Want to get a good return on the money you fork over to pay for tuition? Then you might want to consider going to the Massachusetts Institute of Technology, where you’ll make almost $1.7 million more than you would with a high school diploma. That’s one take-away from a new college ranking out this week from PayScale Inc., which compiles employee salary data. Not surprisingly, media coverage of the report has latched onto which colleges provide the best bang for your buck.
But it’s not quite that simple.
Colleges are ranked according to a 30-year net return on investment, which the report calculates by taking how much more a graduate of the college would make than a high school graduate over 30 years and subtracting the sticker price of the college. This figure is then multiplied by the college’s graduation rate (the report assumes that for a student who begins but does not graduate from college, the extra earnings from education and the expenses of acquiring it even themselves out).
The ranking has some additional limitations:
•Some people go on to grad school: The report does not consider the income of graduates who go on to earn an advanced degree. For some colleges, this greatly shrinks the pool of graduates whose income can be considered. It also helps explain why three of the top five schools on the list are renowned for their engineering programs.
•Not everyone pays sticker price: By focusing on sticker price and assuming costs are paid out-of-pocket, the report neglects the difference in net price that a big grant award can make, as well as the added burden of loan debt.
•Not all work is counted: Only full-time employees paid a salary or an hourly wage are considered, which means project-based fields like architecture and small-business ownership probably go uncounted.
•Dropouts: The report intentionally dings colleges with lower graduation rates, but its assumption that students who begin but do not finish college break even (what they pay in tuition and lost work time equals what extra they earn with “some college”) seems arbitrary.
•Public colleges: The return on investment for in- and out-of-state students is considered separately for public colleges. But while the report accounts for the difference in sticker price for those two groups, no other difference between them, such as graduation rates, is taken into account.
•Limited data: Information on graduate’s earnings comes from self-reported information that users of PayScale’s salary-comparison tool provide. The report accounted for how long graduates had been out of school, but it didn’t have enough data on every college to include it.
The report is certainly well-intentioned. Al Lee, director of quantitative analysis at PayScale, explains that it is meant to show consumers that not all four-year degrees are created equal and not everyone who starts college winds up with a degree. But it’s not hard to see that message getting lost any time a numerical rank is listed next to a college’s name.