The University of Washington — No. 41 in the latest rankings by U.S. News & World Report — has come in at No. 5 on SmartMoney's list of Colleges That Pay Off, just behind the University of Georgia, Georgia Tech, the University of Texas at Austin, and No. 1 Texas A&M. In comparison, the top five schools according to U.S. News are Harvard, Princeton, Yale, MIT, and Stanford. The first of those to appear on SmartMoney's combined list (not available online) is Princeton, at No. 20. Why the disparity?
The answer: differing goals and methodologies. While U.S. News attempts, not without some controversy, to "judge the relative quality of institutions based on widely accepted indicators of excellence," SmartMoney is naturally more interested in the almighty dollar. They set out to "quantify the long-term value of a college education... [and] spotlight the relationship between tuition costs and graduates' earning power." To do this, they took graduates' median salaries three and 15 years after graduation, divided those by the cost of a four-year degree in 2005 and 1993, and averaged the totals.
The UW, with median salaries of $48,800 (for recent grads) and $85,300 (for 1990s alums) and tuition figures of $62,632 and $22,935, respectively, comes in at an "average payback" of 225 percent. (Texas A&M tops the list at 315 percent, while Princeton, with a BA running $111,840, has a figure of 132 percent.) The schools boasting six-figure tuition bills, argues SmartMoney, don't deliver more bang for that buck. Some less expensive schools such as UW offer better payback. "For parents fretting about sending their kid to the University of Washington versus, say, Columbia or Brown, they can rest easier knowing that Husky alums recoup their tuition costs, on average, twice as fast as grads from those two Ivies."
Things aren't quite that simple, of course, as SmartMoney acknowledges. Salary figures were calculated only for those who stopped after earning their bachelor's degrees, eliminating those with professional, master's, and doctoral degrees from the statistics. But in 2004, holders of advanced degrees made up 9.4 percent of the population — 19.3 percent in Seattle, the second-highest in the nation. These figures are missing quite a lot of doctors', lawyers', scientists', and professors' salaries. In addition, few pay the full stated tuition. Nearly three quarters of private-school undergraduates received grants and scholarships in 2004, while many public schools not only offer aid, but also heavy discounts to state residents. (This year's UW tuition is $23,219 for non-residents but only $6,802 for the 81.5 percent of students who are Washingtonians.) Not only that, but while Huskies' "payback ratio" may be higher, their 15-year median salary is still just 64 percent of Dartmouth grads' $134,000.
Comments on the SmartMoney rankings quickly degenerated into a fight about the relative merits of the University of Rhode Island, and whether the story should even have been written in the first place, as SmartMoney is, according to one reader, a "magazine where 99.9 percent of the readers will not get accepted to the very schools they say are not worth the money."
However, others offered good points. Two readers ran the numbers but came to different conclusions. One compared the total future salary earned by a graduate of the University of Georgia to that earned by a graduate of Harvard, factoring in the initial savings in tuition and assuming a 12 percent yearly market return on that sum (which sounds a bit ambitious these days, I'll admit). By his calculations, the Crimson beat the Bulldogs for the first quarter century or so, but that after that, Georgia steadily overtakes Harvard.
The other reader, who is "very disappointed" in this, his first issue of SmartMoney, notes that "rate of return is only a useful measure if your investment size is scalable ('I'll take 4 Univ. of Georgia please!')," and gives the edge to Harvard almost from the get-go. The Bulldog saves on tuition, but "one needs to include the investment of the Harvard grad's higher income... you'll find that the Harvard grad's additional invested income has caught and passed the UGA grad's $50k investment by the fourth year." This, of course, assumes both the tuition savings and the extra income are both being invested in full, which is unlikely.
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