One-Pager|Economy   3 Minute Read

Executive Summary: A New College Compact

Published February 17, 2015

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For decades, Washington has focused almost exclusively on defraying the cost of college for families as tuition sticker prices have increased. But the time has come for a new national conversation to address the far more serious and fundamental problem: how to significantly increase the quality of college education while lowering the actual cost.

The Crisis in Higher Education

Too many undergraduates leave college without an education worth their investment. These students aren’t learning enough, aren’t graduating at acceptable levels, and still face rising costs and mounting debt.

  • Graduation rates are too low. Just 39% of first-time, full-time students complete a bachelor’s degree in four years, and only 59% finish in six years. Failing to earn a degree yields less of a benefit in terms of employment and wages—and often leaves one burdened with high levels of student debt.
  • Student achievement lags. An influential study of over 2,300 students by sociologists Richard Arum and Josipa Roksa found that 36% demonstrated no statistically significant gains in critical thinking over four years at college. A recent OECD survey measuring adult skills in advanced global economies ranked U.S. college graduates third-to-last in math attainment—and in the 30th percentile overall.
  • Students aren’t prepared for the workforce. 40% of two-year graduates and 30% of four-year graduates believe that college has failed to prepare them for the workforce.

The Failure of Federal Policy

While Washington was focused on defraying the cost of college for families, it has failed at a far greater task—increasing the quality of college education while lowering the actual cost.

  • Federal law prohibits students from accessing data on income and employment. Students don’t have full access to graduation rates or student employment outcomes and cannot link existing data on tuition prices, debt levels, and alumni earnings records. While the Obama Administration has made strides in this area, more needs to be done.
  • The federal government doesn’t do enough to hold colleges accountable. The accreditation process is largely hollow, student default requirements are pathetic, and colleges aren’t required to measure whether students are actually learning.
  • Federal policy incentivizes research—not teaching. For every $100 the government spends on research grants, it provides just 24 cents on improving instruction.
  • Federal funding does nothing to curb rising college costs. Simply defraying rising costs fails to consider what is known as the Bowen Effect—that universities are driven by prestige, and are thus incentivized to spend all of the money they can. Federal subsidies increase what students can pay, and colleges will constantly spend as much of that as they can.

A New Compact With America’s Colleges:

We need a new compact with America’s colleges that will restore the promise of higher education—a top notch education at an affordable price. Here are the three steps policymakers should take:

  1. Right to know law for college consumers. Parents and students should have access to far more expansive quality information to make better-informed choices about where to make their college investment. Congress should repeal the ban on invaluable consumer information and ensure that the Department of Education, the Social Security Administration, and other agencies can make data publicly available on college prices, debt levels, and graduate employment earnings.
  2. Re-prioritize teaching and student learning. By 2020, every college in America that takes in federal loans or grants should be required to have a transparent system in place to measure student learning, as well as an actionable plan to improve teaching quality. Schools should be allowed to tailor evaluations to their unique circumstances, and the federal government should provide a $200 million grant program to help colleges design effective evaluations. Congress should also ensure that a minimum of 1% of total federal funding on research and instruction is spent every year on improving teaching quality so students are getting the highest caliber instruction possible.
  3. Restructure federal financing to protect students. PLUS loans should be curbed to reduce over-borrowing which is contributing to increased college costs. Risk sharing can be improved by enrolling more students in programs that limit or tie monthly loan payments to a certain portion of an individual’s income. And colleges should be held accountable for not only high default rates but also for high percentages of students who are failing to make their monthly loan payments.

A college degree remains the most important vehicle for middle class attainment. But the quality crisis in higher education is draining the economy and chipping away at the American dream. A new compact with American colleges is essential if we hope to foster a new era of middle class prosperity.

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