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How Obama’s College Scorecard Helps (and Doesn’t)

university campus bicyclesEarlier this month, the Department of Education released a new College Scorecard which contains a variety of information about almost all U.S. colleges, including costs, graduation rates, test scores and students’ future earnings. While it is a great source of data, the Scorecard has important limitations and users should be careful when using student outcomes to compare colleges. When comparing costs, however, the Scorecard can be more useful.

One especially tempting use of the data is to use graduation rates or students’ future earnings to assess colleges. In his 2013 State of the Union address, President Obama said, “My Administration will release a new College Scorecard that parents and students can use to compare schools based on a simple criteria: where you can get the most bang for your educational buck.”

Over the past two years, government officials have backed off the idea of providing a direct rating of colleges, but the data provided still invites the comparison and so does the president. More recently, in his September 12 remarks introducing the new Scorecard, he said, “You’ll be able to see how much each school’s graduates earn, how much debt they graduate with, and what percentage of a school’s students can pay back their loans – which will help all of us see which schools do the best job of preparing America for success.”

The tricky part is that different colleges bring in different types of students. For example, in the American Institute for Economic Research’s home state of Massachusetts, the flagship state university UMass-Amherst has a listed graduation rate of 71 percent and median salary of $49,600 10 years after enrollment. For Harvard University, the listed numbers are much higher – 97 percent and $87,200.

However, Harvard’s students have much higher average test scores and are less likely to come from disadvantaged backgrounds. How much of the better graduation and earnings outcomes have to do with what the students were like before they enrolled, and how much is the difference between attending Harvard or UMass? From the perspective of students trying to make the best decision, the second question is the important one, but looking at graduation rates or earnings only gives us a combined answer to both questions.

Many, many economists (including myself) have tried to separate these two things and show how much of differences in student outcomes are due to students versus colleges and universities. Most studies find selective schools lead to higher income even after adjusting for student characteristics. But the estimated size of the impactdepends on the data and the researcher’s assumptions. If better schools are more expensive, then we often can’t be sure whether the increase in future income would be big enough to justify higher costs.

However, sometimes a student can attend a more selective school at a lower cost, and this is one area in which the Scorecard may be most useful. The Costs section of the Scorecard breaks down average cost of attendance for all universities by family income, after subtracting financial aid. In our example, the net price of Harvard is less than UMass for every income range below $110,000, and is around $10,000 less for incomes below $75,000.

This is not an aberration: one of the lists made from Scorecard data shows low-income students face low average costs for many excellent universities, ranging from other Ivy League schools (e.g. Princeton, Yale) to small liberal arts colleges (e.g.  Colby, Williams) to elite public universities (e.g. Michigan, Georgia Tech). This is important because economists have shown that high-achieving students with low income often don’t apply to top tier schools, and one experiment showed that providing information to these students helps them apply and be admitted to more colleges.

In addition to average prices, the Scorecard provides links for students to go to colleges’ websites and estimate a personalized net price. If students focus on the cost side of the Scorecard to find out what prices they personally would face, they should get accurate answers and hopefully make the best decisions for their future.

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