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Higher Ed: Sticker Price, Potential Earnings Can Be Deceptive

Blog Post
July 3rd, 2012
By David Maxwell, President, Drake University and Larry Zimpleman, Chairman, President, and CEO, The Principal Financial Group

Originally published in Huffington Post (7/2/2012)

Students are more likely to succeed when pursuing their passions.

This past April, thousands of college-bound high school seniors and their families were forced to make a series of bewildering decisions: Which is the best college or university for me? Which school(s) can we afford? What should I major in? On what other criteria do I base my choice?

As the chair of the Board of Trustees and the president, respectively, of Drake University -- one of the nation's top comprehensive universities and identified as a best value by several national publications -- we view the decision-making process with deepening concern. Students are increasingly making critical life choices based primarily on money -- choices that ultimately may turn out to be the wrong ones in the long run. They are choosing an institution based on often uninformed assumptions about the cost of public institutions versus private; based on which school has offered them largest scholarship; based on assumptions about earning potential of a particular major.

What is missing from these deliberations, when they are dominated heavily by financial considerations, are some important nuances. Private colleges and universities are not necessarily more expensive than public; most top private institutions have a time-to-degree for undergraduates of four years -- the average time to graduation in the nation's public universities is over six years. Additionally, many private institutions offer significant amounts of academic merit aid, reducing the real cost. In looking at scholarship offers, applicants need to read the fine print -- many institutions set a very high bar for academic performance in order for the scholarship to continue after the first year. And the institution that offers the highest scholarship award may also have the highest "sticker price." In all, determining the net cost of attendance is critical.

Choosing a major field of study (and the institution that offers it) on the basis of expected career earnings entails the greatest risk. While we applaud President Obama's call for a college "scorecard" that helps students and their parents compare institutions with objective data, the proposal for a "potential earnings" indicator exacerbates the already serious negative impact of money on college choice for a variety of reasons.

First, data indicate that a significant number of undergraduates (40 percent) change their major at least once, and there is a relatively low correlation between undergraduate major and eventual career (especially given the fact that the majority of future graduates will be employed in jobs that do not exist yet!). Similarly, there has been little historical correlation between major and eventual earnings. There is a correlation between grade point average and earnings -- suggesting that a student is much better off majoring in something for which he/she has both talent and passion.

There is an anecdote circulating on the web that is illustrative (if unverifiable) of the unreliability of a connection between major and career earnings. Supposedly, the highest average starting salary of University of North Carolina graduates belongs to geography majors -- thanks to Michael Jordan's inordinate earnings. The cautionary message, of course, is that high-paid outliers (who may well be in careers unrelated to their majors!) can skew the statistical average and provide students with misleading data on salary prospects.

Finally, an important national survey of 305 businesses across sectors, conducted for the Association of American Colleges & Universities, demonstrated powerfully that employers are much less interested in undergraduate major than they are in oral and written communications skills, critical analysis skills, quantitative literacy, the ability to collaborate and to work in diverse groups, the capacity for ethical decision making and for creativity and innovation (all, incidentally, specific learning outcomes of the Drake Curriculum).

It must be acknowledged that higher education is complicit in intensifying the role that money plays in enrollment decisions. It is clear that on a national scale the financial model for higher education is not sustainable -- we are increasingly inaccessible financially to low-income families, and we are pricing ourselves out of range of the middle class. We exacerbate the problem by offering academic merit aid to students who may not need it financially, often at the expense of our ability to support high-need students. We must commit ourselves to the identification, development and implementation of better models.

In an ideal world, a student should enroll in the institution that is the best fit for his/her goals, learning and living styles and academic ability. College must not be just about jobs and money. College should be the place where young men and women figure out their aspirations for meaningful professional and personal lives, and set off -- with our support and guidance -- to make those aspirations come true. It is time that we committed ourselves as a nation to make that expectation of higher education.

Ultimately, the solution has to be a partnership among families, institutions, and governments (state & federal). Families must recognize that higher education is an investment in their future, institutions should do everything they can to be cost-effective and financially accessible, and governments must recognize that post-secondary education is a public good for which they must share the burden of cost -- a burden that is much less expensive than prisons, welfare and a stagnant economy.

David Maxwell is President of Drake University, and a member of the Boards of Directors of the American Council on Education and the Association of American Colleges and Universities.

Larry Zimpleman is Chairman, President and CEO of The Principal Financial Group, and chairman of Drake University's Board of Trustees.

Both Dr. Maxwell and Mr. Zimpleman are members of the Business-Higher Education Forum.



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