Buried Treasure in the U.S. News Rankings

HIGHEREDWATCH.ORG

Lindsey Luebchow | September 4, 2007

The U.S. News & World Report’s annual ranking of colleges and universities, "America’s Best Colleges 2008," was published last week with typical fanfare. High school students and their parents likely flipped immediately to the "top schools" ranking, where they found—gasp!—that Princeton University earned the top spot for the eighth consecutive year! And the same exact schools as last year continue to fill the top 12 slots.

What many potential college applicants may not have noticed, and what we believe would be immensely more useful to them, is the treasure trove of data on financial aid and student debt that is included in the report. The magazine publishes information on financial aid packages offered at schools, such as the average need-based grants and loans that students receive and the average percent of a student's financial need that the colleges meet.

That isn’t to say that college quality is less important than cost. There’s no question that applicants should consider the quality of various institutions before applying. But credible data on college quality is hard to come by. And there are few people who believe (and a lot of evidence disputing the notion) that the U.S. News "top schools" ranking has anything to do with actual quality of schools. Most agree that the rankings have much more to do with the size of a school's endowment and its reputation, which in many cases may be outdated.

And of course money matters a lot—specifically, how much a school actually costs (i.e. it's net cost after financial aid is taken into account) and what form financial aid comes in (i.e. grants versus loans). Often people are so focused on the superficial aspects of colleges that they forget to consider how much debt they are going to leave with four or more years later. Who really cares that 31% of alumni give money back to Georgetown University? It's not completely unimportant. But isn't it more important to know that Georgetown promises to meet 100% of your financial need?

The U.S. News financial aid table is actually somewhat deceiving, because it lists schools by those that "award the most (and least) need-based aid." While it’s great that George Washington University has the highest average aid package in the country at $33,809, this isn’t because the university is particularly generous—it’s because it's the most expensive school in the country, with an annual tuition of more than $39,000 and total cost that exceeds $50,000 per year.

What’s more interesting than the relative size of aid packages is the ratio of grants to loans in the average package. Also quite useful is a table ranking the average amount of debt with which students graduate.

This data can be particularly helpful when comparing similar schools. For example, let’s look at two universities that have comparable ranks on the U.S. News list: New York University and Lehigh University. Both NYU and Lehigh rank in the low 30s on quality and charge around $35,000 in tuition per year.

Lehigh meets 96% of students' financial need, with the average student receiving five times more grant aid than loan aid—$21,794 in grants compared to $4,367 in loans. Lehigh's endowment of $975 million supports the school's financial aid program, among other activities.

In contrast, NYU meets only 66% of students' financial need, and has a much lower average grant to loan ratio—with the average student receiving $14,207 in grants and $5,149 in loans. In other words, students who choose NYU over Lehigh are very likely to shoulder a heavier debt load. In fact, NYU ranks number three on the "most debt" ranking, with graduates leaving school with an average debt of $34,417. You'd think a school like NYU with a $1.75 billion endowment—one of the largest in the country—could do better.

While we're disappointed with NYU, our main point is that there is a lot of very valuable information in the US News report. Just don’t get too caught up in the crazy hype of the "top schools" ranking. Flip to the financial aid data, and make sure that your dream school isn't going to smother you with excessive debt.

Sign Up For Higher Ed Watch E-mails | Return to Main Blog Page

Comments

Impossible to Interpret

Submitted by Marky Marc (not verified) on September 5, 2007.

Unfortunately for students, I'm not sure that this data can be interpreted exactly as Lindsey has interpreted it.

For example, it's possible that NYU accepts a large number of rich kids, who it deems unworthy of grant aid (i think we'd all agree with that logic), and then these rich kids decide to borrow loans to help pay for school. In other words, high debt levels for a school doesn't necessarily mean that it's the poor kids that are getting stuck with the debt. In fact, although NYU has a higher overall debt level than Lehigh, it's possible that NYU provides more grants to poor kids, in sort of a "Robin Hood" fashion.

So students should not necessarily be discouraged by a school's overall debt level, because this debt level is almost impossible to interpret and may have different implications, depending on students' unique financial situation.

So U.S. News doesn't deserve any extra enthusiasm yet.....

Luebchow Response

Submitted by Education Policy on September 5, 2007.

Thank you very much for your comment. We greatly appreciate your readership and input.

We agree that one needs to be careful interpreting financial aid data from the U.S. News report. However, that being said, there is still a lot of value in the data available. For example, in the case we provided, it is significant that New York University (NYU) only covers 66% of financial need, while Lehigh covers 96%. It is reasonable for students with financial need to expect a better aid package from Lehigh than NYU given their comparable sticker prices, although, of course, aid packages will still vary on a case-by-case basis.

Also, according to U.S. News data on Pell Grants, NYU actually enrolls a much higher percentage of Pell Grant recipients, who are low-income students, than Lehigh and other top institutions. At NYU, 17% of undergraduates are receiving Pell Grants, while at Lehigh only 9% of undergraduates are receiving Pell Grants. Your argument that one school might receive an exceptionally high proportion of high-income applicants is possible. However, comparable universities generally get a similar pool of candidates, and even if the applicant pool were skewed slightly by income, it’s unlikely that income shifts in the student population could skew the aid distribution that significantly ($34,417 is a lot of debt).

Thank you for reminding everyone that the U.S. News data looks at averages and general trends at a school and shouldn’t be interpreted as applying to a single student’s situation.

Marky Marc Response

Submitted by Marky Marc (not verified) on September 5, 2007.

The amount of data that U.S. News provides is overwhelming and often confusing and unhelpful. Students need to learn how to focus on the helpful data, and ignore the misleading data.

Case in point: You state that it's reasonable for students to expect much better packages from Lehigh than NYU, because Lehigh covers 96% of need, while NYU covers only 68% of need. However, the loan amounts are not that different between the schools: Lehigh students have $4367 per year, while NYU students have $5149 per year. Although this difference should not be entirely shrugged off, do you really think it's important enough for students to ignore NYU? I would argue that students should not really make decisions on such a small difference, hence this data can be confusing and misleading for students. Instead, I'd recommend that students reduce their debt as much as possible, but the U.S. News chart shows that most schools have similar annual debt levels, of about $3,000 - $4,000. Once again, U.S. News data fails to really deliver much valuable info here.

You mention that NYU accepts more Pell grant students than Lehigh...but I'm not sure if this proves or disproves your point. After all, I thought you had previously said that low-income students should look to Lehigh for the better deals...but, whoops, it appears Lehigh won't accept these students anyway....

As to the $34,000 NYU total debt figure: where does this come from? If NYU students borrow $5,149 per year, then four years should lead to $21,000 of debt, which is about average. My guess is that the $34,000 figure includes non-need loans, or the loans that rich people borrow because they don't feel like paying cash at the moment. Whatever the reason, it's not clear who this $34,000 figure applies to.

My main point is this: the U.S. News data is very contradictory and difficult to interpret, and I'm not sure that it can be properly interpreted. I'd advise students to use it with extreme caution and not necessarily use it to make any major decisions about schools to apply to or attend.