The U.S. Department of Education’s College Scorecard, which became available in September 2015, provides prospective college students and their families with a useful tool for finding colleges and evaluating outcomes, such as graduation rates, median federal student loan debt at graduation and median and mean earnings. It is expected that this tool will eventually be integrated with the U.S. Department of Education’s College Navigator tool.

More importantly, though, is that the data used to create the College Scorecard will be used to enhance commercial college search web sites. Most of these web sites already use data provided by the U.S. Department of Education through the Institutional Postsecondary Education Data System (IPEDS). The College Scorecard data significantly expands the data that is available through IPEDS.

For example, it is now possible to calculate the return on a college investment for the first time. The College Scorecard data includes median and mean income for federal student aid recipients 10 years after the student first enrolled in college.

There are two main approaches to ranking colleges according to the return on investment.

  • One approach compares the median earnings after graduation with the median federal student loan debt at graduation. This ratio measures the extent to which the college’s graduates will be able to repay their student loans. So long as the total student loan debt is less than annual income, meaning that the ratio of income to debt is equal to or greater than 1, the borrower will be able to repay his or her student loans in ten years or less.
  • The other approach compares the median earnings after graduation with the average net price. The net price is the difference between the cost of attendance and gift aid, such as grants and scholarships. It is the amount the student and his or her family must pay, through savings, income and loans, to cover college costs. Although this does not directly measure the payback period for the college investment, it correlates well with it.

Since students who do not graduate do not benefit from the higher earnings that come with a college degree, both metrics are multiplied by the college’s six-year graduation rate. This yields an approximation of the expected value of the college education.

These metrics may then be used to rank colleges, as illustrated in the following two tables. The rankings were filtered to include only colleges with a graduation rate of at least 75%.

Some colleges ranked high on both lists, including Princeton University, Stanford University, Pomona College, Rice University, Yale University, UC Berkeley, Brigham Young University, Vanderbilt University, UCLA and Duke University.

Most of these colleges had low enrollment of Federal Pell Grant recipients, since graduation rates tend to correlate inversely with the percentage Federal Pell Grant recipients. There were, however, a few noteworthy exceptions that appear to have a high return on investment despite a high Federal Pell Grant percentage: Hamilton Technical College (82%), Ranken Technical College (69%) and several of the University of California schools at 43% percentage Federal Pell Grant recipients.

Some of these colleges may rank highly because they enroll predominantly wealthy students or because the mix of majors is tilted toward more lucrative academic majors. Eventually, the U.S. Department of Education will provide data at each college according to academic major.

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