Why is College So Expensive? (Nearly) Everyone is to Blame

“Why is college so expensive?” “Why does college cost so much?” If I had a dollar for every time I’ve been asked that type of question, I could probably pay the roughly $15,000 it takes to provide a year of college for the typical student at a four-year regional public university. This is the true cost of college—how much the college spends on a given student each year. The public is often more concerned with the price (what students and their families pay), but barring additional massive public spending on higher education, the cost of providing a college education must be brought under control in order for students to see lower price tags.

Any piece written by a member of the higher education community for the general public about college costs is likely to reach a large audience due to deep public concerns about college affordability. A recent piece in the Washington Post by Steven Pearlstein, former journalist and current professor at George Mason University, offers four potential solutions to bending the college cost curve. Below, I discuss each of his four ideas and whether they are feasible. (Note that because the focus is on reducing the cost of educating a student, state funding and additional financial aid aren’t relevant here—although they would reduce the price faced by students.)

Proposal #1: Cap administrative costs. This one seems like a no-brainer; if the goal is to educate students, more money should be spent on instruction compared to various “deanlets” and other administrators. But there are legitimate reasons for additional administrators. First, as Pearlstein notes, increasingly complex government regulations, such as for how financial aid is disbursed, do need specialized individuals. As the college-going population has become more diverse, at least some additional student services are required to serve a student body with different academic and social needs than decades ago.

However, the blame for rising administrative costs can also be shared among students and faculty in addition to administrators and regulators. Some students’ preferences for intercollegiate athletics and recreation facilities (such the infamous climbing walls and lazy rivers) also require a number of additional staff members and administrators to run these endeavors. Additionally, as Andrew Kelly of the American Enterprise Institute noted last week, even student protesters’ demands for additional services at places such as the University of Missouri and Yale could increase total costs. Faculty are also to blame—each time we give up a former part of our jobs (such as advising students, making admissions decisions, or even making copies), someone else does it.

Proposal #2: Use a year-round teaching schedule, five days per week. It’s really hard to argue that college facilities are being used in an efficient manner. Fridays tend to be ghost towns at many colleges, although many less-selective colleges do hold quite a few evening and weekend classes. But residential students tend not to like Friday classes, and faculty with demanding travel schedules also prefer to keep Fridays free for travel. I teach Monday and Wednesday evenings, and I’ll use about half of the Fridays in a given semester to go to meetings and conferences. Technology has the ability to help solve this problem through the use of hybrid classes. Faculty can teach online a few weeks each semester while they are traveling, something which I do on occasion as well as when the weather is bad.

Moving to a year-round teaching schedule, however, is likely to have significant budgetary implications. Most faculty with teaching obligations are on a 9-month or 10-month contract, meaning that they are not expected to work with students during the summer period—let alone teach. Asking faculty to teach in the summer would likely result in contracts needing to be 11 or 12 months per year, which would probably mean increased salaries. After all, if teaching is added to a professor’s schedule in the summer, she probably won’t work for free.

Proposal #3: Teach more and research less. Pearlstein notes that much research is never cited by any other academics, as well as noting that the incentive structure often favors research (which is far easier to quantify than teaching). The blame for the focus on research can be placed on both administrators and faculty, as both groups often prefer research over teaching and may both have input into the tenure and promotion process.

However, Pearlstein’s mention of research showing that “teaching loads at research universities have declined almost 50 percent in the past 30 years” is incorrect. That study, which used the National Study of Postsecondary Faculty, was rescinded in 2013 due to concerns about the wording of faculty workload questions changing during the length of the study. While it’s probably the case that faculty teaching loads at more selective institutions have declined somewhat, Pearlstein shouldn’t have used a study that was rescinded a month after it was released.

Proposal #4: Cheaper, better general education. In this section, Pearlstein pushes for more online and hybrid courses to better engage students in the material. This sounds good, but it is far from a certainty that online courses are actually less expensive than in-person courses. (Research on this is nascent and inconclusive.) Additionally, Pearlstein cites government data stating that “more than three-quarters of students at four-year colleges and universities have never taken an online or hybrid course.” As Russ Poulin at WCET notes, 27% of students took a distance education course in 2013 alone, meaning that the percentage of students with some online experience at some point in college is likely far larger than 25%. I’ll be the first to admit that general education is not my strong point as a member of the graduate faculty, but there are lots of good people working on issues of general education.

As the discussion above suggests, nearly everyone (except woefully underpaid adjuncts) is to blame for the rising costs—and prices—of a college education. The challenge is that any solution is likely to be fairly complex and involve negotiations among faculty, administrators, students, and taxpayers. This is why college costs tend to get lip service from the higher education community until revenue sources dry up. But the financial struggles of many small private colleges (let alone many cash-strapped public colleges) make cost-cutting measures necessary, and hopefully the rest of the higher education community can learn from their experiences.

Should Students in “Boot Camps” Get Federal Financial Aid?

In the last several years, a number of companies have started short-term, intensive training programs in fields such as computer programming, Web design, and business designed to give fresh college graduates the skills they need to land lucrative jobs in growing fields. These “boot camps” include offerings by start-up companies such as Dev Bootcamp, General Assembly, and Koru as well as some entries from branches of traditional colleges (such as Rutgers). This sector is rapidly growing, with one organization estimating that about 16,000 students will complete coding boot camps in 2015.

Boot camps may tout their high job placement rates, but they are not cheap for students. The typical program costs about $11,000 for an 11-week program, although shorter options are often available in some fields. Unlike for most undergraduate and graduate programs through traditional colleges, these programs are currently not eligible for federal financial aid dollars. This means that students have two options to pay for these programs: paying out of pocket or taking out a private loan. However, the U.S. Department of Education is beginning an “experimental sites” program that will allow a small number of colleges to partner with unaccredited providers like boot camps to offer courses and receive federal financial aid.

Should students in boot camp programs be able to receive federal grants and loans? The best argument toward allowing students to receive federal funds for these programs (after a careful vetting process) is that it would allow students with modest financial means and little creditworthiness of their own to easily pay for some or all of these programs. These programs tend to recruit heavily from selective colleges with fewer low-income students (see the list of Koru’s partners), where ability to pay hasn’t been such a concern to this point. But as the sector expands to include colleges with more economic diversity, financing these programs could become a problem.

On the other hand, the highly vocational nature of these programs allows for different financing structures to make sense. This can happen through private loans focused on high-quality programs, which is the goal of the partnership between private lenders Skills Fund and six boot camps. Income share agreements are also a potential fit in this area, although I do have concerns about whether successful graduates would want to give up equity in themselves rather than just make loan payments. Finally, it remains to be seen whether boot camps themselves would actually be interested in going through certification and quality assurance processes that are likely to accompany federal student aid. For example, General Assembly’s co-founder told Inside Higher Ed that he didn’t want to receive federal student aid due to concerns about federal aid leading to higher prices in the future (the so-called “Bennett Hypothesis”). Others, such as Alex Holt at New America, have concerns about additional federal oversight leading to reduced program quality and less innovation.

I’ve thought about the dueling concerns of access and flexibility regarding boot camps, and I still don’t know exactly where I stand. The good thing here is that we’re likely to have a small number of programs get access to federal financial aid, so the effects of federal funding (and rules) can be examined before opening the spigot for more interested programs. I’d love to hear your thoughts on this question below, as this is a developing issue on which research badly needs to be conducted.

Comments on the New College Scorecard Data

The Obama Administration’s two-year effort to develop a federal college ratings system appeared to have hit a dead-end in June, with the announcement that no ratings would actually be released before the start of the 2015-2016 academic year. At that point in time, Department of Education officials promised to instead focus on creating a consumer-friendly website with new data elements that had never before been released to the public. I was skeptical, as there were significant political hurdles to overcome before releasing data on employment rates, the percentage of students paying down their federal loans, and graduation rates for low-income students.

But things changed this week. First, a great new paper out of the Brookings Institution by Adam Looney and Constantine Yannelis showed trends in student loan defaults over time—going well beyond the typical three-year cohort default rate measure. They also included earning data, something which was not previously available. But, although they made summary tables of results available to the public, these tables only included a small number of individual institutions. It’s great for researchers, but not so great for students choosing among colleges.

The big bombshell dropped this morning. In an extremely rare Saturday morning release (something that frustrates journalists and the higher education community to no end), the Department of Education released a massive trove of data (fully downloadable!) underlying the new College Scorecard. The consumer-facing Scorecard is fairly simple (see below for what Seton Hall’s entry looks like), and I look forward to hearing about whether students and their families use this new version more than previous ones. I also recommend ProPublica’s great new data tool for low-income students.

shu

But my focus today is on the new data. Some of the key new data elements include the following:

  • Transfer rates: The percentage of students who transfer from a two-year to a four-year college. This helps community colleges, given their mission of transfer, but still puts colleges at a disadvantage if they serve a more transient student body.
  • Earnings: The distribution of earnings 10 years after starting college and the percentage earning more than those with a high school diploma. This comes from federal tax return data and is a huge step forward. However, given very reasonable concerns about a focus on earnings hurting colleges with public service missions, there is also a metric for the percentage of students making more than $25,000 per year. Plenty of people will focus on presenting earnings data, so I’ll leave the graphics to others. (This is a big step forward over the admirable work done by Payscale in this area.)
  • Student loan repayment: The percentage of students (both completers and non-completers) who are able to pay down some principal on loans within a certain period of time. Seven-year loan repayment data are available, as illustrated here:

loan_repayment

In the master data file, many of these outcomes are available by family income, first-generation status, and Pell receipt. First-generation status is a new data element to be made available to the public; although the question is on the FAFSA, it’s never been made available to researchers. For those who are curious, here’s what the breakdown of the percentage of first-generation students (typically defined as students whose parents don’t have a bachelor’s degree) by institutional type:

firstgen

There are a lot of data elements to explore here, and expect lots of great work from the higher education research community in upcoming months and years using these data. In the short term, it will be fascinating to watch colleges and politicians respond to this game-changing release of outcome data on students receiving federal financial aid.

Who Would Use Income Share Agreements to Pay for College?

This post first appeared at the Brookings Institution’s Brown Center Chalkboard blog.

In response to concerns over the rising price of college and increasing amounts of student loan debt, the Obama Administration has worked to expand income-based repayment programs for those with federal student loans. In late 2015 or early 2016, the U.S. Department of Education will likely allow students with any federal loans to enroll in a more-generous version of income-based repayment that would cap monthly payments at 10 percent of discretionary income (i.e., earnings above 150 percent of the federal poverty line) for 20 years for undergraduate students and 25 years for graduate students, with any remaining balances forgiven by the federal government.

Although this new version of income-based repayment has the potential to benefit up to six million Americans with student loan debt, concerns have been raised about this more generous program. First, the price tag is estimated at $15.3 billion over 10 years, or roughly 5 percent of forecasted Pell Grant expenditures during this period. Second, graduate students, who are more likely to have six-figure student loan debt and enroll in income-based repayment programs at higher rates, will see more benefits than undergraduate students with smaller amounts of debt but worse career options. Finally, as more students enroll in income-based repayment plans, colleges have fewer reasons to control costs due to students’ ability to access credit.

An interesting alternative to federal student loans that has emerged in recent years has the potential to shift the financial risk of paying for college away from the federal government and students, instead placing the risk in the private sector. Income share agreements (ISA) function somewhat similarly to income-based repayment plans, as students pledge to pay a predetermined percentage of their annual income in exchange for funds to pay for college. However, unlike federal income-based repayment plans, the percentage of income and the length of the repayment period are negotiated between a private investor and the student instead of being the same across all students. Students who major in economically desirable fields, such as engineering and business, at top colleges are likely to get better repayment terms than students majoring in less-profitable but socially important fields, such as education and nursing, at more typical colleges.

Given the current generosity of income-based repayment programs—and the likelihood that the federal government loses money on many students today—I have to wonder how many students would use ISAs once potential legal issues around their operation in the United States are resolved. Students in less-lucrative fields or those who plan to work in public service careers are unlikely to get better terms from the private sector than the federal government. These students would be likely to continue using federal student loans, although it is possible that ISAs could partially replace Parent PLUS loans as a financing source should parents not want to take out loans for their children when ISAs are available.

This leaves two groups of students who are likely to be interested in ISAs. The first group is those students who are either attending colleges that do not offer their students federal loans (primarily for-profit colleges and community colleges), or those attending short-term training programs such as coding ‘boot camps’ that do not currently qualify for federal student aid. Something in the neighborhood of two million students attend these colleges and programs, which results in a fairly sizable market. However, all of these programs tend to be relatively inexpensive, meaning that the per-student profit for an ISA provider will be fairly small.

The group of students who would be more lucrative for ISA providers would be those students enrolled in profitable degree programs at traditional undergraduate and graduate institutions. Because these programs tend to be expensive, the contract would need to be designed so the provider could make a profit on a large initial investment. However, students could lock in paying a lower percentage of their income than what they would expect to pay under income-based repayment if their expected earnings are high enough.

But students with high expected incomes may stay away from ISAs because they may expect to pay more in an ISA than under the standard federal repayment plan (a fixed monthly payment over 10 years). It would be difficult for ISA providers to undercut the federal government’s price in today’s environment of reasonably low interest rates, but it could be possible for students who have the highest likelihood of graduating and making a large salary because of the relatively low risk these students represent to a provider. Additionally, the presence of post-graduation private loan refinancing options such as Earnest and SoFi give successful graduates a way to lower their loan payments without giving up a share of their income.

Income share agreements have the potential to create another option for students looking to pay for college while seeking assurances they will not be overwhelmed by future payments. However, given the current generosity of federal income-based repayment programs and the likely hesitation of those who expect six-figure salaries to sign away a percentage of their income for years to come, the market for these programs may be somewhat limited. However, the federal government should encourage the development of private ISA providers in order to give students as many options as possible to finance their education while setting reasonable parameters for their operation that protect students from fraud and abuse.

What if College Amenities Were Unbundled?

Recent articles by Jeff Selingo in the Washington Post and Matt Reed in Inside Higher Ed have address the idea of “unbundling” college credits. Selingo contends in his piece that two of the reasons why students pay so much for college is that they face the same price if taking 12 or 15 credits per semester (true at many colleges) and that colleges don’t always accept transfer credits in an effort to generate revenue (probably true, but difficult to prove). Reed notes an important distinction regarding transfer credits—although students may get credit for a community college course at a four-year institution, the credit might be granted as an elective that still requires the student to take the course over again.

Both Selingo and Reed refer to the push to allow consumers to unbundle their cable packages as a potential example of what to do (or not to do) in higher education. Currently, consumers have to choose a bundle of channels in order to get the particular channel or two they are the most interested in actually watching. A recent report estimated that cable companies paid an average of $6.04 per month to carry ESPN—and this gets passed along to consumers regardless of whether they actually want to watch the channel. Verizon has recently allowed subscribers to choose what types of channels they want to pay for, and Disney (the owner of ESPN) promptly sued to maintain the bundle. Disney’s fear is that maybe only half of the subscribers would pay $6 per month for ESPN, meaning that the price would have to double in order to match the previous revenue—at which point more customers would likely opt out.

Higher education offers similar examples of bundling that would quite possibly be brought down if students had the choice to select their preferred options. At many colleges, amenities such as recreation centers and intercollegiate athletics programs are funded through mandatory student fees. For example, the typical Big Ten Conference university charges students about $150 per semester in fees to fund recreational activities, regardless of whether a student actually chooses to use any facilities. While students often vote to approve the initial imposition of the fee, students who enroll in later years still have to pay the fee even if they would not have voted for it in the first place.

Fees for supporting intercollegiate athletics can be over $1,000 per year at some colleges, particularly at institutions without large donor bases or other revenue sources. An example is Longwood University in Virginia, which charges $239 per credit hour in tuition alongside over $63 per credit in athletics fees. This means that Longwood students taking 120 credits would be paying about $7,500 to subsidize athletics during their time on campus, something which many students might opt out of it they had a chance.

Higher education could be unbundled in other ways, including removing any requirements that students live on campus or purchase a meal plan, ending provisions requiring students to complete a certain number of credits in residency, or even potentially through the encouragement of open courseware that does not require an expensive subscription through the college. But any such efforts to unbundle will take away important revenue sources, so expect colleges to compensate in any way that they can. There is value in some of the bundling requirements, to be sure—for example, campus mental health services may not be offered if students had to opt into paying for the ability to access services. But it is worth having a conversation about what should be bundled and what should be provided on an a la carte basis.

Comments on the Brookings Value-Added Rankings

Jonathan Rothwell and Siddharth Kulkarni of the Metropolitan Policy Program at Brookings made a big splash today with the release of a set of college “value-added” rankings (link to full study and Inside Higher Ed summary) focused primarily on labor market outcomes. Value-added measures, which adjust for student and institutional characteristics to get a better handle on a college’s contribution to student outcomes, are becoming increasingly common in higher education. (I’ve written about college value-added in the past, which led to me taking the reins as Washington Monthly’s rankings methodologist.) Pretty much all of the major college rankings at this point include at least one value-added component, and this set of rankings actually shares some similarities with Money’s rankings. And the Brookings report does mention correlations with the U.S. News, Money, and Forbes rankings—but not Washington Monthly. (Sigh.)

The Brookings report uses five different outcome measures, which are then adjusted for available student characteristics and institutional characteristics such as the sector of the college and where it is located:

(1) Mid-career salary of alumni: This measures the median salary of full-time workers with a degree from a particular college and at least ten years of experience. The data are from PayScale, which suffers from being self-reported data for a subset of students, but the data likely still have value for two reasons. First, the authors do a careful job of trying to decompose any biases in the data—for example, correlating PayScale reported earnings with data from other sources. Second, even if there is an upward bias in the data, it should be similar across institutions. As I’ve written about before, I trust the order of colleges in PayScale data more than I trust the dollar values—which are likely inflated.

But there are still a few concerns with this measure. Some of the concerns, such as limiting just to graduates (excluding dropouts) and dropping students with an advanced degree, are fairly well-known. And the focus on salary definitely rewards colleges with large engineering programs, as evidenced by those colleges’ dominance of the value-added list (while art schools look horrible). However, given that ACT and SAT math scores are the other academic preparation measure used, the bias favoring engineering schools may actually be smaller than if verbal/reading scores were also used. I would also have estimated models separately for two-year and four-year colleges instead of putting them in the same model with a dummy variable for sector, but that’s just my preference.

(2) Student loan repayment rate: This represents the opposite of the average three-year student loan cohort default rate over the last three years (so a 10% default rate is framed as a 90% repayment rate). This measure is pretty straightforward, although I do have to question the value-added estimates for colleges with very high repayment rates. Value-added estimates are difficult to conceptualize for colleges with a high probability of success, as there is typically little room for improvement. But here, the highest predicted repayment rate is 96.8% for four-year colleges, while several dozen colleges have actual repayment rates in excess of 96.8%. It appears that linear regressions were used, while some type of robust generalized linear model should have also been considered. (In the Washington Monthly rankings, I use simple linear regressions for graduation rate performance, but very few colleges are so close to the ceiling of 100%.)

(3) Occupational earnings potential: This is a pretty nifty measure that uses LinkedIn data to get a handle of which occupations a college’s graduates pursue during their career. This mix of occupations is then tied to Bureau of Labor Statistics data to estimate the average salary of a college’s graduate, where advanced degree holders are also included. The value-added measure attempts to control for student and institutional characteristics, although it doesn’t control for the preferences of students toward certain majors when entering college.

I’m excited by the potential to use LinkedIn data (warts and all) to look at students’ eventual outcomes. However, it should be noted that LinkedIn is more heavily used in some fields that might be expected (business and engineering) and others that might not be expected (communication and cultural studies). The authors adjust for these differences in representation and are very transparent about it in the appendix. This appendix is definitely on the technical side, but I welcome their transparency.

They also report five different quality measures which are not included in the value-added estimate: ‘curriculum value’ (the value of the degrees offered by the college), the value of skills alumni list on LinkedIn, the percentage of graduates deemed STEM-ready, completion rates within 200% of normal time (8 years for a 4-year college, or 4 years for a 2-year college), and average institutional grant aid. These measures are not input-adjusted, but generally reflect what people think of as quality. However, average institutional grant aid is a lousy measure to include as it rewards colleges with a high-tuition, high-aid model over colleges with a low-tuition, low-aid model—even if students pay the exact same price.

In conclusion, the Brookings report tells readers some things we already know (engineering programs are where to go to make money), but provides a good—albeit partial—look at outcomes across an unusually broad swath of American higher education. I would advise readers to focus on comparing colleges with similar missions and goals, given the importance of occupation in determining earnings. I would also be more hesitant to use the metrics for very small colleges, where all of these measures can be influenced by a relatively small number of people. But the transparency of the methodology and use of new data sources make these value-added rankings a valuable contribution to the public discourse.

Why ASAP Could Harm Some Students

The City University of New York’s Accelerated Study in Associate Programs (ASAP) has gotten a great deal of positive attention in the last few years, and for good reason. The program provides much-needed additional economic, advising, and social supports to community college students from low-income families, and a new evaluation of a randomized trial from MDRC found that ASAP increased three-year associate’s degree completion rates from 22% in the control group to 40% in the treatment group. I’m glad to see that the program will be expanded to three community colleges in Ohio, as this will help address concerns about the feasibility of scaling up the program to cover more students.

But it is important to recognize that ASAP, as currently constituted, is limited to students who are able and willing to attend college full-time. Full-time students are the minority at community colleges, and full-time students tend to be more economically and socially advantaged than their part-time peers. As currently constructed, ASAP would direct a higher percentage of resources to full-time students, even though part-time students likely need support more than full-time students. (However, it’s worth noting that although part-time students count in some states’ performance-based funding systems, they are currently not counted in federal graduation rate metrics.)

Students in ASAP also get priority registration privileges, which can certainly contribute to on-time degree completion. But it is not uncommon for classes (at least at desirable times) to have waiting lists, meaning that ASAP students get access to courses while other students do not. If a part-time student cannot get access to a course that he or she needs, it could mean that the student is forced to stop out of college for a semester—a substantial risk factor for degree completion.

ASAP has many promising aspects, but further study is needed to see if the degree completion gains for full-time students are coming at the expense of part-time students. Some of the ASAP services should be extended to all students, and priority registration should be reconsidered to benefit students who are truly in need to getting into a course instead of those who are able to attend full-time.

Comments on President Obama’s State of the Union Higher Education Proposals

As President Obama enters the last two years of his presidency, he has made higher education one of the key points in his policy platform. The announcement of a plan to give students two years of free tuition at community colleges has gotten a great deal of attention, even though a lot of details are still lacking. (See my analysis of the plan here.) In an unusual Saturday night release, the Obama Administration laid out some details of its tax proposals that will be further elaborated in Tuesday’s State of the Union Address.

Many of the tax provisions will either directly affect higher education, or they will impact students and their families who are currently struggling to pay for college. Here is a quick overview of the provisions:

  • Expand the Earned Income Tax Credit, which goes to lower-income families with some wage income. This credit is fully refundable, meaning that families can benefit even if they don’t have a tax liability to offset with a credit (meaning that negative effective tax rates can result).
  • Expand and streamline the Child and Dependent Care Tax Credit, which is designed to offset high costs of child care. This could help the growing number of students who have children.
  • Consolidate the tuition and fees deduction and Lifetime Learning Credit into a streamlined and expanded American Opportunity Tax Credit, and making the AOTC permanent (it is set to expire in 2017). The AOTC would be set at $2,500 per year for five years and would be indexed for inflation. The AOTC would also be expanded to cover part-time students and the refundable portion would increase from $1,000 to $1,500. Finally, Pell Grant funds received would not count toward the AOTC. The AOTC expansion would be partially covered by reducing tax incentives for 529 and Coverdell savings plans.
  • Eliminate any taxes on any student loan balances forgiven after making the full 20 years of payment under income-based repayment plans. Right now, students are scheduled to be taxed on any balances—although few (if any) students have actually faced the tax burden at this point. This would partially be paid for by getting rid of the student loan interest deduction; essentially, students would lose any tax benefits for paying interest during the life of the loan, but they could benefit at the end of the payment period.

Although the exact costs of each of these proposals will not be known until the President releases his budget document later this spring, it appears that much of the revenue needed to pay for these expanded programs will come from higher taxes on higher-income individuals and large financial companies. Those tax increases are extremely unlikely to be passed by a Republican Congress, but some of the individual tax credit proposals may still be considered with funding coming from other sources.

Putting concerns about feasibility and funding aside, there are some things to like about the President’s proposals, while there are other things not to like. I’m generally not a fan of tax credits for higher education, as it is far less efficient to give students and their families money months after enrollment instead of when they actually need it the most. A great new National Bureau of Economic Research working paper by George Bulman and Caroline Hoxby examined the effectiveness of federal higher education tax credits and found essentially no impacts of tax credits on enrollment or persistence rates. It would be far better to give students a smaller grant at enrollment than a larger grant later on, but that is unlikely to ever happen due to the political popularity of tax credits on both sides of the aisle.

But I do like the part of the proposal that cuts the student loan interest deduction and directs the savings toward addressing the ticking time bomb of the loan forgiveness tax. The interest deduction is complicated, making it less likely to be claimed by lower-income households. Additionally, making interest partially tax-deductible could be seen as encouraging students to borrow more, potentially putting upward pressures on tuition. That is a difficult claim to verify empirically, but it is something that is often mentioned in discussions about college prices.

Regardless of whether any of these proposals become law, it is exciting to see so much discussion of higher education finance and policy at this point. Hopefully, there will be additional proposals coming from both sides of the political aisle that will help students access and complete high-quality higher education.

Thoughts on President Obama’s “Free Community College” Proposal

(NOTE: Updated 1/9/15 11 AM ET with discussion of state performance-based funding and maintenance of effort requirements.)

Two weeks in advance of the State of the Union Address, President Obama unveiled a proposal for tuition-free community college that is getting a great deal of attention. The plan, which was influenced by a “Free Two-Year College Option” paper by Sara Goldrick-Rab and Nancy Kendall, calls for the federal government to fund three-fourths of the cost of tuition and fees while states fund the remainder. The student is then responsible for covering other costs that go along with college attendance, such as books and living expenses.

This is an ambitious and complicated proposal that requires a fiscal outlay and Congressional approval. As a researcher at the intersection of financial aid and accountability policies, there are some things to like about the proposal, but there are also some significant concerns. Below, I list some of the pros and cons of the tuition-free community college proposal, as well as some potential items that can best be classified as “mixed” at this point:

Pros:

  • This sends a clear message that community college is an affordable option for all students. Even though tuition and fees make up a small portion of the total cost of attendance—and it is unclear if all students will see additional savings from this plan—telling students early on that tuition will be free may induce more to prepare for college and eventually enroll.
  • This could potentially encourage students to switch from expensive for-profit colleges to less-expensive community colleges for an associate’s degree. This would reduce their debt burden and maybe encourage them to pursue further education if desired.
  • This program will likely be targeted toward middle-income families who do not qualify for the Pell Grant, but cannot readily afford to pay several thousand dollars out of pocket each year for college. This group is key in building public support for higher education. (I don’t think it would affect the college choices of high-income families, who typically chose four-year institutions.)
  • Covering half-time students in addition to full-time students is a plus, although it remains to be seen whether half-time students would be eligible for additional years at a lower enrollment intensity.

Cons

  • The neediest students may not benefit as much from this plan as a straightforward increase to the Pell Grant, as some funds will go to students without financial need. At this point, it sounds like the proposal is NOT a last-dollar scholarship, meaning that all students will get at least some money. But while this is less efficient than increasing the Pell, the broad-based nature of the plan could gain additional political support.
  • If enough students switch from private to public colleges, the additional demand would force states and localities to undertake expensive capital building projects. This could also place additional strain on state financial aid programs.
  • The promise to cover three-fourths of tuition could encourage states and colleges to raise their tuition in order to qualify for more funds. Ideally, the legislation will have some sort of mechanism to prevent outright gaming, but community colleges in high-tuition states will effectively get more money than those in low-tuition states (often with a better history of state and local support). The state/federal/institutional interactions deserve careful scrutiny.
  • In order to qualify for the funds, states must allocate at least some appropriations based on performance instead of enrollment. This sounds like a good thing, but there are two problems. First, measuring performance is difficult–even with respect to graduation rates at community college. Second, as shown in research by Nick Hillman and David Tandberg, it is far from clear that performance-based funding policies improve student outcomes.

Mixed or unclear

  • Students must enroll half-time and earn at least a 2.5 GPA in order to qualify for free tuition. That is a step up from current rules for satisfactory academic progress for the Pell Grant, which typically requires a 2.0 GPA. It may help students be more serious about their studies, but it could also cut off struggling students who need additional support.
  • Requiring the state to fund the remaining cost of tuition could cut out the role of the local community college district. While some states have centralized funding structures for community colleges, others rely on local districts to fund their own college. Moving to a system of state-funded community colleges could help reduce massive funding inequities across districts, but it could reduce taxpayer support for higher education if they do not want their funds going elsewhere.
  • The plan calls for community colleges to work on transfer agreements with public four-year colleges and universities, which is a good thing. But I’d like to see the plan encourage collaboration with other regionally accredited institutions, including reputable private nonprofit and for-profit colleges.
  • The requirement that states maintain their effort for other sectors of higher education may induce some states to not participate. Additionally, if students shift from the four-year sector to two-year colleges, it’s not clear how “effort” should be defined.

We don’t know all of the details about the plan yet, but it is certain to generate a great deal of discussion in Washington and around the country. I’m looking forward to the conversation!

What Will the College Opportunity Summit Mean for Higher Education?

Today, the White House is hosting a second College Opportunity Summit, following up on a summit held in January that was roundly criticized for focusing on elite institutions. Both this summit and the previous summit involved colleges and other organizations making pledges designed to improve college access and completion rates, particularly for underrepresented populations and in STEM. The first round of pledges (and progress made) and the second round of pledges can both be found on the White House’s website.

Several hundred people, including administrators, policy analysts, and researchers, are at today’s summit, which has the potential to generate useful discussions. But it could also be the case that the discussion turns into a stereotypical academic conference, where a lot of items are discussed but no action is ever taken. So what could the summit mean for higher education?

The first thing that jumps out from the list of pledges is the sheer number. The list contains over 600 actions that colleges, associations, and other organizations plan to take—which is admirable. But as a researcher, two key questions should be considered:

(1) Would colleges and organizations have adopted these policies even without a formal pledge? In research language, this is known as the counterfactual—considering what would have happened in the absence of the policy being studied. This list could represent a list of things that colleges already planned to do (but they get good PR and tickets to the White House tree lighting), or this could be a result of colleges setting new goals as a result of the White House’s call for commitments. When considering the impact of this summit, researchers should talk to some college administrators (while promising confidentiality) to see if the pledges were policies already being planned or a new development.

(2) Will these pledges improve student outcomes? This involves thinking carefully about program design and data collection, so it is possible to use experimental or quasi-experimental methods combined with in-depth interviews in order to examine program impacts and potential moderating and mediating factors. The Institute for Education Sciences announced an additional $10 million in funding for postsecondary research, but that amount won’t make much of a difference as funding an intervention and conducting an evaluation can easily cost several million dollars.

I hope the summit helps colleges and organizations develop partnerships similar to the University Innovation Alliance, the Student Achievement Measure, and other organizations that link colleges with similar goals to each other. But it’s worth keeping in mind that many of these pledges are likely things that colleges planned to do anyway.