The good, the bad and the ugly in private college outcomes

Posted June 12

College is supposed to be the gateway to opportunity, but a new report argues that for many young people, that gate swings shut against them.

Titled "Incomplete: The Quality Crisis at America's Private, Non-Profit Colleges," the report, compiled by Third Way, a center-left think tank, finds that America's private colleges have surprisingly low graduation rates for students who take out loans.

The report notes that 2.7 million students each year attend private not-for-profits, with about 1.7 million taking out student loans and more than 1.1 million receiving Pell Grants, adding up to a total of $4.5 billion federal tax dollars.

The report is significant because it shifts the conversation away from the for-profit sector, which has been under heavy fire for years, and instead critiques private not-for-profit colleges, which have escaped scrutiny.

"Schools are continuing to qualify for federal student loan aid, even when they are graduating students in the single digits," said Tamara Hiler, the report's lead author. "In high school if you are graduating less than 2/3 of your students, you are labeled as a drop out factory by the federal government, and states and districts are required to intervene."

She notes that only 5 percent of high schools currently have that designation, but 74 percent of private universities and colleges fail to graduate two-thirds of their students within six years.

Six years after starting college, when most former students should be beginning their careers, 63 percent of graduates from private not-for-profit schools who took out student loans earn less than high school graduates, or under $25,000 a year.

Mobility index

The Third Way report includes a "mobility index" that weighs Pell Grant percentages, graduation rates, earnings and loan repayment rates into a single metric.

One goal of the report is to show what schools are doing the most with federal money, recognizing those who educate a high number of Pell Grant students who also produce a high number of graduates who go on to get well-paying jobs and repay their loans.

At Spellman College in Georgia, over half the student body qualifies for Pell Grants, but it still graduates an above-average 70 percent of its students on time and 65 percent of those earn more than $25,000 six years after starting college.

The report is less kind to elite schools that educate few low-income students, like Harvard, which has a stellar 97 percent graduation rate, but only 10 percent of its students qualify for Pell Grants.

The report also exposes lower-tier colleges that induce students to take on debt while giving degrees that have little value. Lane College in Tennessee, for example, has 2,200 students, and 92 percent qualify for Pell Grants. But only 30 percent of their graduates make more than high school graduates after six years, and just 17 percent are able to keep current on their loans.

It's schools like that that Hiler has in mind when she says, "Some of these students would have been better off never attending college at all."

Proposed solutions

The Third Way report makes several proposals.

One would require colleges receiving federal aid to put "skin in the game," accepting some shared risk for students who fail to repay their federal loans. A school that missed targets on loan repayment rates would be required to help share the cost with the taxpayer, giving the school an incentive to help students choose good majors and get jobs after college.

While at first blush this proposal would encourage schools to avoid those most in need, this could be compensated for, the report notes, by offering inducements for schools that take on riskier students. A school that took a high number of low-income students, English language learners or ethnic minorities would be given slack on loan repayment.

Another proposal, borrowing from the high school model, would require schools with low graduation rates to develop corrective plans that would include improved teaching and mentoring.

In fact, they might even get a bonus. The report also calls for a Title I for colleges, which borrows from the K-12 federal model, granting increased federal support to schools that serve higher percentages of at-risk and low-income students.

The authors also recommend that more elite schools receiving federal funds could be required to educate a set percentage of low-income students. They suggest a minimum of 19 percent Pell Grant eligible, which is roughly half of the national average.

Finally, the report calls for better data transparency, publicizing the outcomes schools are achieving with different types of students.

Better measures

Most experts agree that more data is badly needed, and many agree that the key piece missing from the puzzle is "student unit" data that includes federal social security and unemployment insurance to measure employment and earnings.

But not everyone thinks that would be enough.

Higher education lacks a clear sense of mission, said John Pryor, a leading higher education researcher who runs his own consulting firm in Los Angeles. Merely focusing on graduation rates, salaries and loan repayments may not be enough, Pryor argues.

Pryor says that incoming first-year students often say they attend college to "get a good job" and "make a good salary," but that is only part of higher education.

"If you look at university mission statements," Pryor said, "you rarely seem them saying, come to our college so you can make more money."

"We need some good comprehensive measures of what the product is of college," Pryor said, pointing to the broad goals of improving the lives of students by expanding their horizons. "We cannot be just focused on salary."

At-risk students

Pryor does endorse Third Way's effort break out graduation rates by the types of students served, though.

Schools working with at-risk students face a daunting challenge, Pryor said, particularly first-generation college students, English language learners and those from low-income families.

The ACT college entrance exam, Pryor notes, has four key college readiness markers. In 2015, just 40 percent of students taking the exam met at least three of those markers, and 31 percent met none at all.

"Those students, if they enroll, will end up taking remedial classes," Pryor said, "and that's where a lot of failure happens."

One of the most interesting proposals from the paper, says Ray Franke, a professor of higher education at the University of Massachusetts, Boston, is the proposal to offer infusions of federal funds to colleges that serve high ratios of at-risk or low-income students.

The proposal borrows from K-12 school funding, which offers not just direct funding on a per-student basis for schools serving low-income students, but also "concentration" funding for schools that serve higher ratios of at-risk students.

"That could be a game-changer," Franke said. "I don't know if the funding would be there, but it's a great idea. We do have to account for the fact that some schools enroll more students who are less prepared for academic work, and while money cannot fix everything, it can provide more resources to fix part of the problem."

Unintended consequences

Of course, with a suggestion of more funding aid comes more regulatory teeth, and the Third Way proposal does suggest mandatory interventions for schools that underperform on key measures while taking in federal student aid. These schools may, for example, be asked to refocus their mentoring and teaching performance.

Not everyone is thrilled with the idea of the federal government using loans and grants to regulate private colleges when students fail to graduate or prosper.

"I don't think people understand how higher education in the United States works," said Linda DeAngelo, who studies higher education at the University of Pittsburgh. "Our system was not designed to give the federal government that kind of centralized oversight over education."

Because most students go to schools within 50 miles of their home, they end up experiencing educational choice as a system they plug into, rather than as a smorgasbord of options they consider.

"We don't have a natural market at all," DeAngleo said.

Franke agrees, adding that it would run contrary to the American "system" of higher education to try to use top-down controls.

"We are talking about a very complex institutional set up in the United States," Franke said. There are so many different types of institutions with so many different missions, he argues, that efforts to drive them into uniform metrics runs into trouble.

"You get into all these intricacies of comparing one to the other," Franke said, "it gets very tricky."



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