"For the first time, the U.S. News Best Colleges rankings, the perhaps best-known and in some circles, most controversial, college guide, factored student debt in its rating of schools.
To determine colleges’ rankings, which were revealed Monday, U.S. News took into account the average amount of federal student debt undergraduates leave the school with and the percentage of full-time undergraduate students who borrowed federal student loans.
Adding those two factors into the mix of indicators shifted some of the weight the organization places on other metrics. For example, the value placed on standardized test scores and alumni giving were subsequently reduced. " …
Or a college that doesn’t charge that much to begin with, I’m not sure there’s a big difference in the rankings from last to this, but I’ll guess that public Us may do a little better.
You’d think the better metric to measure what I think they are getting at is either avg net price after financial aid or avg debt of students on financial aid.
https://www.usnews.com/education/best-colleges/articles/how-us-news-calculated-the-rankings says that “Schools that ranked the highest had the lowest average amount of debt accrued by their the most recent graduates and a relatively small proportion of students graduating with debt compared with other schools in their U.S. News ranking category.” This makes up 5% of the ranking (3% for indebtedness level, 2% for proportion with debt).
Basically, colleges with more students from wealthier families and enough money of their own to fund good financial aid for the few who do need it will do better on this measure. In other words, it skews the ranking in favor of the usual prestige privates.
In theory, these ranking factors could create incentive for colleges to offer better financial aid to reduce the amount of debt and the percentage of students with debt. However, it may be easier and less costly for colleges just to chase students from wealthier families to improve these ranking factors.
Simplistic rankings such as this are one of the main reasons students’ debt have skyrocketed. Many students and their families have taken on more debt in their pursuits of higher ranked colleges.
The 2% weighting on colleges with the least federal loans no doubt favors high endowment private colleges with top FA like HYPSM… The top USNWR ranked colleges were Harvard (2%), Princeton (4%), Caltech (5%), Stanford (8%), and Yale (8%).
However, the larger 3% weighting on average debt among students who took out federal loans has a more complex relationship. HYPSM… all do very well, but some publics with lower tuition also do well since many of the students who take out loans tend to take out smaller loan sizes. For example, the following colleges all had similar average loan totals among students taking federal loans.
The combined weighting probably still favors the usual high endowment privates.
For a particular student, this metric is near useless. Who cares about the average federal loan statistics for that college? The far more important metric is how much debt that particular student needs to take on, and that number is probably going to very different from the federal loan average and probably will not follow the listed order well.
With 2% and 3% weighting, it won’t have much influence on rankings. In theory, it could also result in colleges encouraging students to take out institutional loans or other private alternatives to federal loans.
For example, my earlier post mentions that Caltech was among the top 3 colleges with fewest federal loans, with only 5% of students. This 5% number is used for USNWR ranking. However, ~30% of Caltech students took out loans in 2019, not 5%, with the vast majority of that 30% coming from institutional loans. Caltech institutional loans typically have a slightly lower interest rate than federal loans, so most students choose Caltech institutional loans over federal loans. These Caltech institutional loans don’t incur a USNWR penalty since USNWR only counts federal loans. The small minority of Caltech students who took out federal loans also usually took out institutional loans, which keeps the average federal loan amounts down, further boosting USNWR ranking.
UCLA shows a somewhat similar % of students taking out loans as Caltech and average loan amounts, but UCLA doesn’t do as well since the vast majority of UCLA students who take out loans choose federal loans, not institutional loans, so they incur the USNWR penalty.
Not all loans are the same. I know a Caltech student who took out an institutional loan , after his enrollment, to buy a car (he presumably justified it to the FA office why he needed a car). The loan had zero interest rate while he was in college, and no payment and de minimis interest rate while he was in grad school. He only had to repay his loan after he got a job and the monthly payment was capped and interest rate was a fraction of the market rate. That must be the next best thing to free money.
This doesn’t seem to include private loans so it may make colleges with poor FA more likely to offer institutional loans or refer students to private lenders rather than encouraging them to take on federal loans?