. Moreover, the benefits of a college degree are not just financial: college graduates tend to lead healthier lives, have lower divorce rates, and have children who are better prepared for school. On average, a college degree is a worthwhile, if increasingly expensive, investment.
But the key phrase in that answer is “on average.” Graduates of some colleges make a lot more money than graduates of others. It would be helpful if students and parents had information on which was which when choosing colleges, so graduates could avoid the unemployment line the next time the economy implodes. Unfortunately, colleges have been slow to collect earnings data about their graduates—or if they have it, they keep it to themselves. As a result, some people don’t realize they’ve enrolled in the wrong college until it’s too late.
Fortunately, new job market information is starting to become available. Some states are using Labor Department data to track the earnings of college graduates who work within the state. The U.S. Department of Education will soon begin evaluating career-focused programs, primarily in for-profit colleges, by comparing graduates’ earnings to the size of their student loans. The day is coming when we’ll know how much the graduates of every college—possibly even every department or program within a college—earn after they finish school.
And thanks to an innovative online company called Payscale, we can get a sneak preview of how that information will change the way colleges are rated and ranked. Payscale runs a Web site that asks users to complete a voluntary survey about their earnings, job history, and educational background. In return, people get a report on how their salary compares with others with similar backgrounds doing similar jobs—which they can then take into their next round of pay negotiations at work. That’s the service Payscale offers. But the company has also decided to do something else with the data it has collected. Using its trove of survey responses, Payscale has set out to calculate the thirty-year “return on investment” (ROI) for different colleges by comparing their tuition to the lifetime earnings of their graduates.
Because it’s self-reported, Payscale’s data isn’t perfect. Nor are average alumni earnings over thirty years necessarily the best measure; that figure won’t, for instance, reflect recent changes, positive or negative, at a college. But Payscale’s database of more than a million profiles still provides a valuable window on the wide disparities of college earnings outcomes, which range from less than $100,000 to over $1.8 million. In other words, graduates of some schools will see a payoff on their college investment that is nearly twenty times higher than graduates of other schools.
Topping Payscale’s return on investment ranking are prestigious schools with a strong focus on science and engineering, like the California Institute of Technology and Harvey Mudd College. Among schools with a more liberal arts bent, the top performers are also household names, like Dartmouth College, Stanford University, and Princeton University.
But it’s difficult to disentangle the merits of the schools themselves from the talents of the students they recruit. Payscale’s top thirty ROI schools have a median SAT score above 1370— and you would expect students with high SAT scores to do well. At the Washington Monthly, however, we want to measure the value that schools add, not the inputs they attract. So for our own ranking we used a strategy similar to the one we employ for the graduation rate and Pell Grant enrollment measures in our social mobility ranking: We calculated a “predicted” return on investment for our national universities (the only group with a critical mass of Payscale data) based on each school’s average SAT score. Then we ranked schools based on the difference between their actual ROI for graduates, from Payscale’s data, and our predicted measure.
Some of the results were surprising. The Polytechnic Institute of New York University, for instance, turned up number one on our return on investment calculation, but ranks 153rd in the ranking of national universities. NYU-Poly provides its students—almost half of whom receive Pell Grants—with the prospect of a nearly $1.6 million thirty-year payoff on their college degree. Similarly, our second-place university is the New Jersey Institute of Technology, a public institution with 29 percent Pell Grant enrollment and a thirty-year ROI of almost $1.5 million. Both of these schools edge out well-known Cal Tech, which ranks third on this list. Other less prestigious schools like Worcester Polytechnic Institute and the Colorado School of Mines are in the top five, beating schools like the Massachusetts Institute of Technology, Princeton University, and Duke University.
It makes sense that many of these top schools specialize in high-paying fields like science and engineering. But not everyone wants to be an engineer. So we ranked schools again, this time controlling for both SAT scores and the percent of students receiving bachelor’s degrees in science, technology, engineering, and math. This produced another crop of previously under-recognized universities. The University of Massachusetts Lowell, for example, is a public institution with midrange SAT scores that admits 73 percent of those who apply. It’s the kind of place that doesn’t register very high on the prestige-o-meter—it’s 183rd on the U.S. News rankings. But it winds up at number four in our calculations because its graduates, who tend to major in practical areas like business administration, computer sciences, engineering, and health professions, do unusually well in the job market.
Compare that to Brandeis, a private university about twenty-five miles away from Lowell. The highly selective Brandeis is number thirty-four on the U.S. News ranking. It also showed up on a recently released federal government list of the highest-priced universities in the country (the total cost to attend is nearly $55,000 per year). But the return on that investment falls short of other universities, particularly given Brandeis’s relatively high SAT scores: based on our ROI calculations, Brandeis comes in at number 240, three spots from the bottom.
Our calculations scramble the U.S. News hierarchy in all sorts of ways. A handful of the top ten—Dartmouth, Princeton, University of Pennsylvania—stay on top. But others slip— Harvard, for example, falls, to twentieth place. Still other prestigious schools, like the Massachusetts Institute of Technology, Cornell University, and Yale, don’t break the top sixty, trailing lesser-known public institutions like George Mason University, San Diego State University, and Northern Illinois University, all of which make the top thirty when their alumni’s earnings are taken into account.
Because Payscale doesn’t have data for every college, we couldn’t include our ROI calculations in our national university rankings. But if we did, it would shake up our list, too, moving Stanford University to number one. The University of California, Santa Barbara, the University of Notre Dame, and the University of Pennsylvania move into the top ten, bumping out Case Western Reserve University, Jackson State University, and the University of Michigan, Ann Arbor.
Getting a job and making money aren’t the only reasons to go to college, of course. But they’re the main reasons for most students. As the current brutal job market shows, it’s critically important for students to get a diploma that will pay off. And as more earnings data becomes available from public and private sources, the time when all colleges will be judged by measures like ROI is quickly approaching. Our first look at the likely results suggests that some colleges won’t be able to hide behind nationwide averages for college graduate earnings anymore. Others, though, will get deserved credit for preparing students to succeed in their careers, in good times as well as bad.