Setting the Curve: Ranking Colleges by Economic Value Add, a Report by Wonk Tank
February 16, 2016
As the cost of a college education increases, one wonders whether college is “still worth it.” Are the monetary benefits – increased wages and job opportunities – and non-monetary benefits – increased happiness, better health and so forth – worth the debt and years out of the workforce?
Using the College Scorecard released by the Obama administration, Wonk Tank, the Penn Wharton PPI Student Association, ranked colleges to help students identify which universities would provide the biggest boost to their income. The premise of Wonk Tank’s rankings is that the economic value of a college is the additional income the median graduate of a particular college earns compared to what they would have earned had they chosen to go elsewhere.
Authors: Shane Murphy, Vivek Nimgaonkar, Kailash Sundaram
Research Assistants: Adarsh Battu, Emily He, Scott MacGuidwin, Prakash Mishra, Cecilia Pan, Saier Wang, Stephanie Yang
Using data on incomes of college graduates ten years after college in combination with data on the composition of students at individual universities (i.e., median SAT scores, racial demographics, median family incomes, etc.), the authors of the report used a regression to model the expected income of a college’s graduates. The Wonk Tank contributors then found the difference between the actual and expected income of a college’s graduates to identify the value-add of the particular college. Schools that are not always at the top of the US News and World Report Rankings are found near the top of these rankings in some cases. For instance, the University of Colorado-Denver ranked third amongst all schools in our analysis; the median graduate was expected to earn $36,443.72 but actually earned $62,861.01, amounting to a value-add of $26,417.28.
However, the goal of this report is not necessarily to create lists comparable to the US News and World Report Rankings that pool hundreds of schools for composite lists of overall rankings. Rather, the hope that the rankings, which follow on other attempts to use the College Scorecard, can offer an opportunity for college students, educators, and policymakers to compare similar institutions along their value-add and assess the economic value that individual schools are providing for students. Wonk Tank considers these comparisons (the choice between two “reach” schools, or between two “safety” schools) convey more actionable information for parents and students making decisions about colleges and will help them make more informed decisions on higher education options.
Originally, the College Scorecard was intended as a means for the Department of Education to assign “grades” to individual schools – grades which would reflect a data-driven judgment about the efficacy and value of an education from that particular institution. While the Obama administration abandoned this plan amidst concerns, especially from higher education administrators and interest groups, about the implementation of the rankings, Wonk Tank still believes there is value in quantitative evaluations of the contribution of individual schools to the future financial success of the students who pass through their walls..
This report’s structure is as follows: a brief history of higher education in the United States, a literature review of the monetary benefits of college, an overview of the College Scorecard, a description of the regression methodology, a discussion of the results, and a conclusion.
Table of Contents
II. History of Higher Education in the United States
III. Literature Review on the Value Added by a College Education
IV. College Scorecard Database
V. Our Model: Determining the Dependent Variable
VII. Implications of the Model
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