A First Look at Program-Level Earnings Data by Credential Level

The U.S. Department of Education has been promising program-level earnings data in the College Scorecard for several months now following the release of program-level debt data back in May. Debt data are interesting, but I think everyone was waiting for earnings data to come out. And it came out today, sending me scrambling to get into the data in between meetings, teaching, and other responsibilities of a tenured faculty member. The data can be found here, and please do read the documentation before digging into the data.

Before I get back to meetings, here are a few takeaways:

(1) Debt and earnings data are based on different samples of students. Debt data only include people with federal loans, while earnings data include people with any type of financial aid. At community colleges, these samples are quite different because more students typically get Pell Grants than loans. But for graduate programs, the numbers really only differ by a few work-study students.

(2) Most programs aren’t covered in the data, but most students are. For the most recent data file, there are 216,638 programs listed. Of these programs, 45,371 have earnings data and 51,423 have debt data.

(3) Earnings data are soon after graduation. Earnings were measured in 2016-17 for students graduating in 2014-15 and 2015-16. More years of data will be included in the future.

(4) Want to make money? Be a dentist. The program with highest earnings was (The) Ohio State University’s dental program, with earnings of $231,200 and debt of $173,309. Dental and other health sciences programs dominated the top of the earnings distributions, with a few law and business programs thrown in. Most of these programs have high debt burdens. On the other hand, Parker University’s chiropractic program brought up the rear with debt of $193,328 and earnings of $2,700. Something strange is probably going on with the data there.

(5) Earnings and debt vary considerably by credential level. In general, both debt and earnings increase across credential levels, but debt increases at a higher rate. As shown below, the median debt-to-earnings ratio across first professional (law, medicine, etc.) programs was 191%. Earnings often increase quickly in future years, but the first few years won’t be fun.

I look forward to seeing a whole host of (responsible) analyses using the new data, so keep me posted of any good takes. This has the potential to influence families and colleges alike, and I’m particularly interested to see if the data release affects whether colleges close low-performing programs (as I discussed in my last blog post).

New Working Paper on the Effects of Gainful Employment Regulations

As debates regarding Higher Education Act reauthorization continue in Washington, one of the key sticking points between Democrats and Republicans is the issue of accountability for the for-profit sector of higher education. Democrats typically want to have tighter for-profit accountability measures, while Republicans either want to loosen regulations or at the very least hold all colleges to the same standards where appropriate.

The case of federal gainful employment (GE) regulations is a great example of partisan differences regarding for-profit accountability. The Department of Education spent much of its time during the Obama administration trying to implement regulations that would have stripped away aid from programs (mainly at for-profit colleges) that could not pass debt-to-earnings ratios. They finally released the first year of data in January 2017—in the final weeks of the Obama administration. The Trump administration then set about undoing the regulations and finally did so earlier this year. (For those who like reading the Federal Register, here is a link to all of the relevant documents.)

There has been quite a bit of talk in the higher ed policy world that GE led colleges to close poor-performing programs, and Harvard closing its poor-performing graduate certificate program in theater right after the data dropped received a lot of attention. But to this point, there has been no rigorous empirical research examining whether the GE regulations changed colleges’ behaviors.

Until now. Together with my sharp PhD student Zhuoyao Liu, I set out to examine whether the owners of for-profit colleges closed lousy programs or colleges after receiving information about their performance.

You can download our working paper, which we are presenting at the Association for the Study of Higher Education conference this week, here.

For-profit colleges can respond more quickly to new information than nonprofit colleges due to a more streamlined governance process and a lack of annoying tenured faculty, and they are also more motivated to make changes if they expect to lose money going forward. It is worth noting that no college should have expected to lose federal funding due to poor GE performance since the Trump administration was on its way in when the dataset was released.

Data collection for this project took a while. For 4,998 undergraduate programs at 1,462 for-profit colleges, we collected information on whether the college was still open using the U.S. Department of Education’s closed school database. Looking at whether programs were still open took a lot more work. We went to college websites, Facebook pages for mom-and-pop operations, and used the Wayback Machine to find information on whether a program appeared to still be open as of February 2019.

After doing that, we used a regression discontinuity research design to look at whether passing GE outright (relative to not passing) or being in the oversight zone (versus failing) affected the likelihood of college or program closures. While the results for the zone versus fail analyses were not consistently significant across all of our bandwidth and control variable specifications, there were some interesting findings for the passing versus not passing comparisons. Notably, programs that passed GE were much less likely to close than those that did not pass. This suggests that for-profit colleges, possibly encouraged by accrediting agencies and/or state authorizing agencies, closed lower-performing programs and focused their resources on their best-performing programs.

We are putting this paper out as a working paper as a first form of peer review before undergoing the formal peer review process at a scholarly journal. We welcome all of your comments and hope that you find this paper useful—especially as the Department of Education gets ready to release program-level earnings data in the near future.

Twenty-Two Thoughts on House Democrats’ Higher Education Act Reauthorization Bill

House Democrats released the framework for the College Affordability Act today, which is their effort for a comprehensive reauthorization of the long-overdue Higher Education Act. This follows the release of Senator Lamar Alexander’s (R-TN) more targeted version last month. As I like to do when time allows, I live-tweeted my way through the 16-page summary document. Below are my 22 thoughts on certain parts of the bill (annotating some of my initial tweets with references) and what the bill means going forward.

(1) Gainful employment would go back in effect for the same programs covered in the Obama-era effort. (Did that policy induce programs to close? Stay tuned for a new paper on that…I’m getting back to work on it right after putting up this blog post!)

(2) In addition to lifting the student unit record ban, the bill would require data to be disaggregated based on the American Community Survey definitions of race (hopefully with a crosswalk for a couple of years).

(3) Federal Student Aid’s office would have updated performance goals, but there is no mention of a much-needed replacement of the National Student Loan Data System (decidedly unsexy and not cheap, though).

(4) Regarding the federal-state partnership, states would have access to funds to “support the adoption and expansion of evidence-based reforms and practices.” I would love to see a definition of “evidence”—is it What Works Clearinghouse standards or something less?

(5) The antiquated SEOG allocation formula would be phased out and replaced with a new formula based on unmet need and percent low-income. Without new money, this may work as well as the 1980 effort (which flopped). Here is my research on the topic.

(6) Same story for federal work-study. Grad students would still be allowed to participate, which doesn’t seem like the best use of money to me.

(7) Students would start repaying loans at 250% of the federal poverty line, up from 150%. Automatically recertifying income makes a lot of sense.

(8) There are relatively small changes to Public Service Loan Forgiveness, mainly regarding old FFEL loans and consolidation (they would benefit quite a few people). But people still have to wait ten years and hope for the best.

(9) I’m in a Halloween mood after seeing the awesome Pumpkin Blaze festival in the Hudson Valley last night. So, on that note, Zombie Perkins returns!

The Statue of Liberty, made entirely out of pumpkins. Let HEA reauthorization ring???

(10) ED would take a key role in cost of attendance calculations, with a requirement that they create at least one method for colleges to use. Here is my research on the topic, along with a recent blog post showing colleges with very low and very high living allowances.

(11) And if that doesn’t annoy colleges, a requirement about developing particular substance abuse safety programs will. Campus safety and civil rights requirements may also irk some colleges, but will be GOP nonstarters.

(12) The bill places a larger role on accreditors and state authorizers for accountability while not really providing any support. Expect colleges to sue accreditors/states…and involve their members of Congress.

(13) Improving the cohort default rate metric is long-overdue, and a tiered approach could be promising. (More details needed.)

(14) There would be a new on-time loan repayment metric, defined as the share of borrowers who made 33 of 36 payments on time. $0 payments and educational deferments count as payments, and ED would set the threshold with waivers possible.

(15) This is an interesting metric, and I would love to see it alongside the Scorecard repayment rate broken down by IDR and non-IDR students. But if the bill improves IDR, expect the on-time rate to (hopefully!) be high.

(16) It would be great to see new IPEDS data on marketing, recruitment, advertising, and lobbying expenses. Definitions matter a lot here, and the Secretary gets to create them. These are the types of metrics that the field showed interest in when the IPEDS folks asked Tammy Kolbe and me to do a landscape analysis of higher ed finance metrics.

(17) Most of higher ed wants financial responsibility scores to be updated (see my research on this), and this would set up a negotiated rulemaking panel to work on it.

(18) There is also language about “rebalancing” who participates in neg reg. The legislative text will be fun to parse.

(19) Teach for America will be reauthorized, but it’s in a list of programs with potential changes. Democrats will watch that closely.

(20) And pour one out for the programs that were authorized in the last Higher Education Act back in 2008, but never funded. This bill wants to get rid of some of them.

(21) So what’s next? Expect this to get a committee vote fairly quickly, but other events might swamp it (pun intended) in the House. I doubt the Senate will take it up as Alexander has his preferred bill.

(22) Then why do this? It’s a good messaging tool that can keep higher ed in the spotlight. Both parties are positioning for 2021, and this bill (which is moderate by Dem primary standards) is a good starting place for Democrats.

Thanks for reading!

Income-Based Repayment Becoming a Costly Solution to Student Loan Debt

This post was originally published at The Conversation.

When Congress established the income-driven repayment for federal student loans back in 2007, it was touted as a way to help student loan borrowers save money by capping monthly payments at a certain percentage of a borrower’s income.

Since then, student loan debt has risen from US$500 billion to where it is now approaching the $1.5 trillion threshold. The federal government expects to forgive over $100 billion of the $350 billion in loans under income-driven repayment as of 2015. That means taxpayers are picking up the bill.

This has put the entire income-driven repayment system in jeopardy as there have been proposals by congressional Republicans and the Trump administration to reduce the amount of loans forgiven and end the Public Service Loan Forgiveness program, which is a special repayment option for people in public service fields. So far, these proposals have failed to become law, but expect to see them put forth again in the future as concerns about program costs continue to grow.

As a researcher who specializes in higher education policy and financial aid, here are some of my insights on how income-driven repayment works, why its future is now in jeopardy and some potential options that can protect the most vulnerable borrowers while also helping taxpayers.

How it works

Six months after they leave college, students who took out a federal student loan are automatically put into a repayment plan with fixed monthly payments over 10 years. This is similar to how mortgages and car loans work. However, repayment can often be a major burden for student loan borrowers who take low-paying jobs or struggle to find employment after college.

To address this issue, Congress and the Department of Education created a number of options during the George W. Bush and Barack Obama presidencies that tied student loan borrowers’ payments to their discretionary income, that is, how much money they have left after meeting their basic needs.

Most students who take out federal loans today qualify for a plan called Pay As You Earn. This plan – known as PAYE – limits monthly payments to 10% of a student loan borrower’s discretionary income for up to 20 years.

There are two requirements. First, student loan borrowers must fill out paperwork each year with their income to be eligible for income-driven repayment. In recent years, more than half of federal student loan borrowers have failed to complete the paperwork on time, putting them back into the standard plan. Second, if any part of the loan is not repaid within 20 years, the remaining balance is forgiven. But this forgiveness counts as income and taxes must be paid on it in that year.

Borrowers who work for government agencies and certain nonprofit organizations can qualify for Public Service Loan Forgiveness, which limits payments to 10% of discretionary income for as little as ten years with no income tax penalty. So far, just 1% of borrowers who applied for forgiveness have had their loans forgiven, but this rate will likely increase over time as the Department of Education gets better at managing the forgiveness process.

Problems abound

In some respects, the biggest problem with income-driven repayment is that too many people are taking advantage of it.

The share of students who reduced their loan balances by even one dollar within five years of leaving college has fallen from 67% to 51% over the last five years as low monthly payments under income-driven repayment mean that many borrowers’ balances are growing instead of shrinking. This has increased the projected price tag of these programs to the federal government well beyond expectations.

These programs tend to be used more frequently by borrowers with large debt burdens – especially those who have more than $100,000 in debt. Data from the Department of Education show that students who owe $100,000 or more make up just over one-third of all outstanding student debt but nearly half of all borrowers in income-driven repayment.

Trying to pay back $100,000 in student loans is certainly not easy, and I can speak from experience thanks to my wife’s law school debt. But most of the borrowers with large student debt burdens tend to be professionals with graduate degrees and reasonably high incomes. Many of the borrowers who have the greatest difficulty repaying their loans never earned a college degree and thus did not see substantial financial benefits from their investment.

What can be done?

As a researcher of student financial aid, my concern is that policymakers might throw the proverbial baby out with the bathwater and get rid of the entire income-driven repayment system.

In my view, a better way to stop borrowers with $100,000 in debt from getting most of the benefits is to limit the amount forgiven. This can be done by capping the amount of loans that can be repaid through income-based repayment or extending the repayment term.

President Obama proposed limiting Public Service Loan Forgiveness to the first $57,500 in loans, although this did not pass Congress. His administration also implemented a program that required graduate students to pay for five more years than undergraduate students.

The savings from requiring higher-income borrowers with large loans to repay more of their loans can then be used to help the most vulnerable borrowers. Students who dropped out of college after a semester or two could see their debt forgiven more quickly and without having to pay additional income taxes. This may be a tough political sell, but this could also encourage students – especially those who are the first in their families to attend college – to give college a shot.

Some of the money could also be used to support larger Pell Grants to reduce the need for borrowing in the first place. Cutting the total amount of loans forgiven in half would allow for an increase of about 20%, or $1,200 per year, in the maximum Pell Grant, which is $6,195 for the 2019-2020 academic year. This would help cover much of the tuition increases over the last decade and reduce student loan debt.

The Conversation

Highlighting Some Interesting Living Allowance Estimates

As a self-proclaimed higher education data nerd, I was thrilled to see the U.S. Department of Education release the first of the 2018-19 data via its Integrated Postsecondary Education Data System (IPEDS) website. Among the new components released today was fresh data on tuition, fees, and other components of the total cost of attendance. After taking a little bit of time to update my datasets (a tip to users: investing in using the full data files instead of the point-and-click interface is well worth it), I’m surfacing with a look at some of the more interesting living allowance estimates for off-campus students.

Some quick details on why this is important: colleges are responsible for setting the cost of attendance (COA) for students, which includes estimated expenses for room and board, books and supplies, and other miscellaneous expenses like transportation and personal care. Students can access financial aid up to the COA, and the net price of attendance (a key accountability measure) is derived by subtracting grant aid from the COA. Colleges are thus caught in a bind between giving students access to the aid—often loans—they need to succeed while not looking too expensive or raising concerns about ‘overborrowing’ (which I am generally skeptical of at the undergraduate level).

Building on previous work that I did with Sara Goldrick-Rab of Temple University and Braden Hosch of Stony Brook University (here is a publicly-available version of our journal article), I pulled colleges’ reported on-campus and off-campus room and board estimates for the 2018-19 academic year.[1] To put this information in comparison, I also pulled in the average county-level nine-month rent for a two-bedroom apartment that is shared with a roommate. To make this fully comparable, I also added $1,800 for nine months to account for food; this amount falls between the USDA’s current cost estimates for their thrifty and low-cost food plans.

Here is a link to the data for all 3,403 colleges that reported off-campus room and board data for the 2018-19 academic year.[2] Below, I highlight some colleges on the high end and on the low end of the estimated living allowances.

Extremely low living allowances

Thirty colleges listed living allowances of $3,000 or below in the 2018-19 academic year. Given that food is approximately $1,800 for nine months, this leaves less than $150 per month for rent. Even in affordable parts of the country, this is essentially impossible. For example, Wilmington College in Ohio is in a reasonably affordable region with the price tag of sharing a two-bedroom apartment coming in at about $350 per month. But an off-campus allowance of $2,650 for nine months is insufficient to cover this and food. (The on-campus price tag is $9,925 for nine months, suggesting that price-sensitive students are probably looking to live off campus as much as possible.)

name state On-campus room and board, 2018-19 Off-campus room and board, 2018-19 Off-campus room and board, 2017-18 Estimated off-campus room and board, 2018-19
Southern California University of Health Sciences CA N/A 1600 4800 9859.5
University of the People CA N/A 2001 2001 9859.5
Wellesley College MA 16468 2050 2050 11673
Kehilath Yakov Rabbinical Seminary NY 2800 2100 2100 9787.5
Western International University AZ N/A 2160 2160 6628.5
Central Georgia Technical College GA N/A 2184 2600 5823
Washington Adventist University MD 9370 2226 2226 9292.5
The Southern Baptist Theological Seminary KY 7150 2460 2460 5638.5
The College of Wooster OH 11850 2500 2500 5107.5
Ohio Institute of Allied Health OH N/A 2500 2500 5346
Agnes Scott College GA 12330 2500 2500 6777
Sharon Regional School of Nursing PA N/A 2500 4800 4995
John Brown University AR 9224 2500 2500 5211
Elmira College NY 12000 2500 2500 5553
Estelle Medical Academy IL N/A 2500 2500 7254
Mountain Empire Community College VA N/A 2600 2600 4995
Wilmington College OH 9925 2650 2650 4945.5
Cleveland Community College NC N/A 2700 2700 4882.5
Michigan Career and Technical Institute MI 6156 2716 2664 5823
Hope College MI 10310 2760 2790 5733
Bryant & Stratton College-Online NY N/A 2800 2800 5571
Allegheny Wesleyan College OH 3600 2880 2880 4869
Daemen College NY 12915 2900 2900 5571
George C Wallace Community College-Dothan AL N/A 2983 2983 4630.5
Long Island Business Institute NY N/A 3000 3000 10039.5
Uta Mesivta of Kiryas Joel NY 6000 3000 3000 7857
Wytheville Community College VA N/A 3000 3000 4959
Skokie Institute of Allied Health and Technology IL N/A 3000 N/A 7254
Rabbinical College Ohr Yisroel NY 3000 3000 3000 10039.5
Bishop State Community College AL N/A 3000 3000 5616

 

Extremely high living allowances

On the high end, 28 colleges checked in with nine-month living allowances above $19,000. Even for colleges in expensive areas, students could easily afford splitting a two-bedroom apartment and eating reasonably well with this allowance. For example, Pace University in New York has a room and board allowance of $19,774 for nine months while splitting a two-bedroom apartment and buying food checks in at $10,040. But if the student has a child and needs a two-bedroom apartment, this estimate is almost spot-on.

name state On-campus room and board, 2018-19 Off-campus room and board, 2018-19 Off-campus room and board, 2017-18 Estimated off-campus room and board, 2018-19
Acupuncture and Massage College FL N/A 19144 16880 8343
Central California School of Continuing Education CA N/A 19210 19210 8739
Arcadia University PA 13800 19292 18365 7200
University of Baltimore MD N/A 19350 14200 7839
Circle in the Square Theatre School NY N/A 19375 18500 10039.5
Little Priest Tribal College NE 7000 19440 19440 4950
Pace University NY 18529 19774 18756 10039.5
New York Film Academy CA N/A 19800 19800 9859.5
Fashion Institute of Technology NY 14480 19968 19558 10039.5
Miami Ad School at Portfolio Center GA N/A 20000 14520 6777
Atlantic Cape Community College NJ N/A 20100 19600 7555.5
John F. Kennedy University CA N/A 20112 N/A 11367
Hofstra University NY 14998 20323 19850 10381.5
School of Visual Arts NY 20400 20400 19600 10039.5
California Institute of Arts & Technology CA N/A 20496 19271 11106
Hawaii Medical College HI N/A 20712 19152 11101.5
Ocean County College NJ N/A 20832 20496 8455.5
Colorado School of Healing Arts CO N/A 20940 12267 8586
New York School of Interior Design NY 21300 21300 21000 10039.5
Monterey Peninsula College CA N/A 21753 17298 8730
School of Professional Horticulture, New York Botanical Garden NY N/A 22000 22000 10039.5
The University of America CA N/A 23000 N/A 7344
Carolinas College of Health Sciences NC N/A 24831 24108 6426
Long Island University NY 14020 25000 25000 10381.5
Carlos Albizu University-Miami FL N/A 25536 25083 8343
Miami Ad School-San Francisco CA N/A 29400 29400 16065
Miami Ad School-New York NY N/A 29400 29400 10039.5
Miami Ad School-Wynwood FL N/A 29400 29400 8343

 

As a final note in this post, I would like to say that I frequently hear from colleges that I am using incorrect data for their institution in my analyses. My response to that is to remind them to make sure the data they provide to the U.S. Department of Education is correct. I do my best not to highlight colleges that had massive changes from year to year, as that could be a reporting error. But ultimately, it’s up to the college to get the data right until the federal government finally decides to audit a few colleges’ data each year as a quality assurance tool.

[1] This excludes colleges that report living allowances for the entire length of the program to allow for a consistent comparison across nine-month academic years. Additionally, room and board estimates are for students living off campus away from their families, as students living ‘at home’ do not have living allowance data in IPEDS.

[2] If a college requires all first-year students to live on campus, they may be missing from this dataset.

How the New Carnegie Classifications Scrambled College Rankings

Carnegie classifications are one of the wonkiest, most inside baseball concepts in the world of higher education policy. Updated every three years by the good folks at Indiana University, these classifications serve as a useful tool to group similar colleges based on their mix of programs, degree offerings, and research intensity. And since I have been considered “a reliable source of deep-weeds wonkery” in the past, I wrote about the most recent changes to Carnegie classifications earlier this year.

But for most people outside institutional research offices, the first time the updated Carnegie classifications really got noticed was with this fall’s college rankings season. Both the Washington Monthly rankings that I compile and the U.S. News rankings that I get asked to comment about quite a bit rely on Carnegie classifications to define the group of national universities. We both use the Carnegie doctoral/research university category for this, putting master’s institutions to a master’s university category (us) or regional universities (U.S. News). With the number of Carnegie research universities spiking from 334 in the 2015 classifications to 423 in the most recent 2018 classifications, this introduces a bunch of new universities into the national rankings.

To be more exact, 92 universities appeared in Washington Monthly’s national university rankings for the first time this year, with nearly all of these universities coming out of the master’s rankings last year. The full dataset of these colleges and their rankings in both the US News and Washington Monthly rankings can be downloaded here, but I will highlight a few colleges that cracked the top 100 in either ranking below:

Santa Clara University: #54 in US News, #137 in Washington Monthly

Loyola Marymount University: #64 in US News, #258 in Washington Monthly

Gonzaga University: #79 in US News, #211 in Washington Monthly

Elon University: #84 in US News, #282 in Washington Monthly

Rutgers University-Camden: #166 in US News, #57 in Washington Monthly

Towson University: #197 in US News, #59 in Washington Monthly

Mary Baldwin University: #272 in US News, #35 in Washington Monthly

These new colleges appearing in the national university rankings means that other colleges got squeezed down the rankings. Given the priority that many colleges and their boards place on the US News rankings, it’s a tough day on some campuses. Meanwhile, judging by press releases, the new top-100 national universities are probably having a good time right now.

Some Updates on the State Performance Funding Data Project

Last December, I publicly announced a new project with Justin Ortagus of the University of Florida and Kelly Rosinger of Pennsylvania State University that would collect data on the details of states’ performance-based funding (PBF) systems. We have spent the last nine months diving even deeper into policy documents and obscure corners of the Internet as well as talking with state higher education officials to build our dataset. Now is a good chance to come up for air for a few minutes and provide an update on our project and our status going forward.

First, I’m happy to share that data collection is moving along pretty well. We gave a presentation at the State Higher Education Executives Officers Association’s annual policy conference in Boston in early August and were also able to make some great connections with people from more states at the conference. We are getting close to having a solid first draft of a 20-plus year dataset on state-level policies, and are working hard to build institution-level datasets for each state. As we discuss in the slide deck, our painstaking data collection process is leading us to question some of the prior typologies of performance funding systems. We will have more to share on that in the coming months, but going back to get data on early PBF systems is quite illuminating.

Second, our initial announcement about the project included a one-year, $204,528 grant from the William T. Grant Foundation to fund our data collection efforts. We recently received $373,590 in funding from Arnold Ventures and the Joyce Foundation to extend the project through mid-2021. This will allow us to build a project website, analyze the data, and disseminate results to policymakers and the public.

Finally, we have learned an incredible amount about data collection over the last couple of years working together as a team. (And I couldn’t ask for better colleagues!) One thing that we learned is that there is little guidance to researchers on how to collect the types of detailed data needed to provide useful information to the field. We decided to write up a how-to guide on data collection and analyses, and I’m pleased to share our new article on the topic in AERA Open. In this article (which is fully open access), we share some tips and tricks for collecting data (the Wayback Machine might as well be a member of our research team at this point), as well as how to do difference-in-differences analyses with continuous treatment variables. Hopefully, this article will encourage other researchers to launch similar data collection efforts while helping them avoid some of the missteps that we made early in our project.

Stay tuned for future updates on our project, as we will have some exciting new research to share throughout the next few years!

How Much Money Should Students Borrow for College?

Well-known personal finance personality Dave Ramsey apparently tweeted out something about paying for college yesterday. When I went to click on the link, I got the following notice from Twitter.

As far as I am aware, this is the first time that someone has blocked me on Twitter (I only use the blocking function for likely Russian bots and people who have made racist or sexist statements against people I know). And I’m pretty sure I know the reason why Ramsey blocked me—this interview that I did with Money magazine last spring in which I noted that his advice to avoid all college debt is a generally bad idea for students. Limiting ridiculous credit card debt and having a plan to pay off debt eventually are sound recommendations, but delaying the labor market benefits of a college credential to work your way through debt-free just doesn’t make long-term sense for most people. (And research shows that borrowing for college can improve student outcomes.)

On the other hand, students also should be reasonable about how much they borrow for college. While I was pulling up the Money magazine link for the previous paragraph, I noticed that their feature piece today is on someone with $185,000 in student loan debt and who is struggling to make minimum payments. There are key details missing in the piece, such as how much of the debt is for graduate school, the person’s income, and how much interest has capitalized, but this is certainly a cause for concern absent additional information (which seems to be missing from many of these pieces).

So this brings me to a question that I get asked quite a bit: how much should students borrow for college? To me, the correct answer is generally “it depends”—but most people don’t like that classic answer from a tenured professor. This leads me to specify some basic ground rules that students and their families should consider before signing that Master Promissory Note.

For undergraduate students: I am generally not concerned if students take out the maximum amount in federal student loans in their own name while in college. Younger (dependent) students can typically take out up to $31,000 in federal loans, while independent students can take out up to $57,500. These loans have generous income-driven repayment options that reduce payments if college doesn’t work out financially for a student. (Any forgiven balance outside of Public Service Loan Forgiveness may be taxed, but my guess is that Congress patches that fix on an annual basis going forward.)

Beyond that amount, students and their families may be able to get Parent PLUS or private loans, which generally require a co-signer and varied levels of creditworthiness in order to qualify. Parent PLUS loans scare me (as I talked about last fall with NPR), as they require many parents to pay loans into their retirement and have much lower credit standards than private loans. Students and their families need to have long and hard conversations about borrowing beyond the federal student loan limit to see if parents or co-signers can afford to repay those loans and the student’s likely ability to help parents repay those debts.

For graduate students: Most six-figure student debt burdens are from graduate school, since students can borrow up to the full cost of attendance in their own name through the Grad PLUS program and many of these programs tend to be expensive. New program-level College Scorecard data show that a large number of master’s and professional doctorate programs graduate students with more than $100,000 in debt. And I can speak to this personally as my wife and I are down to the final year of payments on her $110,000 in law school debt.

Income-driven repayment plans and PSLF extend to all graduate debt through the federal government, so there is some protection against low earnings after attending graduate school. However, unless a student is sure that he or she is going to be in a public service field and receive PSLF, it is important to keep loan balances in mind. Income-driven repayment plans require 20 years of payments instead of the ten years under PSLF, and this requires committing ten percent of your income over 150% of the poverty line for much of your prime earning years. Sit down with your family and try to get a handle on expected future earnings (program-level earnings data will come out this fall) and other expenses such as childcare and housing and see what is affordable. $100,000 in debt is extremely manageable for a two-income household making $150,000 per year, but much harder for a single adult making $60,000 per year.

The right answer for how much a student should borrow for college depends quite a bit on individual circumstances, but in general the modest federal loan limits for undergraduate students are manageable for most graduates with the help of income-driven repayment programs. Dave Ramsey may be an influential voice in the personal finance world, but following all of his advice on paying for college is likely to be a losing proposition for many students.

Trends in For-Profit Colleges’ Reliance on Federal Funds

One of the many issues currently derailing bipartisan agreement on federal Higher Education Act reauthorization is how to treat for-profit colleges. Democrats and their ideologically-aligned interest groups, such as Elizabeth Warren and the American Federation of Teachers, have called on Congress to cut off all federal funds to for-profit colleges—a position that few publicly took before this year. Meanwhile, Republicans have generally pushed for all colleges to be held to the same accountability standards, as evidenced by the Department of Education’s recent decision to rescind the Obama-era gainful employment era regulations that primarily focused on for-profit colleges. (Thankfully, program-level debt to earnings data—which was used to calculate gainful employment metrics—will be available for all programs later this year.)

I am spending quite a bit of time thinking about gainful employment right now as I work on a paper with one of my graduate students that examines whether programs at for-profit colleges that failed the gainful employment metrics shut down at higher rates than similar colleges that passed. Look for a draft of this paper to be out later this year, and I welcome feedback from the field as soon as we have something that is ready to share.

But while I was putting together the dataset for that paper, I realized that new data on the 90/10 rule came out with basically no attention last December. (And this is how blog posts are born, folks!) This rule requires for-profit colleges to get at least 10% of their revenue from sources other than federal Title IV financial aid (veterans’ benefits count toward the non-Title IV funds). Democrats who are not calling for the end of federal student aid to for-profits are trying to get 90/10 changed to 85/15 and putting veterans’ benefits in with the rest of federal aid, while Republicans are trying to eliminate the rule entirely. (For what it’s worth, here are my thoughts about a potential compromise.)

With the release of the newest data (covering fiscal years ending in the 2016-17 award year), there are now ten years of 90/10 rule data available on Federal Student Aid’s website. I have written in the past about how much for-profit colleges rely on federal funds, and this post extends the dataset from the 2007-08 through the 2016-17 award years. I limited the sample to colleges located in the 50 states and Washington, DC as well as to the 965 colleges that reported data over all ten years that data have been publicly released. The general trends in the reliance on Title IV revenues are similar when looking at the full sample, which ranges from 1,712 to 1,999 colleges across the ten years.

The graphic below shows how much the median college in the sample relied on Title IV federal financial aid revenues in each of the ten years of available data. The typical institution’s share of revenue coming from federal financial aid increased sharply from 63.2% in 2007-08 to 73.6% in 2009-10. At least part of this increase is attributable to two factors: the Great Recession making more students eligible for need-based financial aid (and encouraging an increase in college enrollment) and increased generosity of the Pell Grant program. Title IV reliance peaked at 76.0% in 2011-12 and has declined each of the most recent five years, reaching 71.5% in 2016-17.

Award Year Reliance on Title IV (pct)
2007-08 63.2
2008-09 68.3
2009-10 73.6
2010-11 74.0
2011-12 76.0
2012-13 75.5
2013-14 74.6
2014-15 73.2
2015-16 72.5
2016-17 71.5
Number of colleges 965

I then looked at reliance on Title IV aid by a college’s total revenues in the 2016-17 award year, dividing colleges into less than $1 million (n=318), $1 million-$10 million (n=506), $10 million-$100 million (n=122), and more than $100 million (n=19). The next graphic highlights that the groups all exhibited similar patterns of change over the last decade. The smallest colleges tended to rely on Title IV funds the least, while colleges with revenue of between $10 million and $100 million in 2016-17 had the highest shares of funds coming from federal financial aid. However, the differences among the groups were less than five percentage points from 2009-10 forward.

For those interested in diving deeper into the data, I highly recommend downloading the source spreadsheets from Federal Student Aid along with the explanations for colleges that have exceeded the 90% threshold. I have also uploaded an Excel spreadsheet of the 965 colleges with data in each of the ten years examined above.