Picking the right college: what can we learn about college quality from the average earnings of its students?

• Author: Ward, Bryce
• Position: TRENDING - Statistical data

Deciding where to attend college can be one of lifes pivotal decisions--one that can largely shape a student's future. Every year, high school seniors across Montana apply to schools based on limited information, often making their decisions on vague rankings, a schools reputation or how much they like the football team.

Making a cold, rational calculation on costs can be difficult. For example, how much would they earn down the road by attending one school over the other? To help students make a more informed decision, the Department of Education released a trove of data about colleges on the website collegescorecard.ed.gov. It allows a user to compare colleges based on a variety of metrics, including the net cost (after financial aid), the school's graduation rate and their possible income 10 years after enrollment.

Some of the data presented could be confusing to young people, who might be led to choose one school over another due to what the data suggests. The biggest problem with the Department of Education's website is its income data, which can be misleading.

To understand the problem, consider the mean earnings, median earnings and the share of students earning more than $25,000 ten years after enrollment for Montana's main four-year universities presented in Table 1. (I've added Harvard University and the national average of all similar universities for comparison.) The table also presents the average net cost of each college.

A couple of things stand out. First, the difference in average earnings between colleges is quite large and secondly, the earnings outcomes for all Montana's colleges is relatively poor. Those earning fall below the national average. (And yes, for students who qualify for federal financial aid, Harvard is cheaper than the other universities.)

While it is tempting to look at these data and infer that colleges with higher earnings are better, in that they are doing a better job preparing their students for the labor market, this conclusion is not supported by the data presented on the College Scorecard website. In fact, it does nothing to reveal the quality of any institution listed.

Before delving into big conceptual issues, it is worth noting that the income data has its limitations. One must keep in mind that the reported information does not represent the earnings for all students enrolled in a particular college. It only represents the earnings for students who received some form of federal financial aid...