Tuesday, March 13, 2012

Proving the Value of Higher Education

Last year, 2011, a law went into effect requiring colleges and universities to post a cost calculator on their web pages. (http://www.usatoday.com/news/education/story/2011-10-19/college-cost-calculator/50830080/1) The goal being that people planning to go to college should be able to make an informed choice and understand their likely costs. In this blog post I am going to propose another law that goes a step forward.

In many ways, the costs of college have always been fairly transparent. However, I know people in admissions think that the cost calculators could have as big an impact on recruiting as rankings had when they were first introduced. What is far less transparent about college is what you get out on the other end. The What's It Worth? study showed correlations between degrees and earnings across the nation, but modern technology should allow this to go much further. Most importantly here, it should allow us to get measures of what people earn after leaving different schools with different degrees.

I learned about the cost calculator in a meeting of the admissions committee at Trinity University. The cost calculator is a big deal for us because Trinity is not cheap. The standard argument is that a liberal arts education prepares students to go on to very successful lives. What struck me as unfortunate is that we can do little more than provide anecdotes to that effect. While most Universities, including Trinity, have active alumni associations, it simply doesn't fly to ask everyone how much money they make. However, thanks to modern computing technology I think that with very minimal support from the federal government, it would be possible to get that information in a reliable and anonymous way.

The scheme I have in mind relies on the fact that colleges and universities have the Social Security Numbers of their graduates. It also requires that the IRS help out a bit. The colleges would request income information for groups of people. Ideally I see these being groups based on major and years of graduation. The IRS would provide only a median income level for the group, and perhaps quartiles if the group is large.

To preserve anonymity, groups need to have no fewer than 50 people and the IRS need only provide information back if it has data for at least 30 of them. I feel like groups should also include at least one full major for at least a five year window. Smaller schools and smaller majors will need to group things to make the 50 person rule. They might choose to group several related majors or to make windows of 10 years instead of just 5.

Requests for data could only come from accredited institutions, and there would be significant penalties for falsifying anything. That would prevent an institution from putting a single person into more groups than they should be part of to bump thing up. The use of median and quartiles instead of mean is also significant here. The exact levels of income at the top and the bottom are unimportant so a single billionaire can't throw things off.

Of course, this would only track income in the US so it couldn't follow people who go to work abroad. I'm sure there are a number of other possible pitfalls as well. However, it seems to me like a very plausible, low cost way to really show the value, or lack thereof, in the higher education provided by a particular institution. If the federal government is forcing schools to provide cost calculators with the idea of helping to inform and protect the consumer, this seems to me like the next logical step to provide actual information on financial benefit. What is more, the cost to the IRS would be extremely minimal and the cost to colleges and universities should not be all that high either. The information is already being stored in computer systems capable of far more complicated tasks. Even the software required would be simple to write.

What do you think? If you like the idea, suggest it to your US congress people or maybe just send this blog post to WhiteHouse.gov.