What Makes College Worth the Cost?

Which colleges are wise investments and which are scams? Michael Dannenberg, the founding director of the Education Policy Program at the New America Foundation, wants to know. In “Colleges Need a Lemon Law,” Dannenberg presents the case that a good project for Education Secretary Arne Duncan would be to publish a list of price-to-earnings ratios at U.S. colleges and universities. 

When it comes to higher education, Americans pay way too much for way too little. Now more than ever, as tuition costs outstrip inflation and as students graduate with narrow job prospects and heavy debt, we need to help families make smart decisions about college. But how do we know what gives higher education value? What makes one college worth the cost and another one a rip-off?  

There are many ways of calculating college value; I will highlight three. First is the method used in Kiplinger’s lists of “50 best values” in public and private universities. The rankings were determined based on criteria in academic quality and affordability, including: 

• Percentage of the freshman class scoring 600 or higher on the verbal and math components of the SAT (or scoring 24 or higher on the ACT)
• Admission rate
• Student-faculty ratio
•  Graduation rate
• Total costs for students
• Cost after need-based aid
• Percentage of aid from grants
• Cost after non-need-based aid
• Percentage of all undergraduates without need who received non-need-based aid
• Average debt at graduation 

In 2009, the highest ranked Kiplinger public school is the University of North Carolina at Chapel Hill, and the top private school is the California Institute of Technology. Lists like these are useful, and colleges take them seriously. But while they evaluate academic rigor, they don’t take into account the content of the institutions’ curricula.  

Which brings us to a second method of measuring colleges’ worth - one that asks, “Do students at x college learn the subjects they should?” The American Council of Trustees and Alumni (ACTA) wanted find out, and this year they created WhatWillTheyLearn.com, which surveys whether colleges require students to take “core subjects” of composition, literature, foreign language, U.S. history, economics, mathematics, and science. Schools that require six or seven of the core subjects get an A; only seven out of the127 schools ACTA reviewed made it to the A list. Unlike Kiplinger, ACTA doesn’t compare academic strength to the cost of attending, but it does have a list of about 50 schools in the “30,000+ Club.” The idea is to expose the colleges that cost the most but fail to ensure that students graduate with a solid education.  

A note: ACTA’s approach is different from that of the assessment movement to measure “student learning outcomes.” Rather than trying to quantify every concept students learn in college (many of which are intrinsically unquantifiable), What Will They Learn identifies seven broad subjects that together make for a well-rounded education, and asks whether each college is making sure that students take at least one course in each before they graduate.  

A complement to the “academic substance” method is to examine academic non-substance. Omitting core subjects hurts the quality of education; so does letting ideology permeate the university. As NAS president Peter Wood wrote in “What Does ‘Sustainability’ Have to Do with Student Loans?”: 

When colleges and universities transform themselves into enterprises centered on "sustainability," which students are they serving? Are students assuming these burdens of debt (average balance over $19,000; a quarter of students owing nearly $25,000) willingly paying a premium to be indoctrinated in some resident hall director's theory of social justice? 

When political ideologies are allowed to usurp the mission of higher education, students suffer the consequences. Instead of learning the important ideas and skills that college should provide, they get an education diluted with the drivel of race-class-gender. So method #2, in brief, weighs what students learn and what they could do without. As of now, no formal system measures both of these factors for general public use.  

A third way of determining whether a college is worth the cost is to look at the income of its alumni. This is the idea Dannenberg promotes. He recommends that with publicly available information on colleges’ average net price after financial aid, starting and mid-career salaries of graduates, and the percentage of those who default on their student loans, the Department of Education (or anyone) should be able to create a “higher education p/e ratio, price of college to expected future earnings, for each school.”  

For instance, Dannenberg writes: 

Consider the State University at Binghamton and Niagara University, for example, both in upstate New York. From a purely financial standpoint, Binghamton is a great deal. Its sticker price is approximately $17,000 a year, and graduates earn a median income of $52,000 within five years of separation, according to Payscale.com. 

In contrast, Niagara's sticker price is $35,000 a year, and graduates earn a median starting income of less than $38,000 within five years of separation. 

People should know what they’re getting into when they spend hundreds of thousands of dollars on higher education. For those schools like Niagara that offer a poor return on the investment, he advocates a surgeon-general-esque caveat to be placed at the bottom of recruiting brochures: 

“Warning: One in three Acme College borrowers defaults on a student loan within three years of separation from Acme College. Acme graduates earn an average starting salary of $22,000 a year. Be careful before assuming substantial student loan debt to attend Acme College.” 

Dannenberg’s price-earnings ratio idea is a good one for publicizing a purely financial cost-benefit analysis. But, as illustrated by the first two methods, future earnings aren’t all that matter in determining the value a particular college has to offer. Perhaps someone could produce a hybrid of all three? Maybe then it would become plain when a school is a good deal, financially and academically—or when it is soured by ideological commitments.