The return a student may expect on their educational investment should be an important factor in determining which college to attend. At Degreechoices, our mission is to help prospective students analyze the economic track records of different schools, giving them practical tools to easily compare colleges and universities.
We evaluate the economic performance of a school on the basis of 2 parameters: how educational cost measures up to the additional earnings a student can expect to make thanks to their degree, and how this earning potential compares to that student’s cohort.
This methodology statement details how we benchmark and compare different colleges and programs against these 2 metrics.
Payback measures how long it takes the average student to pay back the total cost of their education with marginal earnings. Marginal earnings are the difference between what the average student “would have earned” before their college education and what they earn afterwards. This metric is inspired by Third Way’s Price-to-Earnings Premium, whose educational director Michael Itzkowitz consulted on this project.
“Once students have recouped the amount they paid to obtain their degree, the additional income quite literally becomes a ‘return on investment’ for those students.”
The equation we use to calculate payback is quite simple: total cost / marginal earnings = payback
The net annual cost refers to the amount paid by students for all their educational expenses – tuition, fees, books, room, board, and other related expenses – after grants and scholarships have been deducted. The net cost figures are taken from the Department of Education’s College Scorecard and refer only to students who receive some federal financial aid. More granular pricing data can be found on our school profile pages, where net cost is broken down by household income brackets.
Marginal earnings are the difference between pre- and post-college earnings. The high school earnings benchmark is taken from the American Community Survey of the Census Bureau to represent earnings pre-college education. Post-education earnings are taken from College Scorecard’s latest institutional report. We use the metric that measures the earnings of all students 10 years after enrollment.
The payback rate allows students to easily compare the average amount of time, in months and years, that it takes for each school’s total cost to be covered by new earnings. In some cases, a student would be better off choosing the school with higher comparative earnings over shorter payback.
EarningsPlus compares student earnings against a weighted average earnings benchmark based on their major and graduation year. An EarningsPlus of $10,000 indicates that students have outperformed the benchmark by $10,000. An EarningsPlus of -$10,000 indicates underperformance of $10,000 in relation to the benchmark.
At the school level, EarningsPlus is an aggregate of the school’s program-level earnings performance.
For example, if a school has 50 students in one program with an EarningsPlus of $10,000 and 25 students in another program with an EarningsPlus of $15,000, the school-level EarningsPlus would be (50*$10,000+25*$15,000)/75 = $11,667.
EarningsPlus benchmark calculation
We also adjust the earnings benchmark for each school to account for the in-state/out-of-state composition of the student body.
For example, if a school has a 50/50 split between in-state and out-of-state students, and the weighted average earnings for a particular program are $50,000 in-state/$75,000 out-of-state, student earnings are compared against a weighted average of $50,000*50%+$75,000*50%=$62,500.
Check out our statement on recent changes to our methodology for more information on why we make these adjustments.
Payback and EarningsPlus are combined into a single number used to represent comparative economic value – a school’s economic score.
- To calculate the economic score, we first divide a school’s program earnings by the earnings benchmark to create an EarningsPlus percentage (EPP).
- An EPP of 100% would indicate identical earnings between the school and the benchmark, with anything above that indicating school overperformance, and anything below indicating underperformance.
- We then divide a school’s payback by their EPP.
- An EPP above 100% will result in an economic score lower than the school’s payback.
- An EPP below 100% will result in an economic score higher than the school’s payback.
- Therefore, a lower economic score is better.
For example, imagine 2 schools with a payback rate of 2.0.
The first school outperforms their earnings benchmark by 20% (EPP=120%), while the second school underperforms their earnings benchmark by 20% (EPP=80%).
The first school would earn an economic score of 1.67, while the second would get a 2.5.
There are 2 differences in how we rank graduate programs compared to our undergraduate rankings.
First, IPEDS does not track the cost of attending graduate programs, so we must make do with using debt rather than cost. For this reason, we replace the payback rate described above with a debt-to-earnings calculation.
The debt-to-earnings rate compares total debt against annual earnings of the debtor. A debt-to-earnings ratio of 1 would indicate that the debt accrued from the program is 100% of a student’s earnings. A debt-to-earnings ratio of .5 would indicate a debt level of 50% against earnings, a 1.2 ratio would indicate 20% above earnings, and so on.
Debt-to-earnings uses the debt a student holds at graduation against earnings 3 years after graduation.
The debt-to-earnings ratio is divided by the EarningsPlus metric – which is calculated by comparing graduates against a benchmark of students graduating in the same year and in the same program – to generate the economic score.
The second difference is that we report only at the program level when analyzing graduate-level studies, and we currently consider only master’s programs (i.e., not doctoral programs).
We also compare online programs using our economic score. The comparison cohort is limited to other online programs or schools.
Our online college rankings consider only schools that are 100% online. At the program level, we include both entirely online and hybrid online-campus programs.
- Schools included in our rankings must be eligible for Title IV funds
- Schools with graduation rates in the bottom 25% nationally are pushed to the bottom of our ranking tables.
- Our rankings lists are divided into different school categories, and you might be looking under the wrong list.
- National Universities: Must offer doctorate level studies (Carnegie Classification 15-17)
- Regional rankings: Masters and bachelor-level institutions that do not offer doctoral programs (Carnegie Classification 18-20,22)
- Liberal Arts: Bachelor level colleges with an arts and sciences focus (Carnegie Classification 21)
If there are less than 5 ranked schools, we do not display the state at the program or institutional level.
If there are less than 10 ranked schools offering a particular program across the country, we do not show the program.
- We only consider programs with at least 10 conferrals at the undergraduate level and at least 5 conferrals at the graduate level.
- Programs with too few graduating students often will not have enough earning data for statistical significance, and so are omitted from Treasury reporting. We will not include schools that do not have the earnings and cost data required to calculate our economic score.
If there are less than 3 programs available for comparison in any state we will not populate the state rankings. You can still check out a school’s individual performance on their school profile.
- Only entirely online colleges are included in our best online colleges list.
- Colleges on the best online colleges list must have at least 5 different programs.
- Programs must have at least 10 conferrals to be considered.
- Rankings for online programs include all programs with at least 10 conferrals. These programs may be either hybrid or entirely online.
Content and Data Strategist
David Levy manages the content, product, and data strategy for Degree Choices. Recently he has been spending much of his time developing and honing the economic valuation methodology used for ranking colleges and programs. David graduated way back in 2001 from Kenyon College in Gambier, Oh, with a major in political science.