Claremont McKenna College Is Top Liberal Arts College According To This Economic Analysis

Claremont McKenna College is ranked as the #1 national liberal arts college in a new analysis of the economic returns students receive from attending college. Rounding out the top five were Harvey Mudd College, Washington and Lee University, Davidson College and Virginia Military Institute.

While many of the schools ranked in the top 25 by this analysis were well-known, elite institutions, several others were high-quality, but nonetheless, less famous colleges that traditionally do not fare as well in other college rankings like U.S. News and World Report.

The just-released rankings are the work of DegreeChoices, a relatively new company that provides students, families and consumers with information about their college and career options. (Full disclosure: I’m a consultant on webpage content for DegreeChoices.)

Earlier this month, I reported the results of the DegreeChoices economic analysis of the leading national universities. The methodology used to evaluate the liberal arts colleges is the same.

Using public data from the U.S. Department of Education’s College Scorecard and the Integrated Postsecondary Education Data System (IPEDS), DegreeChoices researchers ranked more than 2,000 undergraduate institutions based on the mathematical combination of two outcomes.

The first is payback – a measure of how long it takes students to recoup their educational investment after attending a given school. The second is earningsplus, a calculation of how much more or less students from a particular college earn when compared to the weighted average of students from all colleges in that state.

Payback is essentially the same measure Third Way uses to analyze colleges’ economic returns. Michael Itzkowitz, a senior education fellow at Third Way who developed its payback methodology, also served as a consultant to DegreeChoices for its ranking system.

Payback is calculated by dividing how much money a student pays out-of-pocket to attend a given institution by the average salary boost they receive. The salary boost is computed by comparing the average salaries of the college attendees to the average salaries of peers with only a high school diploma in the state where the college is located.

Dividing net costs by the premium that college attendees earn vs. high school graduates shows the number of years it takes for students to recoup the net costs of their education.

Earningsplus calculates the difference in median earnings for students from a particular college by deducting the state’s weighted average earnings from the school’s median earnings.

To arrive at what is called an institution’s economic score, the factor on which DegreeChoices ranked schools, the school’s payback is divided by the percentage advantage/disadvantage of its earningsplus factor.

Let’s use two highly ranked colleges in Virginia to illustrate. The payback for a student attending either Washington and Lee University or Virginia Military Institute is 1.9 years. Each school looks about the same on this measure.

But then consider earnings and earningplus. Compared to the average earnings of all students ten years after attending any Virginia college ($42,984), Washington and Lee students earn an average of $86,020, 200% of the state average, while Virginia Military Institute students earn $71,910 or about 167% of Virginia’s state average.

Both do well, but the longer term picture provided by the earnings data looks more favorable to Washington and Lee. Dividing Washington and Lee’s payback by 2.o yields an economic score of .94; dividing Virginia Military Institute’s payback of 1.67 yields an economic score of 1.16.

Whether payback or earningsplus is more important will vary depending on individual circumstances. Payback reveals how soon educational costs can be recovered on average, while earningsplus conveys relative economic advantages later down the road.

Just remember: schools that earn more than 100% of the state average will see an economic score lower than their payback rate. And in this ranking system, the lower the economic score the better.

The Top 20 Liberal Arts Colleges

Here are the top 20 liberal arts colleges, ordered by their economic score. In addition, each listing displays admission rate, graduation rate, net cost, payback, average earnings, and earningsplus.

1. Claremont McKenna College .87
2. Harvey Mudd College .92
3. Washington and Lee University .94
4. Davidson College 1.15
5. Virginia Military Institute 1.16
6. Pomona College 1.18
7. Colby College 1.25
8. Lafayette College 1.40
9. Wabash College 1.45
10. Wofford College 1.50
11. Swarthmore College 1.53
12. Hamilton College 1.54
13. Rhodes College 1.63
14. Amherst College 1.64
15. Bucknell University 1.68
16. Haverford College 1.68
17. Williams College 1.71
18. Albion College 1.73
19. Bowdoin College 1.80
20. Colgate University 1.83

Eight institution in the DegreeChoices top 20 list do not make the most recent U.S. News Top 20 liberal arts colleges – Harvey Mudd College, Virginia Military Institute, Lafayette College, Wabash College, Wofford College, Rhodes College, Albion College, and Bucknell University.

Twelve schools make both lists – Williams College, Amherst College, Swarthmore College, Pomona College, Bowdoin College, Washington and Lee University, Claremont McKenna College, Davidson College, Colby College, Hamilton College, Haverford College, and Colgate University.

The overlap is constrained a bit by one factor, which is that DegreeChoices’s economic analysis requires cost and earnings data, which are not rep0rted for the military academies, two of which are ranked in U.S. News Top 20 (U.S. Naval Academy and U.S. Military Academy).

Of particular interest are the schools that significantly “over-perform” in the DegreeChoices list, which relies on economic payoff as its ranking factor, vs. U.S. News, which uses various factors including retention and graduation rates, reputation and institutional resources. Take these five examples – in each case, the DegreeChoices ranking is displayed first and the U.S. News ranking is second:

Virginia Military Institute 5 vs. 67

Wabash College 9 vs. 57

Wofford College 10 vs. 67

Rhodes College 13 vs. 54

Albion College 18 vs. 128

Consumer interest in the economic returns of attending college continues to run strong, and researchers have now developed several different methodologies for calculating those returns.

While economic payoffs are clearly not the only way to evaluate the quality or value of colleges, they are useful because of rising concerns about the high costs of a college education, the college-related debt that many students and their families take on, and the fact that most students say that getting a good job is their main reason to go to college.

As students and families research their college options, financial considerations will be important to most of them. In some instances, it may be the decisive factor. Calculating the return on investment from a college education is complicated and is influenced by several factors such as out-of-pocket costs, academic program mix and student body composition. DegreeChoices’ economic score addresses some of this complexity and provides a useful means for evaluating the economic returns of the nation’s universities and colleges.