Will Federal Aid Be Tied to College Ratings? (Poll)

With all of the discussion of what will be included in the proposed Postsecondary Institution Ratings System (PIRS), there has been relatively little discussion about whether federal Title IV financial aid will actually be tied to the ratings by 2018—as the President has specified. I would love to get your thoughts on the feasibility by taking the following poll, and leaving any additional comments below.

 

 

I’ll share my thoughts in a subsequent post, so stay tuned!

My State of the Union Wish List

My State of the Union Wish List

I don’t have tremendously high expectations for tonight’s State of the Union address regarding higher education, given the priority placed on other topics such as social mobility and potentially even foreign affairs. However, I would be thrilled if President Obama and/or the small army of Republicans responding touched on any of the three following items:

(1) Don’t make grand claims on fixing the rising burden of student loan debt. While student loan debt has crossed $1 trillion, it’s unclear whether any of the proposals out there would seriously help students after they leave college—let alone encourage students to attend college. Last year’s fight over interest rates was an example of tinkering around the edges. The push for so-called “Pay it Forward” plans might help, but these plans are a long way from enrolling students and may have adverse consequences. I encourage the President and Republicans to bring up these ideas, but don’t overpromise here.

(2) Talk about access to college for more than just high-achieving, low-income students. The recent White House summit on these students is a nice PR push, but will do little to improve college access. Most of these students are going to college somewhere, although some are attending less-selective institutions. As Matt Chingos at Brookings notes, focusing on the problem of “undermatching” won’t move the college completion margin in any substantial way. Focus on trying to increase college access for more than just the small number of very well-prepared students.

(3) Don’t overpromise on college ratings. While the push for federal ratings is moving forward this year, these ratings won’t be released for at least several more months. And once the ratings get released, there is no guarantee that students use the ratings in any meaningful way (although it’s possible). Additionally, tying aid to ratings takes an act of Congress and won’t happen during the current administration. Keep plugging forward on the ratings work, but don’t make them sound like the solution to all of our problems.

I’m looking forward to the speech tonight, and please send along your wish list through either the comments section or via Twitter!

Is the Term “College Ratings” Toxic?

In what will come as a surprise to few observers, much of the higher education community isn’t terribly fond of President Obama’s plan to develop a college ratings system for the 2015-16 academic year. An example of this is a recently released Inside Higher Ed/Gallup survey of college provosts and chief academic officers. Only a small percentage of the 829 individuals who returned surveys were supportive of the ratings and thought they would be effective, as shown below:

  • 12% of provosts agree the ratings will help families make better comparisons across institutions.
  • 12% of provosts agree the ratings will reflect their own college’s strengths.
  • Just 9% agree the ratings will accurately reflect their own college’s weakness.

There is some variation in support by type of college. Provosts at for-profit institutions and public research universities tended to offer more support, while those at private nonprofit institutions were almost unanimous in opposition. But regardless of whether provosts like the idea of ratings, the plan seems to be full steam ahead.

The Association of Public and Land-Grant Universities (APLU) took a productive step in the ratings conversation by releasing their own plan for accountability and cost-effectiveness. This plan centers on three components that could be used to allocate financial aid to colleges: risk-adjusted retention and graduation rates, employment/graduate degree rates, and default/loan repayment rates. Under APLU’s proposal, colleges could fall into one of three groups: a top tier that receives bonus Title IV funds, a middle tier that is held harmless, and a bottom tier that loses some or all Title IV funds.

To me, that sounds like a ratings system. But APLU took care not to call their plan a ratings system, and viewed the Administration’s plans as being “extremely difficult to structure.” It seems like the phrase “college ratings” has become a toxic idea; so rather than call for a simplified set of ratings, APLU discussed the use of “performance tiers.” This sounds a little like the Common Core debate in K-12 education, in which some states have considered renaming the standards in an attempt to reduce opposition.

It will be interesting to see how the discussion on college ratings moves forward over the next several weeks, particularly as more associations either offer their plans or decry the entire idea.  The technical ratings symposium previously scheduled for January 22 will now occur on February 6 on account of snow, and I’ll be presenting my thoughts on how to develop a ratings system for postsecondary education. I’ll post my presentation on this blog at that time.

The College Ratings Suggestion Box is Open

The U.S. Department of Education is hard at work developing a Postsecondary Institution Ratings System (PIRS), that will rate colleges before the start of the 2015-16 academic year. In addition to a four-city listening tour in November 2013, ED is seeking public comments and technical expertise to help guide them through the process. The full details about what ED is seeking can be found on the Federal Register’s website, but the key questions for the public are the following:

(1) What types of measures should be used to rate colleges’ performance on access, affordability, and student outcomes? ED notes that they are interested in measures that are currently available, as well as ones that could be developed with additional data.

(2) How should all of the data be reduced into a set of ratings? This gets into concerns about what statistical weights should be assigned to each measure, as well as whether an institution’s score should be adjusted to account for the characteristics of its students. The issue of “risk adjusting” is a hot topic, as it helps broad-access institutions perform well on the ratings, but has also been accused of resulting in low standards in the K-12 world.

(3) What is the appropriate set of institutional comparisons? Should there be different metrics for community colleges versus research universities? And how should the data be displayed to students and policymakers?

The Department of Education has convened a technical panel on January 22 to grapple with these questions, and I will be among the presenters at that symposium. I would appreciate your thoughts on these questions (as well as the utility of federal college ratings in general), either in the comments section of this blog or via e-mail. I also encourage readers to submit their comments to regulations.gov by January 31.

Will Holding Colleges Accountable for Default Rates be Effective?

As student loan debt continues to climb and Congress enters a midterm election year, three Democrats in the United States Senate (Reed, Durbin, and Warren) recently introduced a piece of legislation designed to hold certain types of colleges and universities accountable for their students’ loan default rates. If enacted, the bill would require colleges to pay a fine of a percentage of its students’ total defaulted loans to the Department of Education, part of which would be used to help borrowers avoid future defaults and the other part would go to a fund to help support the Pell Grant in case of any future funding shortfalls.

The proposed fines are the following:

  • 5% fine if the most recent cohort default rate (CDR) over three years is 15-20%
  • 10% if CDR is 20-25%
  • 15% if CDR is 25-30%
  • 20% is CDR is 30%+

As an example of what these fines could mean, consider their potential implications for the University of Phoenix’s online division. Data from the Department of Education’s Integrated Postsecondary Education Data System (IPEDS) show that Phoenix collected roughly $1.4 billion in student loan revenue during the 2011-12 academic year, while 34.4% of students who took out loans defaulted in a three-year period. This default rate would place them in the 20% fine category, resulting in a fine of roughly $100 million per year based on an estimated $500 million per year in defaulted loans. This would represent roughly four percent of their total tuition revenue ($2.7 billion) in the 2011-12 academic year—which is far from a trivial sum.

Daniel Luzer on Washington Monthly’s College Guide blog (where many of my pieces are cross-posted) notes some of the potential positives of this legislation, including encouraging colleges to spend more time and energy counseling students and providing more information about financial aid.

But, in order for this legislation to actually benefit students, three things must happen:

(1) Some colleges must actually be affected by the legislation. The sanctions in the bill would not apply to community colleges, historically black colleges and universities (HBCUs), and likely other colleges designated as minority-serving institutions. This excludes a substantial number of nonprofit institutions, many of which have higher default rates. A provision in the bill excludes colleges at which fewer than 25% of students take out federal loans, which further diminishes the number of nonprofit institutions on the list.

But even if a college is not exempt from the legislation, it is still possible to avoid fines if default rates are over 15%. The legislation grants the Secretary of Education the authority to grant waivers, which would be the first time the Secretary has ever been granted that authority. (Kidding!) Colleges can submit remediation plans in order to avoid or reduce fines. It will be interesting to see the reaction to the first waiver request, as colleges’ lobbying efforts tend to be well-organized.

A more interesting case will involve the for-profit sector. Given the three Senators’ general distrust of for-profit institutions, it would not surprise me if nearly all of the colleges facing fines are proprietary in nature. But the way the bill is targeted seems to be similar to previous attempts at gainful employment legislation, which have been the subject of massive amounts of litigation. Expect this proposal to face litigation if it ever became law.

(2) Colleges must be able to improve their financial aid offices without restricting students’ access to financial aid. One of the underlying premises of this legislation is that financial aid offices are not helping students make sound financial decisions that help them complete college. Aid administrators would likely disagree with that statement, although additional resources targeted toward financial counseling may be beneficial.

Another concern is that in order to reduce default rates, aid offices will not offer students loans if they perceive the student as having a higher risk of default. While there is a prohibition written into the legislation against denying loans based on the perceived risk of default, this would be extremely difficult to prove and enforce. Colleges are not required to offer students the full amount of loans available in the initial aid package, and indeed some community colleges decline to offer any federal loans to their students. Some colleges would like more authority to limit loan offers to students, and this legislation could reduce access to credit for needy students.

(3) The legislation must adequately address students who transfer. If a student takes out loans while attending multiple institutions, would each college be held responsible for a student’s default—even if most of the debt was at one institution? Consider a student who attends a regional public university for one year and takes out the maximum in subsidized Stafford loans ($3,500). She then transfers to an expensive private college and accrues an additional $30,000 in debt before graduating. If she defaults on her principal of $33,500, should both colleges be held responsible? That is unclear at this point.

So would holding colleges accountable for default rates (in the method of this legislation) help students? I’m skeptical because I don’t see many colleges actually facing sanctions, nor do I see the fines being particularly effective. This is one of those ideas that is great in theory, but may not work as well in practice.

I don’t think this legislation is likely to become law in its current form, but it’s worth keeping an eye on as the Department of Education works to develop the Postsecondary Institution Rating System (PIRS). Many of the potential discussions this legislation raises will certainly come up again once the draft ratings are released.

Performance Indicators and College Ratings

This has been a busy part of the semester from both the teaching and research sides of work. But I was able to go to part of the Association for the Study of Higher Education (ASHE) conference, which included a great panel discussion on performance indicators and college ratings. Rather than write a typical blog post, I’m giving Storify a shot. Below is the link to my story:

http://storify.com/rkelchen/performance-indicators-and-college-ratings#

Take a look and let me know what you think!

What Should Be in the President’s College Ratings?

President Obama’s August announcement that his administration would work to develop a college rating system by 2015 has been the topic of a great deal of discussion in the higher education community. While some prominent voices have spoken out against the ratings system (including my former dissertation advisor at Wisconsin, Sara Goldrick-Rab), the Administration appears to have redoubled its efforts to create a rating system during the next eighteen months. (Of course, that assumes the federal government’s partial shutdown is over by then!)

As the ratings system is being developed, Secretary Duncan and his staff must make a number of important decisions:

(1) Do they push for ratings to be tied to federal financial aid (requiring Congressional authorization), or should they just be made available to the public as one of many information sources?

(2) Should they be designed to highlight the highest-performing colleges, or should they call out the lowest-performing institutions?

(3) Should public, private nonprofit, and for-profit colleges be held to separate standards?

(4) Should community colleges be included in the ratings?

(5) Will outcome measures be adjusted for student characteristics (similar to the value-added models often used in K-12 education)?

After these decisions have been made, then the Department of Education can focus on selecting possible outcomes. Graduation rates and student loan default rates are likely to be a part of the college ratings, but what other measures could be considered—both now and in the future? An expanded version of gainful employment, which is currently used for vocationally-oriented programs, is certainly a possibility, as is some measure of earnings. These measures may be subject to additional legal challenges. Some measure of cost may also make its way into the ratings, rewarding colleges that operate in a more efficient manner.

I would like to hear your thoughts (in the comments section below) about whether these ratings are a good idea and what measures should be included. And when the Department of Education starts accepting comments on the ratings, likely sometime in 2014, I encourage you to submit your thoughts directly to them!

“Bang for the Buck” and College Ratings

President Obama made headlines in the higher education world last week with a series of speeches about possible federal plans designed to bring down the cost of college. While the President made several interesting points (such as cutting law school from three to two years), the most interesting proposal to me was has plan to create a series of federal ratings based on whether colleges provide “good value” to students—tying funding to those ratings.

How could those ratings be constructed? As noted by Libby Nelson in Politico, the federal government plans to publish currently collected data on the net price of attendance (what students pay after taking grant aid into account), average borrowing amounts, and enrollment of Pell Grant recipients. Other measures could potentially be included, some of which are already collected but not readily available (graduation rates for Pell recipients) and others which would be brand new (let your imagination run wild).

Regular readers of this blog are probably aware of my work with Washington Monthly magazine’s annual set of college rankings. Last year was my first year as the consulting methodologist, meaning that I collected the data underlying the rankings, compiled it, and created the rankings—including a new measure of cost-adjusted graduation rate performance. This measure seeks to reward colleges which do a good job serving and graduating students from modest economic means, a far cry from many prestige-based rankings.

The metrics in the Washington Monthly rankings are at least somewhat similar to those proposed by President Obama in his speeches. As a result, we bumped up the release of the new 2013 “bang for the buck” rankings to Thursday afternoon. These rankings reward colleges which performed well on four different metrics:

  • Have a graduation rate of at least 50%.
  • Match or exceed their predicted graduation rate given student and institutional characteristics.
  • Have at least 20% of students receive Pell Grants (a measure of effort in enrolling low-income students).
  • Have a three-year student loan default rate of less than 10%.

Only one in five four-year colleges in America met all four of those criteria, which highlighted a different group of colleges than is normally highlighted. Colleges such as CUNY Baruch College and Cal State University-Fullerton ranked well, while most Ivy League institutions failed to make the list due to Pell Grant enrollment rates in the teens.

This work caught the eye of the media, as I was asked to be on MSNBC’s “All in with Chris Hayes” on Friday night to discuss the rankings and their policy implications. Here is a link to the full segment, where I’m on with Matt Taibbi of Rolling Stone and well-known author Anna Kamenetz:

http://video.msnbc.msn.com/all-in-/52832257/

This was a fun experience, and now I can put the “As Seen on TV” label on my CV. (Right?) Seriously, though, stay tuned for the full Washington Monthly rankings coming out in the morning!