What's wrong with Kiplinger's "best value" college list
Commentary:
(MoneyWatch) When I was checking out the private universities on Kiplinger's new "best values" list, here was my reaction: What in the world were they thinking?
When I took a look at the magazine's 100 best value picks for universities, I was astounded at some of institutions that made the cut. Among the schools that landed a spot on Kiplinger's honor roll were universities that also are on what I like to call the U.S. Department of Education's financial aid hall of shame.
Every year the agency releases a list of the private, nonprofit schools in the U.S. that charge the highest net prices. (The department also produces net price lists for state institutions and for-profit schools.) The net price, which is a far more meaningful figure than the sticker price, is what a family would pay after typical scholarships and grants are subtracted from a school's list price.
Partially in an effort to encourage schools to make their costs more reasonable, the federal government releases each year the names of the top 5 percent of schools that charge the highest net prices. In looking at Kiplinger's supposedly "best value" schools, 13 of these institutions are on the government's dishonor roll. Here are the schools that made both lists:
- Bentley University
- Carnegie Mellon University
- Catholic University of America
- Fordham University
- New York University
- Northeastern University
- Rensselaer Polytechnic Institute
- St. Joseph University
- St. Louis University
- Santa Clara University
- University of Denver
- Wake Forest University
- Washington University St. Louis
Location, location, location
When you look at this list, you'll see a pattern that I've mentioned in previous college blog posts and in my book. Schools in cities primarily on the coasts can get away with charging more money because students place a high premium on location. Teenagers think they need to attend schools in places like New York City, Washington DC, Boston, Denver or Silicon Valley, so schools can charge more in these locations.
I checked Kiplinger's methodology for an explanation of how these schools -- and other extremely expensive universities that offer stingy financial aid packages -- landed on the best value list. According to the magazine, 56.25 percent of the ranking is based on academic qualities, while 43.75 percent is based on cost factors, such as what percentage of financial aid need a school typically meets.
To illustrate why the magazine needs to reexamine its methodology, let's look at New York University, which is known for its poor financial aid packages (Known perhaps to everyone but Kiplinger's.) I used NYU's net price calculator and pretended that I was an applicant whose parents made $30,000 a year. The net price for one year at NYU for that student would be $29,441!
So a family that makes $30,000 would be expected to contribute their entire income for their child to attend NYU. Where is the value in that?
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People seem to like lists. A list may be helpful in choosing what is a good restaurant to go to this Friday night, but for crying out loud, we are talking about an investment of hundreds of thousands of dollars in many cases.
Many of these lists are just flat-out dangerous. They put students and families in more and more debt, and have nothing to do with what is the right school for the student.
Repayment rates and employment rates are incredibly hard to come by but we also factor in those sort of statistic available.
It's hard to "rank" a college in general, but I think it's very important for kids to weigh the financial costs with the quality (reputation) of the college. And the total tuition costs might not be very representative of the cost that student would be expected to pay. A lot of the liberal arts college and colleges with huge endowments are better suited to help low income kids.
Another great insight on your part. It is amazing how certain colleges' reputations continue to enable them to charge high net amounts to families.
I just checked the College Affordability & Transparency Center website and found that NYU provides grant aid to a measly 60 percent of students. That number is well below what most schools on the "High Net Prices" list offer.
We've been diving deep into the private school experience at http://LiberalArtsColleges.com and we are finding that despite these small liberal arts schools not receiving state aid, they tend to be very fair with students when it comes to providing grants and keeping the cost manageable.
Keep up the good reporting!
David
I find that the financial aid at liberal arts colleges is often much greater than at many private universities.
Lynn O'Shaughnessy
We at Kiplinger's can't argue that NYU is expensive, but cost is only part of the equation. Kiplinger's gives more weight to academic criteria—our first measure of value—than to cost, so schools that do well on those measures, including freshman retention rate and four-year graduation rate, tend to score higher in our rankings than schools that do well on cost, such as the amount of need-based aid. NYU 's academic quality was a major factor in its position on our rankings.
Our methodology also recognizes that strong academics have an impact on cost. A high freshman retention rate and a high four-year graduation rate indicate that students at that school are less likely to lose credits by transferring or to take extra years to graduate, saving them time and money.
I'd have to strongly disagree with you on your methodology. Schools with high four-year grad rates and retention tend to correlate with schools that have a high percentage of rich students. That doesn't have anything to do with whether students are receiving an excellent education or not.
I want to share the insightful reaction to your rankings that I got from Zac Bissonnette, a friend of mine, who had this to say about how "academic quality" impacts the ratings:
It's worth noting that 56.25% of the ranking based on academic qualities is based on academic qualities that have never been shown to lead to any particular academic outcomes: admission rate, yield, SAT scores, etc.
It's like saying "Half the ranking is based on the affordability of the school, which we measured based on the color of paint in the reference section of the library. Fuchsia was worth 2 points, beige was worth 3 points, and puce was worth 5 points because who really knows what puce even is?"
Saying that certain stats you used are measures of academic quality does not actually mean that those stats are measures of academic quality.
Lynn O'Shaughnessy
Great point here, the prices are astonishing. College rankings just don't seem to make sense any more.
Committing to an overly expensive school as a freshman can be financially debilitating. A few things to consider...
1. Start at a community college, then transfer to a "big" school to complete a degree.
2. Commute to campus, or find other living alternatives less expensive than dorms.
3. If using student loans, begin repayment while in school to get a jump start on debt elimination.
4. Consider necessary debt versus career options after graduation. No one wants a lot of debt and limited jobs after completing a degree.
Great point here, the prices are astonishing. College rankings just don't seem to make sense any more.
Committing to an overly expensive school as a freshman can be financially debilitating. A few things to consider...
1. Start at a community college, then transfer to a "big" school to complete a degree.
2. Commute to campus, or find other living alternatives less expensive than dorms.
3. If using student loans, begin repayment while in school to get a jump start on debt elimination.
4. Consider necessary debt versus career options after graduation. No one wants a lot of debt and limited jobs after completing a degree.