Education Finance Matters

WSJ: Human Capital Score helps weigh the value of a college diploma

15th December, 2009 - Posted by Alan - No Comments

From the Wall Street Journal …

As millions of students labor over college applications this month, they and their parents are pondering just how big a tuition bill they want to pay.

For parents who want to refine the cost-to-income analysis, a new tool is available that predicts how much money a student is likely to make after graduating. The online calculator, HumanCapitalScore.com, will generate a 10-year range of students’ likely postgraduation income based on their test scores, high school and college attended, grades and major.

Developed by People Capital, New York, a peer-lending concern, as a tool to predict students’ creditworthiness, the calculator can also be used to compare the likely outcome of various possible choices of colleges and majors. It makes projections based on data sets from more than a half-dozen government and private-sector sources, encompassing hundreds of thousands of actual grads. Prices start at $19.95 to compare two scenarios.

I tested the calculator by entering information on six actual college graduates who voluntarily shared their data, and comparing the HumanCapitalScore.com projections to the grads’ actual earnings. The grads’ pay fell within the range projected by the calculator in five of six cases. The exception was a young entrepreneur who chalked up a mediocre record at a little-known college but blossomed later, when working for himself. The projections are based on what “an individual with certain attributes can reasonably expect to earn,” says Alan Samuels, People Capital’s chief product officer. “Clearly, some will do better than expected, while others will do worse;” the projections are likely to be accurate about 80% of the time, he says.

HumanCapitalScore.com’s projections can also help a student figure out how much money to borrow for college. Many experts say total student loans shouldn’t exceed a grad’s first-year income after graduation.

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