U.S. News: Lower Endowment Returns May Affect College Rankings

U.S. News just announced that future rankings may be affected as a result of the generally lower rates of return on investments held by university endowment funds, a development that points out the emphasis (or over-emphasis) that the magazine’s rankings place on financial resources.

Whether the lower endowments will hit public universities harder than it does private institutions remains to be seen.  Many elite public and private universities have large endowments.

While it is obvious that wealthy institutions can provide many advantages to students and faculty, we have argued that ranking components such as small class size, the proportion of faculty with Ph.D.’s, and the proportion of full-time faculty should be considered–but not in tandem with the money behind them.  In other words, measure the impact of the financial resources without duplicating that impact by adding ranking points for the funds themselves.

In general, this double impact results in lower rankings for public institutions.  The current magazine methodology allocates 10 percent of the total score to the wealth of an institution; 7 percent for faculty pay; and 5 percent for alumni giving, which the magazine refers to as an “indirect measure of satisfaction.”  It can be argued that it is, rather, a direct measure of higher income–often a great satisfaction, but not the only one worth noting.

It will be interesting to see whether the loss of endowment income offsets the ranking advantages of wealthy private universities, hits pubic and private schools about equally, or hurts public universities the most.  We will be careful to note the impact when the new rankings come out in September.

 

 

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