Posted on 03-31-2011
Buying College: What Consumers Need to Know
By Julie Margetta Morgan
“If only I’d known then what I know now” seems to be a common lament from college graduates these days. We hear it from students who attended for-profit institutions only to find that their skills are not marketable but their debt will haunt them for the next 30 years. But we also hear it from law school graduates who feel their institutions sold them on the dream of a $150,000 salary when all they got was $150,000 in student loan debt and a temp job reviewing documents. Students’ lack of information when making college choices costs individuals the opportunity to create a better future for themselves and it costs taxpayers when students use federal grants and loans and state subsidies to pursue overpriced or underperforming educational programs.
Better and more timely information must be part of any strategy to get more students into and through college while also addressing the problems of increasing loan defaults and students with credentials but no jobs. CAP advocates for an expanded federal role in providing information resources to college-bound students. But the federal government’s approach to providing information must fundamentally change from dumping data onto websites to targeting information to individuals, taking into account the job that information should accomplish. In broad terms, that job is helping students make better choices, but there are several ways to improve choice making. For instance, we can protect students from poor-performing programs by disclosing key data, or we can help students compare across institutions to make the best choice among them. Also, we can encourage students to choose programs that are a best fit for their learning style, aptitudes, and educational goals, or to become more conscious of college options well before they make the choice of where to enroll.
So far, the federal government approaches all of these improvements to college choice by making data available in an indiscriminate way through postings on federal websites and limited disclosures on college marketing materials. And there is very little evidence that students and families even look at this information, let alone integrate it into their choices. To ensure that information is more effective, it must be organized around the ways it can improve choice.
Many were shocked by figures like the 9 percent graduation rate in University of Phoenix’s bachelor’s degree programs or the 40 percent student loan default rate at Corinthian Colleges as information about for-profit colleges seeped out over the last year in congressional testimony, reports, and news media. But they would be equally shocked by the fact that a community college in New Mexico could have a 16 percent graduation rate, or that graduates of New York University take on an average of $28,000 in debt.
The troubling thing is we’re not giving students and families this shocking information before they choose to enroll. When families are choosing a college, the federal government’s position is this: Information is available on the Internet if you’re inclined to look for it and if you can find it. This “buyer beware” approach does not work for students or the taxpayers who pay for the grants and subsidize the loans many students use to pay tuition. If a student doesn’t happen across important information about the quality or cost of an educational program before enrollment, no one’s going to discharge the student loans he or she incurred. There’s no return policy on a college education, even a bad one. The federal government should compel colleges to provide information up front to protect consumers from institutions that hide their poor quality, low attainment, or high costs.
Graduation rates are the most relevant piece of information to answer the first question, helping a student or parent gauge the likelihood that a student will finish a program. The current federal measure of graduation rates is often criticized because it does not measure the success of all students. But the American Association of Community Colleges’ Voluntary Framework of Accountability is already piloting a few measures that would give students an idea of whether they will finish their program and how long it will take, and that accounts for both full-time and part-time students.
The second question, what will it cost, requires a bit more information. Though the way the government, colleges, and individuals currently fund higher education is complicated, that does not mean the information has to be. Families do not need an education in the difference between “tuition and fees” and “net price.” They need information about cost that is relevant to their lives. We propose three pieces of information. First, students need to know the out-of-pocket cost of attending a particular institution—what the average student pays, net of all grant aid. Next, they need to know the likely cumulative debt they will incur for a given educational program because students increasingly need to take on significant debt to pay for college. The third piece of cost information is related to debt as well. Students need to know the monthly payment they can expect to pay off that debt over a 10-year period. These pieces of information comprise the essentials of cost: What will be my responsibility to pay for this education, how much debt am I likely to incur for that, and what does that debt really mean for my future?
The final question a student should ask is whether the costs associated with a degree or credential are worth it. There are many ways to judge the value of a degree—personal satisfaction, a change in social status, the four-year vacation of a residential party college.
Disclosing the risks related to enrollment is a very basic and very necessary way to stop students from wasting time and money on bad decisions. But beyond simply helping students make the choice of whether or not to enroll at a particular institution, the federal government should be encouraging students to make better choices among the educational options available to them. And the first step toward this is ensuring the information they receive about college options is comparable.
Right now, colleges format much of the information they provide to students in any way they please. This means financial aid letters vary so much in the way they present aid that it is very difficult to lay them side by side and understand which package provides more aid. It also means that on some measures like job placement, there is no standard formula, leaving students unable to compare across institutions—or unaware that the job placement rates on which they rely are not comparable.
Fortunately, there are some easy ways to standardize information for comparability. For example, we propose a financial aid comparison table to be included in aid letters. The table would give students and families an easy way to look across the financial aid offers made by institutions and gauge which provide the most grants or scholarships, loans, or other options for payment.
Each of the ways of looking at how the federal government can help students make better decisions—creating buyer beware notices, encouraging comparison shopping, and increasing college consciousness—represents a step in making sure students rely on information in their college choice, not just reputation or chance. These programs have the added benefit of encouraging colleges to compete for students based upon real factors like student outcomes and affordability rather than U.S. News rankings.
Julie Margetta Morgan is a Policy Analyst with the Postsecondary Education Program.