In the very long history of American higher education, the idea of ranking colleges is actually a fairly recent development.
Though it seems like they have been around forever, the U.S. News & World Report rankings were first published in 1983, and at that time only every other year. In 1989, the magazine made them an annual ritual, but just ranked the top 25 national universities. In the beginning, the magazine based its rankings solely on a survey sent to college presidents and admissions directors asking them to rank their peers on their reputation.
During the next three decades, U.S. News greatly expanded how it calculated the rankings, which gave higher marks to colleges that essentially spent more money on faculty and students. That formulation cost public universities dearly (in 1989, five of the top 25 universities were public; today just three are).
Competitors to U.S News seemed to come and go every year as new college rankings proliferated, but none of them could answer a basic question for students and parents: Of the thousands of colleges in the U.S., which ones are worth the return on my investment?
On Monday, Money Magazine entered the fray of rankings, releasing the second edition of what it calls “true value-based” ratings.
Given the relative youth of Money’s list, it doesn’t get nearly as much attention as the one from U.S. News, but it should. Money tries to crack the code on answering the ROI question, and of all the rankings out there, comes the closest.
Unlike U.S. News, which focuses on several measures that really shouldn’t matter to students — percentage of alumni who donate, for example — Money magazine tries to answer the questions that prospective students should be asking on their college tours this summer: What is the graduation rate, net price (what’s the real tuition they’ll pay), how much do they and their parents have to borrow in loans, and will they learn any marketable skills that will help them get a job in order to pay back those loans?
The final rankings from Money include some of the usual suspects: Stanford, MIT, and Princeton are in the top five. But schools that most people don’t think about when someone asks about the “best colleges” also cracked the top 25: Bentley University, Babson College, the University of California at Irvine, and BYU.
Schools on the list might look unfamiliar exactly because of what Money did right in calculating the rankings.
First, the Money rankings use “net price,” which is what you pay each year after subtracting scholarships and grants that don’t need to be paid back. And because a one-year price doesn’t give you the whole story, Money multiplies the net price by the average number of years it takes a student to graduate. An expensive college is fine, but not if it takes you eight years instead of four years to complete your degree.
Judith Scott-Clayton, an assistant professor at Columbia University’s Teachers College, has found that the average college graduate pays for four and half years of college, not just four. Money noted that the average time for students to get a degree from all of the schools on its list was 4.3 years.
Secondly, in considering the amount of debt students take on to go to college, Money also included what parents borrow in federal PLUS loans. The size of PLUS loans has increased drastically in the past decade. Unlike student loans, PLUS loans don’t have a borrowing limit and are remarkably easy to get. So parents often turn to them to fill the gap in financing an education (and are often encouraged by some colleges, which include them in financial aid packages).
Thirdly, Money adds more context to a college’s graduation rate. How many students graduate in four years or five years differs greatly within a college. What prospective college students should really find out is what the graduation rate is for students like them, since rates differ based on factors like gender, race and ethnicity, and major. The Money rankings include a “value-added graduation rate,” which is the difference between a school’s “actual graduation rate and its expected rate, based on the economic and academic profile of the student body.”
Finally, the Money rankings attempt to answer the question that most parents are asking these days when they write a check for tuition: Will my child get a good job after graduation?
When Money first published its rankings last year, it based this “outcomes” category almost entirely on data from Payscale. The popular Web site gathers data on salaries for various professions from information collected by users, and we all are known to have inflated our salaries from time to time.
As a result, the findings on this measure were among the most questioned of the rankings. The Payscale data are still part of the rankings this year, but they are supplemented by new findings from a Brookings Institution analysis of the market value of the 25 most commonly cited skills listed by alumni of each college in their LinkedIn profiles.
Money’s rankings come just three weeks after the Obama administration dropped controversial plans for the federal government’s own version of ratings based on the value of a degree. With all the college rankings now being published, there was no need for the federal government to enter the game, too. The best thing the federal government can do is encourage, even mandate, colleges and states to report better data, particularly on earnings and outcomes of graduates. In the long run, that will encourage entities, such as U.S. News and Money, to publish their own set of rankings based on better information.
The problem with searching for a college with hard data is that it’s a very emotional decision that most 18-year-olds make only once in their life. It’s also what economists call an “experience good,” meaning you don’t know what you’re buying until after you experience it. But by supplying prospective students and their parents with better information that they can use to balance with their emotional side, they can perhaps make better choices about which schools are best for them.
Money’s Best Colleges
Click here for the full Money rankings
1. Stanford University
2. Babson College
3. Massachusetts Institute of Technology
3. Princeton University
5. California Institute of Technology
6. Harvey Mudd College
6. Harvard University
8. Maine Maritime Academy
9. Amherst College
9. University of California-Berkeley
9. Cooper Union for the Advancement of Science and Art
12. University of Pennsylvania
13. University of California-Irvine
14. Rice University
15. Brigham Young University-Provo
15. Bentley University
17. University of Virginia
18. University of Michigan-Ann Arbor
19. Claremont McKenna College
20. Texas A&M University-College Station
21. Yale University
21. Dartmouth College
21. Duke University
24. Washington and Lee University
24. Vanderbilt University