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What is the value of a college education? Is higher education a good investment? Is there a way to rank colleges based on outcomes rather than the input measures used by U.S. News & World Report?

A new report produced last week provides a first draft at answering those questions. The report, “A First Try at ROI: Ranking 4,500 Colleges,” comes from the Georgetown University Center on Education and the Workforce. Using College Scorecard data, the study attempts to measure the added value in earnings produced by 4,529 colleges and universities both 10 years and 40 years after graduation, or in the case of certificate programs, completion.

Return on investment has become a watchword in higher education as colleges try to respond to concerns about cost and student debt. The Georgetown report concludes that college is a worthwhile investment, but a long-term investment, making it countercultural for an instant gratification society. A college education provides a more immediate return than investing in the stock market but lacks the tangible benefit of purchasing a home.

Going to college is also an investment with risk, given that many students must take on debt. “A First Try at ROI” argues that focusing on debt alone is misguided, as over the long run students who receive a bachelor’s degree have significantly higher ROI despite taking on twice as much median debt.

The Georgetown study calculates return on investment using a method known as net present value. Net present value is best understood as a scientific formulation of the idiom “A bird in the hand is worth two in the bush.” That’s great, as long as you have any idea what that saying means. Are we talking about a literal bird, Larry Bird, Charlie “Bird” Parker or Big Bird? A bush, the Australian bush or President George W. Bush?

Net present value is an attempt to calculate the current value of future earnings, based on an assumption that most of us value what we currently have, the “bird in the hand,” more than what we might gain by taking a risk, the “two in the bush.” Reading the report, and specifically its explanation of net present value, served as a reminder of why I didn’t major in economics and why I am condemned to a nonprofit career.

The narrative provided by the report resembles the plot line from Aesop’s fable about the hare and the tortoise, in that the institutions providing the greatest return on investment over the first 10 years are generally not the same as those that provide the greatest ROI over 40 years.

In the short term, community colleges and certificate programs top the list of institutions providing the greatest payoff, with 26 of the top 30 falling into those categories. The reason for that is a shorter completion time provides faster earnings. Five of the top eight are nursing certificate programs. The median gain for all colleges 10 years out is $107,000, with the highest-ranking schools providing four times that. Public colleges and universities provide higher short-term ROI, largely because of the additional debt graduates of private colleges take on, but 10 years out private college graduates have annual median earnings $8,000 higher than public college alumni.

The picture is different 40 years out. The median gain over that period is $723,000, with a spread between private nonprofit, public and for-profit institutions. Private nonprofit graduates see a median gain of $838,000 compared with $765,000 for public colleges and universities and $551,000 for those attending for-profit institutions. Eight of the top-10-ranked schools are private and nonprofit, with the other two being maritime colleges, Maine Maritime Academy and the United States Merchant Marine Academy.

The three highest-ranked institutions for long-term benefit are pharmacy colleges in New York, Missouri and Massachusetts. The Albany College of Pharmacy and Health Sciences and the St. Louis College of Pharmacy are the only institutions appearing in the top 10 for both the 10-year and 40-year list, and over 40 years both provide median net present value nearly four times the median for all institutions. Rounding out the top 10 are four “usual suspects” -- Massachusetts Institute of Technology and Stanford, Harvard and Georgetown Universities -- along with Babson College.

If private, nonprofit institutions are overrepresented at the top of the list, the Georgetown study shows that the middle of the pack is inclusive, with representation from all sectors. And what about the bottom part of the rankings? The clearest path to a net present value under $300,000 over 40 years is to double major in cosmetology and printmaking at a rabbinical college.

So how valuable is the report? Regardless of how you feel about the report’s methodology and conclusions, it provides a valuable benefit with its list of 4,529 institutions. In my presentations I always include a question about how many colleges there are in the United States, with the common response being, “Nobody told us there was going to be a quiz.” For years I have used the number 3,000 as roughly the number of two-year and four-year colleges, but several years ago I did a presentation for alumni parents at the University of Richmond, and during the introduction the then vice president for enrollment quoted a much higher number in the 5,000 to 6,000 range.

According to the report, 34 percent of the 4,529 colleges are for-profit, and if you take those out you end up with a number close to 3,000 nonprofit institutions. Of those, 58 percent are public. More than a quarter of the colleges included in the report have fewer than 250 students. Most of them are short-term certificate programs for adult learners, and they are included in the study because of changes in federal law that make those attending such programs eligible for Pell Grants.

The data are a valuable contribution to the discussion about ROI and about ranking colleges. We can certainly question assumptions in the report such as that earnings over 10 years are an accurate proxy for future earnings, or that using a 2 percent interest rate in the formula is better than using the average historical returns for the stock market. The report itself reiterates the point made previously by Anthony Carnevale, director of the Georgetown center and one of the report’s authors, that future earnings have a stronger correlation to the academic program one pursues than the institution one attends. The art history majors graduating from Stanford probably don’t have earnings comparable to the engineers graduating from Stanford.

The report also acknowledges that a college education has nonmonetary benefits. The College Scorecard measures the value of a college education in terms of earnings, but the college experience provides other benefits that are not easily measured. We need to ensure that we attempt to measure what we value, not value what we can easily measure.

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