Tuesday, April 12, 2016

Ranking Colleges based on Value and Costs

History of President Obama’s Effort to Rank Colleges Based on Affordability and Value

The Announcement:

In 2013, President Obama announced plans to create a federal rating system that would allow parents and students to easily compare colleges. He also planned to encourage Congress to pass legislation to link student aid to the rating system.

New York Times Article on Announcement by President Obama on plan to rank colleges on results and costs and link financial aid to the college rankings

The Opposition:

The plan was bitterly opposed by university presidents.  

Robert G. Templin (President of Northern Virginia Community Colleges)

  “Applying a sledgehammer to the whole system isn’t going to work.  They think their vision of higher education is the only one.”

Adam F. Falk (President of Williams College)

“As with many things, the desire to solve a complicated problem in what feels like a simple way can capture peoples imaginations.   …. Information about the colleges is likely to be oversimplified to the point where it actually misleads.

Charles L. Flynn, Jr.  (The President of the College of Mount Saint Vincent)  

A rating system is a bad idea that  “cannot be done well.”  He added “I find this initiative uncharacteristically clueless.”

Kenneth W. Starr, (President of Baylor University.)

“We think the entire approach is quite wrongheaded.”

New York Times Article on Reaction to College Rating Proposal by University Presidents:

The Result: 

On September 12, 2015, the Obama Administration abandoned its proposal to rank colleges let alone tie the ranking of the colleges to student aid.

At this time, the Obama Administration introduced a web site that provided raw statistics on annual costs, graduation rates, and salaries after graduation.

Article discussing the Obama Administration decision to abandon its effort to rank colleges on affordability and value:

A Discussion of the Web Site:

The Web site introduced by the Obama Administration to provide additional information on the cost and value of colleges can be found below.

Web Site on College Value and Costs:

The site contains information about schools but does not provide a composite ranking or clearly identify schools that are not good buys. 

Interestingly, the web site does contain some quick links to lists of schools with low costs and/or high incomes but no quick links to lists of schools with high costs and low incomes.

The information obtained on this web site for each school includes – average annual cost, graduation rate, salary 10 years after attending school, percent of students receiving guaranteed loans, typical loan amount for student borrowers who finished the program, percent of graduates who earn more than a high school graduate, SAT and ACT scores, demographics of students, and type of programs.

Limitations of the Debt Information:

There are a number of limitations with the data on the site, especially with the information on debt.

The debt totals excluded private student loans and PLUS loans.   These loans could be more important at some schools than other schools 

A statistic measuring the percent of students taking out PLUS loans for parent should be provided for college. (PLUS loans for parents provide substantial hardship because many parents do not have sufficient income to repay these loans.)

The database only reports median debt levels by student borrowers at a school.   It is likely the dispersion of debt levels is higher for some schools than for other schools.   It would be interesting to know the percent of borrowers with debt levels exceeding certain amounts ($50,000 or $75,000) at each school.

The repayment statistic in the database -- the share of students who paid back at least one dollar on their student loan three years after leaving school -- is not particularly useful.  Initial repayment rates could be low at a school where many alumni go to graduate school.   The default rate, delinquency rate, and the proportion of students not in graduate school who are on target to finish payment on their student loans in 10 years would be more useful than this at-least-one-dollar repayment rate.

One goal of the exercise was to identify colleges that are leaving their students incapable of paying off their student loans.  It is not clear whether the information in this database could be used for this purpose.

Using the College Score Card to Compare Universities

Common sense suggests that the College Score Card cannot be used to compare the value of a state university to the value of an elite private institution.   The difference in post-graduate earnings is likely largely determined by the difference in the talent as measured by SAT score of the student body.  The difference in debt is likely determined by the price tag and the amount of available aid.  A ranking that found Harvard University graduates earned more than students from Ohio State but owed more at graduation would not provide new news.

However, universities in the same category (highly selective, moderately selective, not selective) could and should be compared with universities in the same category.

Concluding Thoughts:  President Obama, under heavy pressure from university presidents, backed off his proposal to rank colleges and use the rankings to limit student aid to schools that did not contain costs and provide students a high quality education.   There are significant limitations with the data on the College Score Card.  However, future research might use College Score Card data to compare similarly situated colleges and to compare one type of college to another.

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