Data-Driven Accountability is Coming to Higher Ed

Most people and institutions are held accountable, however imperfectly. We all know of a charlatan who has yet to be exposed, or a shady institution that is coasting on its reputation, but eventually, the truth wins out.

With any luck, that moment has arrived for higher education. Last fall’s publication of the most comprehensive college outcomes data to date will expose which parts of higher education are failing students. For the first time, students can look up the typical earnings and debt of graduates from the exact college and major they are considering.

This data enables more informed decision-making by students and parents. Previously, students were asked to make the biggest financial decision of their life with extremely limited information. Many “everyone should go to college” advocates tirelessly repeated the mantra that college graduates earn an extra $1 million over their careers (the true value after accounting for the cost of college including student loans is closer to $300,000). And for the past few years, students have been able to find the average salary among a college’s graduates.

This earlier trickle of information was not nearly detailed enough. Knowledge of the average salary by school doesn’t help students choose between majors like nursing or biology. With so little information to help students make wise choices, it is not surprising that 37% of college students realized a negative return on their investment.

The new data helps change that. Rather than a vague “college is worth it (on average)” mentality and a quick check of the average salary for an entire university, students can now look up the median salary for the specific colleges and majors they are considering. As awareness of this data increases, colleges will face consumer-driven accountability from students and parents making more informed choices, which will lead to dramatic changes in enrollment patterns.

While consumer-driven accountability will have the largest effect on higher education, massive government subsidies also open the door to government-driven accountability. In 2017, Pew calculated that governments subsidized higher education to the tune of $173 billion ($75 billion federal—not counting student loans, $87 billion state, and $11 billion local). These colossal taxpayer investments have not required much accountability.

At the federal level, accountability consists of three prongs, none of which are sufficiently tough. The first prong is disclosure—universities are required to submit data to the Department of Education, such as their graduation rate. The second prong is accreditation. For a university’s students to be eligible for federal financial aid programs like the Pell grant or student loans, the university must be accredited by an organization that ensures they are meeting minimal educational requirements. The third prong is the Cohort Default Rate, which will terminate future aid eligibility for colleges where 30% or more of students default on their student loans.

There are two main problems with these accountability mechanisms. First, they are too lenient. There are no sanctions or rewards attached to the data disclosure requirements. Accreditation teams are made up from the very institutions being accredited and often only evaluate a campus once per decade. Universities that already have accreditation rarely lose it, while universities without accreditation can rarely obtain it. If that sounds like a cartel designed to protect incumbents and suppress competition from outsiders, that’s because it is.

And the 30% Cohort Default Rate is too lenient. A 2013 analysis found there were at least 120 universities where students were more likely to default on their student loans than to graduate. Moreover, the introduction of income-driven repayment plans, which vary a student’s loan payment based on their income, has largely made the Cohort Default Rate obsolete, because even students that don’t pay a cent might not be in default under these repayment plans. These income-driven programs are a good idea, but their introduction neuters the only federal accountability mechanism with any teeth.

But the greater problem with these accountability mechanisms is that they are applied to entire universities. It would be shocking if every part of a university was high-performing or low-performing. For example, an institution with a low default rate could nevertheless have programs with high default rates, and vice versa. Yet the policy sledgehammers of accreditation and default rates apply to institutions as a whole, rather than selectively applying to its failing programs.

Wouldn’t it be better to wield an accountability scalpel that only targets the poorly performing parts of a university? Fortunately, the program-level data allow us to introduce these accountability scalpels. For example, in a new report, we at the Texas Public Policy Foundation examined all of the programs at public universities in the state of Texas and found that there were 58 associate’s, bachelor’s, or master’s degree programs that failed a debt-to-earnings test.

Thousands of students are enrolling in these programs every year. But note that even Prairie View A&M University, which had the most failing programs (eight), still had just as many programs pass or on probation. Thus, there is little reason to sanction all of Prairie View A&M University. Instead, we should target the eight failing programs, leaving the rest of the university alone. This targeted approach should be applied to generally high-performing universities too. Programs that fail this debt-to-earnings test at elite institutions include Yale’s studio and fine arts program and a dentistry program at Harvard. These programs should not avoid accountability just because the rest of the university is high-performing.

The release of this detailed data promises to generate two seismic shifts in the accountability landscape for higher education: more informed consumers and program-level (rather than institution-level) accountability based on labor market outcomes. Both of these changes are long overdue reforms that will help mend higher education for the next generation.

Image: Franki Chamaki, Public Domain