This has been a tough year for Shaw University. Shaw, founded by Baptists in 1865, is the oldest historically black institution in the South. It is accredited in good standing and has a respectable graduation rate compared with other colleges that enroll large numbers of low-income and first-generation students. Shaw played an important role in the civil-rights movement and, after a financial scare in the 1980s, built a solid base of enrollment and academic programs.
Academic life was proceeding as usual this year until April, when two unexpected forces buffeted the university. A tornado tore through the North Carolina campus, blowing the roof off the student center and forcing the cancellation of all remaining classes. And a report from PayScale declared that of all the four-year colleges and universities in America, Shaw provides the single worst return on investment for students. Welcome to the future of judging success in higher education.
PayScale is a private company that has compiled a vast database with the help of people who voluntarily provide information about their jobs, salaries, and alma maters in exchange for reports that show how much other people in similar employment situations earn. For its return-on-investment rankings, the company uses a nonrandom, self-reported sample of earnings.
Calling out Shaw for having the "lowest" return on investment is questionable, but PayScale can publish whatever information it likes. The company determines return on investment by calculating how much a college's typical graduates earn over a lifetime compared with what a high-school graduate would have earned. It subtracts the cost of attending the college, in terms of tuition and the money students didn't earn while they were in school.
PayScale then ranks the 690 colleges and universities in its survey from top to bottom and posts the results online. It cites the California Institute of Technology as yielding a 30-year net return of $1,713,000 for its graduates. Institutions like the University of Wisconsin-Stout rank in the middle, returning $281,700. Shaw, at only $15,480, is featured as having the "Lowest College ROI."
If this kind of bloodless analysis makes you uncomfortable, get used to it. Graduate-earnings data are the next big thing in quantifying higher-education performance. And despite the risks and complications, students and parents will be better off when such information becomes widely known.
At the moment, only two hard numbers are commonly used to judge college outcomes: graduation rates and student-loan default rates. That's because everyone agrees that diplomas and loan defaults are important, and because diplomas and loan defaults are easy to count.
Everyone agrees that earnings are important, too. Most students go to college so they can get better jobs after they graduate. That's why many of the most popular majors, like business, teaching, and health professions, are essentially vocational. Colleges do much more than help students become economically productive, of course: In uncountable ways, they help people lead richer, more meaningful lives. But for most colleges and most students, career preparation is the heart of the work.
Earnings are easy to count, too. But unlike diplomas, they're not easy for colleges to count, particularly decades after graduation. (Unless your earnings are very high, in which case it's a safe bet that your alma mater knows exactly who you are, where you live, and when is the best time to call and interrupt your dinner.) So it's been difficult to create earnings measures that allow one college to be compared with another.
Now, though, things are changing, in part because earnings data are easy for large government agencies to collect. If you have a job, your employer reports your earnings every quarter to the state unemployment-insurance agency. That way, if you get laid off, it'll know how big an unemployment-insurance check to write.
For more than a decade, some states have been linking their college-student databases with their unemployment-insurance databases to calculate average earnings by college. That doesn't violate federal privacy laws, because information about individual students is never revealed.
For example, a 2006 resident graduate of Northern Arizona University who stayed and worked in the state earned a median of $35,010 in 2007. That's actually a little higher than typical earnings for graduates of the flagship University of Arizona, who earned $34,885. But when the state looked at 1991 graduates of the two universities, University of Arizona students in 2007 earned over $5,000 per year more. Perhaps NAU has been improving. Or perhaps flagships' degrees pay off better in the long run. These are the kinds of important questions that earnings data provoke.
Two-year colleges, which are even more job-focused, would also benefit from earnings information. The Illinois Community College Board calculates that its students earn 31 percent more with a degree, adding up to $541,115 over the course of their lives. It doesn't break these numbers down by campus but certainly could.
The problem with state measures, however, is that they cover only graduates who stay in the state. In our mobile society, that misses a lot of people. Moreover, each state interprets earnings data in a different way. To measure earnings consistently and accurately, we need information from a large agency that covers the whole country. An agency like the Social Security Administration, which produces that green-and-white report you get every year describing the Social Security benefits you are projected to receive—and how much money you've earned every year of your working life.
The U.S. Department of Education just finalized "gainful employment" rules that will regulate for-profit and other colleges based on the ratio of debt to earnings for graduates of employment-focused programs. Where will the earnings part of the ratio come from? The Social Security Administration. It is a short and easy step from there to calculating and publishing earnings data for every program at every college in America, using far more reliable information than that collected by PayScale.
Lobbyists for traditional public and private nonprofit colleges will undoubtedly argue that doing so would constitute an unforgivable violation of the time-honored principle that colleges should never be held accountable for what they do with taxpayer dollars. That's nonsense—and, more important, a moot point: The number of states measuring earnings is growing by the year. The information is out there, and people are using it because earnings are simply too important, and too easily countable, to keep out of the public domain.
To be sure, earnings aren't a perfect measure of economic value. They don't include assets, so a person who gets rich by creating a business and then takes early retirement would seem like a failure. But assets, too, can be counted. In fact, colleges themselves gather detailed information about family earnings and assets when negotiating student financial aid.
Nor do earnings reflect what can't be measured in dollars and cents. The first job that PayScale lists for graduates of Shaw University is "Senior Pastor." They don't make much money, because some things are more valuable than earthly rewards.
But the way to improve an incomplete measure of success is to gather more measures, not fewer. Colleges can combine earnings with information about the kinds of jobs students get and alumni-satisfaction surveys. If graduates aren't making much because they all went into Teach for America or the Peace Corps, that's one thing. If they're all working at the Kwik-E-Mart, or nowhere, that's something else.
On the whole, it's crucially important for students and parents choosing colleges to have an accurate sense of what degrees yield in the labor market. Too many colleges are trading on widely held notions of the average value of a degree without revealing that their degrees are worth much less. The quality of individual programs within a college often deviates wildly from overall institutional reputations. Overly rosy promises of employment riches are rarely challenged with hard numbers.
Many colleges don't like to admit that they are primarily in the business of preparing students for careers, because vocational concerns feel beneath them. But that's why students and taxpayers give them money, and it's reasonable to ask how much money students and taxpayers are earning in exchange. College administrators who don't have those numbers at the ready need to get them, because pretty soon everyone else will have them, too.