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Obama Administration Focuses on College Tuition ROI

Is it important to go to college after high school? If so, how can we make college more affordable to prospective students? This week, the University of Washington hosted a town hall discussion on these questions and others related to higher education. PayScale attended to find out what we could learn about one of our favorite topics: college tuition return on investment (ROI).

The Obama Administration’s Perspective on College Tuition ROI

The event’s featured speaker was U.S. Under Secretary of Education Dr. Martha Kanter. She was introduced by University of Washington Provost Ana Mari Cauce who set the tone for the event by saying, “The opportunity to attend college is part of the American dream, and it’s going to be lost if students cannot afford to attend college and receive their degrees or certificates in a reasonable timeframe.”

Dr. Kanter presented the Obama administration’s opinion that higher education is essential for each citizen’s success and our success as a nation. Kanter made it clear that the Obama administration wants every American to get at least one year of higher education – whether they choose a welding program or a Ph.D. in astrophysics. She explained to the crowd that workers with education beyond high school typically earn more, plain and simple.

Why the need for higher paychecks? A key reason she listed is that school is expensive. Many students who take out loans to afford their tuition are ending up with crippling debt. She encouraged the use of federally funded Pell grants, which have lower interest rates than credit cards or private loans. But, she went one step further in her discussion of student loans.

Calling Colleges to the Carpet

Dr. Kanter wants to develop a system where colleges and universities are reviewed to ensure they meet certain standards before their students are allowed to take federal loans to attend them. If a college does not offer its students a high enough chance for success, based upon graduation rates and alumni earnings (assessed through loan repayment statistics), then that college’s prospective students should be dissuaded from attending by not receiving as much, or any, access to federal student loan money, according to Dr. Kanter.

“We have schools with a 10 percent graduation rate,” Dr. Kanter said. “Obama has asked the federal government, the states, institutions, students and families to take responsibility to turn these statistics around.”

This unusual idea sparked debate during the town hall. One attendee thought this approach punished students who want to attend those schools. But, Dr. Kanter pointed out that these schools are not good options for students in the first place. They do not offer a high enough return on a student’s tuition investment. Her recommendation? “Do not support colleges that do not demonstrate positive educational and employment outcomes,” a.k.a. have too low of a return on a student’s investment.

PayScale’s College ROI Rankings

PayScale has been studying college ROI for several years. We currently review 853 U.S. colleges and universities for return on investment. Our annual ranking takes into account factors mentioned by Dr. Kanter, like typical graduation rates, time required to finish a degree, cost of education (tuition, room and board, etc.) and alumni earnings. We ask the question, “If students choose to attend a specific college, rather than skipping college and starting to work right after high school, how much more will they earn over a 30-year career?” Using earnings data we’ve collected from our extensive database along with data from the Integrated Postsecondary Education Data System (IPEDS), we’re able to answer that question and rank the colleges from best ROI to worst.

For 2012, the college with the best ROI is Harvey Mudd College while the dubious honor of worst ROI goes to Savannah College of Art and Design (SCAD).

Tell Us What You Think

Keep the discussion on college ROI going on Twitter using hashtag #valueofedu.

More From Payscale

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