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UW: We're Number 5!

SmartMoney says a UW grad gets a 225 percent payback over time, making it a better value than an Ivy League school. But do the numbers add up?
UW, the Harvard of the Northwest?

UW, the Harvard of the Northwest? Crosscut Flickr contributor lachance

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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Comments:

Posted Wed, Jan 7, 8:32 a.m. Inappropriate

I suspect most peopole knowledgeable about higher education would put the UW in the top-third of public universities--not as strong as Berkeley, Ann Arbor, Madison or Chapel Hill, for instance, but certainly stronger than most PAC-10 colleges. It certainly lags behind the major private universities.

The UW itself often cites earnings as a measure of graduates' success. But
higher education, last time I looked, was about more than earnings. The UW
is strong in scientific and technical fields and some of its grad schools are good. But upper-campus, liberal-arts programs appear at least a notch behind those of public-university competitors. Faculty there are comparatively underpaid and dean and faculty vacancies remain unfilled.

As a loyal UW alum, I would like to see my alma mater rank high not only among public but private universities. The US News ratings, imperfect as they are, provide a much better measure of overall excellence than do those from SmartMoney.

Posted Wed, Jan 7, 9:01 a.m. Inappropriate

Having transferred into the UW from a small, residential, liberal arts college there is definitely something to say for smaller institutions.

A real community is a big part of it - and that reflects on the intellectual advancement as well. In a small institution you are much more likely to make aquaintance with others in different fields - true diversity, if you will. This cultural experience synergizes well with the broader goals of a liberal arts education.

At the UW the community is ruled by special interest politics - for all the soapboxing about cultural diversity the sad fact is that folks are much more likely to 'fraternize' within their own groups than at a smaller institution.

Specialized instruction is important to a career, but to a life well lived nothing matures sweeter than social life of the mind fostered at a small liberal arts school.

Posted Wed, Jan 7, 12:29 p.m. Inappropriate

This whole analysis assumes that students attending Ivy League schools pay the full tuition, board and room rate, very few do. Many middle class families would find it cheaper to send their child to Harvard than the UW. Quoted below are the key parameters of Harvard's financial aid packages for undergraduates: "The “Zero to 10 Percent Standard”: Harvard’s new financial aid policy dramatically reduces the amount families with incomes below $180,000 will be expected to pay. Families with incomes above $120,000 and below $180,000 and with assets typical for these income levels will be asked to pay 10 percent of their incomes. For those with incomes below $120,000, the family contribution percentage will decline steadily from 10 percent, reaching zero for those with incomes at $60,000 and below. For example, a typical family making $120,000 will be asked to pay approximately $12,000 for a child to attend Harvard. No Loans: In calculating the financial aid packages offered to undergraduates, Harvard will not expect students to take out loans. Loan funds will be replaced by increased grants from the University. Of course, students will be permitted to cover their reduced cost of attendance through loans if they wish."

I would say the Smart Money analysis is nonsense.

Posted Mon, Jan 12, 12:23 a.m. Inappropriate

The relative rate of return is completely useless as a measure if the amount of the initial investment varies.

Think about it, which was the better decision?
a) Invest $1 with a return of 2000% for a $19 profit
b) Invest $10,000 with a return of 1000% for a $90,000 profit

SmartMoney picks a).

Smart people pick b).

Sean

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