Is Our Students Earning?

The short answer is: probably. While studies of past recessions suggest that the unlucky Great Recession grads will do less well economically than those graduating during better times, they are still likely to earn more and have better job prospects than their peers who lack college credentials. The June 2011 unemployment rate for those with only a high school diploma, for example, was 10 percent, as opposed to 4.4 percent for those with a college degree. And earnings for college graduates were 66 percent higher in 2010 than for high school graduates. Moreover, the benefits of a college degree are not just financial: college graduates tend to lead healthier lives, have lower divorce rates, and have children who are better prepared for school. On average, a college degree is a worthwhile, if increasingly expensive, investment.

But the key phrase in that answer is “on average.” Graduates of some colleges make a lot more money than graduates of others. It would be helpful if students and parents had information on which was which when choosing colleges, so graduates could avoid the unemployment line the next time the economy implodes. Unfortunately, colleges have been slow to collect earnings data about their graduates—or if they have it, they keep it to themselves. As a result, some people don’t realize they’ve enrolled in the wrong college until it’s too late.

Fortunately, new job market information is starting to become available. Some states are using Labor Department data to track the earnings of college graduates who work within the state. The U.S. Department of Education will soon begin evaluating career-focused programs, primarily in for-profit colleges, by comparing graduates’ earnings to the size of their student loans. The day is coming when we’ll know how much the graduates of every college—possibly even every department or program within a college—earn after they finish school.

And thanks to an innovative online company called Payscale, we can get a sneak preview of how that information will change the way colleges are rated and ranked. Payscale runs a Web site that asks users to complete a voluntary survey about their earnings, job history, and educational background. In return, people get a report on how their salary compares with others with similar backgrounds doing similar jobs—which they can then take into their next round of pay negotiations at work. That’s the service Payscale offers. But the company has also decided to do something else with the data it has collected. Using its trove of survey responses, Payscale has set out to calculate the thirty-year “return on investment” (ROI) for different colleges by comparing their tuition to the lifetime earnings of their graduates.

Because it’s self-reported, Payscale’s data isn’t perfect. Nor are average alumni earnings over thirty years necessarily the best measure; that figure won’t, for instance, reflect recent changes, positive or negative, at a college. But Payscale’s database of more than a million profiles still provides a valuable window on the wide disparities of college earnings outcomes, which range from less than $100,000 to over $1.8 million. In other words, graduates of some schools will see a payoff on their college investment that is nearly twenty times higher than graduates of other schools...

Read more from this article in the September/October 2011 issue of Washington Monthly.