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The watchdogs of higher education are failing students
Also: Explaining the Gainful Employment rule, and resuming student loan payments (for real this time).
Welcome to The Tassel, FREOPP’s newsletter on higher education policy, written by senior fellow Preston Cooper. Each month, The Tassel dives into our latest work on higher education, along with a handpicked selection of research and articles from around the web that we think are worth your time. To manage your subscription preferences, visit your Substack settings.
If you’d told me three years ago that college accreditation reform would become a presidential campaign issue, I would have raised an eyebrow. But here’s Florida Governor Ron DeSantis during his campaign launch last month:
“Some of the problems with the university and the ideological capture — that didn’t happen by accident, you can trace back all the way to the accreditation cartels. Well, guess what? To become an accreditor, how do you do that? You’ve got to get approved by the U.S. Department of Education. So we’re going to be doing alternative accreditation regimes.”
Former President Donald Trump has also hammered the accreditation issue. From a recent speech:
The accreditors are supposed to ensure that schools are not ripping off students and taxpayers, but they have failed totally. When I return to the White House, I will fire the radical Left accreditors that have allowed our colleges to become dominated by Marxist Maniacs and lunatics. We will then accept applications for new accreditors who will impose real standards on colleges once again and once and for all.
While the culture-war aspects of the accreditation issue are beyond the scope of this newsletter, Trump and DeSantis’ interest in “alternative accreditation regimes” is welcome for other reasons: accreditors, by and large, are failing to protect students from colleges that leave them financially worse off.
College accreditation fails to guarantee good outcomes
The federal government disburses over $100 billion in college aid every year, but it outsources the task of determining which schools should be eligible for that aid to third-party agencies: accreditors. Accreditation is difficult to secure. Earning recognition from an accreditor takes years and costs over $300,000. This is a prohibitive barrier to entry for many colleges that might otherwise compete with incumbent schools.
The costs associated with accreditation might be worth it if accreditors protected students from low-quality programs. But in a new issue brief for FREOPP, I show that every single accreditor has given the thumbs-up to hundreds of programs that fail to make students economically better off.
FREOPP has estimated return on investment (ROI) for over 60,000 degree and certificate programs at federally funded (and thus accredited) institutions. ROI is defined as the benefits of a college degree (the increase in lifetime earnings) minus the costs (tuition, time spent out of the labor force, and the risk of dropping out).
At each of the six “regional” accreditors, which oversee most four-year schools, at least 25 percent of bachelor’s degree programs are negative-ROI—meaning the average student can expect to be worse off, financially, for having enrolled. Outcomes are even worse for accreditors overseeing less-than-four-year schools. At four of these so-called “national” accreditors, more than 40 percent of subbaccalaureate programs leave their students worse off.
Accreditors have therefore given the green light to thousands of programs that fail the educational Hippocratic oath: first, do no harm to students’ economic welfare.
The issue brief also analyzes whether accreditors are doing anything about this quality problem at the schools they oversee. While accreditors are somewhat more likely to take adverse action against schools where most degree programs are negative-ROI, most schools with lots of negative-ROI programs never face a sanction from their accreditor. Moreover, when the watchdogs bark, they typically do not cite academic quality or student outcomes as the reason.
America needs alternatives to traditional accreditation
The accreditation system has a dual problem. It presents high barriers to entry for new schools, limiting competition. At the same time, accreditors have low standards for incumbent colleges. It should be the opposite. Starting a new college should be easy, but all schools should have to demonstrate excellent outcomes to remain eligible for federal funding.
Put simply, right now colleges face high barriers and low standards. It should be low barriers and high standards.
Let’s start with lower barriers. The government should allow new bodies to serve as quality-assurance entities and gatekeepers of federal financial aid. One option is to allow state governments, which already have quality-assurance processes for universities through the state authorization system, to serve as accreditors. Another is to enable additional third-party entities to provide accreditation if they have a robust process for evaluating student outcomes.
At the same time, the federal government can set its own student outcomes standards, independent of the accreditation system. Colleges would be required to abide by these standards regardless of whether they have traditional or alternative accreditation, thus preventing a “race to the bottom.” FREOPP has developed one potential framework that would require institutions to maintain a satisfactory student loan repayment rate or face financial penalties.
Students and taxpayers deserve an effective quality-assurance system in higher education that upholds high standards and ensures competition. Let’s hope accreditation continues to feature as a campaign issue this election season.
What I’m writing
The Gainful Employment rule is finally out. The Biden administration’s long-awaited rule to defund certificate programs and for-profit colleges with middling student outcomes dropped last month; members of the public may submit comments on the proposed rule until June 20. I cover the main provisions over at Forbes. The rule will cut programs off from federal student aid if student loan payments represent an unaffordable share of earnings, or if a program’s completers earn less than the typical high school graduate. It’s an important step forward for accountability in higher education, but there’s a big drawback: the rule exempts degree programs at public and private nonprofit institutions, meaning the vast majority of college students will not benefit from its protections.
The misguided student loan payment pause will finally end. How does six months turn into three years? While Congress originally suspended student loan payments between March and September of 2020 in response to Covid-19, the Trump and Biden administrations extended that moratorium a collective eight times. Thanks to the debt-ceiling deal passed earlier this month, though, Congress will force the Biden administration to resume payments at the end of August. I reflect on the three-year pause at OppBlog. The moratorium cost taxpayers $195 billion—about half as much as President Biden’s signature plan to forgive up to $20,000 in student debt per borrowers—and benefitted doctors and lawyers most of all.
What I’m reading
The student loan payment pause failed to reduce indebtedness, according to new research by Michael Dinerstein, Constantine Yannelis, and Ching-Tse Chen. By comparing federal student loan borrowers to those with privately-held loans (which were ineligible for the pause), the authors find that the moratorium caused student debt to rise by $1,500 relative to the baseline. Moreover, borrowers took on additional credit elsewhere: mortgage, auto, and credit card debt rose by $1,200.
As college enrollment declines, interest in short-term programs is rising. At Inside Higher Ed, Joe May and Mark Schneider write that we need to collect better data on programs like “online certificates, apprenticeships and industry credentials,” that might lead to employment “in six, eight or ten weeks, not years.” But not all of these programs are created equal. Students and policymakers need better information on which alternative pathways have the best return on investment.
Colleges must do more to improve the labor market relevance of bachelor’s degrees, write Jeffrey Selingo and Matt Sigelman in the Wall Street Journal. Schools should think about what sorts of skills are being taught in the classroom, and how these align to labor-market needs. Even students in the much-maligned gender studies major can boost their earnings if they learn real-world skills such as project management.
US News and World Report is updating the methodology behind its college rankings. The new ranking system will jettison metrics such as alumni giving rates and class sizes in favor of more emphasis on graduation rates. It’s a welcome change, though there’s a cynical interpretation: the new methodology will allow US News to rank colleges even if they refuse to provide data (the remaining variables are largely available in public datasets).
Ohio may strengthen disclosure rules for public colleges. Under a bill that passed the state House this month, schools will have to clearly delineate how much students will pay in tuition and what their estimated loan payments will be, along with expected earnings after graduation. Last year, a government watchdog found that most colleges mislead students about what they’ll actually pay.
What I’m doing
I’m excited to visit Oregon next weekend for my sister’s college graduation. I won’t be climbing any big mountains this time, but last year around this time I made it to the summit of Mount Hood, the highest point in the Beaver State at 11,249 feet. Here I am, exhausted and sunburned, at the summit on June 20, 2022:
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