Should Congress Link Higher-Ed Funding To Graduation Rates?
It’s a familiar story: a young, courageous (usually white male) entrepreneur drops out of college to pursue his dreams, only to become rich and successful beyond all expectation. Its implication, which has found some purchase in the popular imagination, is that it doesn’t matter if a person doesn’t finish college—in fact, he may be better-off following his heart song. Call it the Steve Jobs myth.
A close look at federal higher-education policy suggests that Congress too seems to subscribe to this myth—investing hundreds of billions in taxpayer dollars to make sure all Americans can enter college and then acting as if it is irrelevant whether or not they finish it.
That is a huge problem, because completing a college degree, or failing to, is a major factor in determining whether a person will have an economically stable future. While it might have been possible a few decades ago to graduate from high school, enter the job market, and find a career that enabled one to earn a solid middle-class life, that path to success has been almost completely foreclosed by the changing nature of our 21st-century economy. Yet right now, a student who enrolls in higher education has about a fifty-fifty chance of graduating. Our society can no longer afford to overlook that fact—or act as if it is inevitable. Completion matters to students; it matters to taxpayers; and there is a lot that institutions and the government can do to address the nation’s dismal higher-education dropout rates. With stakes this high, we must stop being cowed by the naysayers on both the right and the left. It’s time to act.
Completion Matters to Students
The Center on Education and the Workforce at Georgetown University estimates that two thirds of the jobs in the American economy will require postsecondary education or training by next year. While wages have stagnated for those without a degree or credential, college-degree holders have weathered the economic changes of the last two decades and seen their pay increase. Those with a four-year degree make an average of about $1,200 a week, while those who never finished college take home about two thirds that amount, reports the U.S. Bureau of Labor Statistics. People with some college but no degree are twice as likely to live in poverty as their peers with bachelor’s degrees, and three times more likely to default on their student loans. By contrast, college graduates are 10 percentage points more likely to be participating in the labor force, and families headed by someone with a college degree are able to save 14 percent more than the families of those who never got to graduation. All in all, Georgetown researchers have projected that completing a college degree enables someone to earn about a million dollars more over a lifetime than someone with a high-school diploma. And it’s not just money: college graduates are also healthier and more civically engaged. Simply put: a college degree pays off.
Completion Matters to Taxpayers
With taxpayers funding $120 billion a year in loans and grants to provide every American a chance to enroll in higher education, the current dropout rates are also causing widespread harm. At Third Way, the center-left think tank where I work in Washington, D.C., we attempted to quantify this loss to taxpayers and society by means of a thought experiment. What would happen if college completion rates rose to the current high-school-graduation level—84 percent? Boosting completion for a single class of students would result in 1.3 million more college graduates, which would translate to:
• 107,400 more employees in the workforce
• 48,000 fewer people in poverty
• 28,000 fewer people living in households participating in Medicaid
• an increase in Social Security contributions of nearly $50 billion
• a lifetime increase of more than $90 billion in local, state, and federal tax revenue.
That’s enough to build more than 5,000 new elementary schools or nearly 23,000 miles of highway, all from just one year of better graduation rates.
If college completion is important, both for improving the lives of students and getting a return on taxpayers’ investment, why haven’t we prioritized improving these rates? The reason is that, in contrast to the way people view K–12 education, they tend to blame the individual student for dropping out of college. Picturing someone who enrolled in higher education but didn’t finish conjures up visions of a teenage party animal who didn’t take his or her studies seriously. Third Way recently conducted 10 focus groups with parents and students to find out who they think is at fault when a student doesn’t complete a degree. Participants uniformly pointed to the student. Yet we know that there are federally funded institutions of higher education that currently graduate less than 10 percent of the students who enter their doors (see Figure 2). And taxpayers gave $106 million last year to those schools alone. If an institution is failing to graduate 90 percent of its students, can the students be solely to blame? Surely that large a proportion of the school’s student body is not made up of lazy party animals who refused to study.
It’s true that some schools admit students who are contending with more challenges than others. Institutions that offer open access or serve higher proportions of historically underserved populations often struggle more to get their students to complete a degree program. However, study after study has shown that even institutions that serve similar student populations are getting wildly different outcomes, and some open-access schools are deriving great results while others are falling way short. That means the students aren’t the problem, and there’s no excuse for consistently failing to deliver. It is possible to do better.
The good news is that there are a variety of evidence-based interventions that are proven to raise graduation rates. One of them is the City University of New York’s Accelerated Study in Associate Programs, which provides low-income students with comprehensive support and an assigned counselor who sticks with a student throughout, all with the aim of helping students acquire an associate degree within three years. Another proven intervention involves giving small emergency-completion grants (averaging $900) to juniors and seniors in four-year programs who encounter an unexpected expense that could derail them. Through such mediations, some institutions have succeeded in graduating significantly higher proportions of their students. The CUNY program has doubled completion rates and provided taxpayers a $3 to $4 return on every dollar invested. The emergency-loan mechanism has helped Georgia State University boost its graduation rate to 54 percent from 32 percent over the last decade—and completely erase racial achievement gaps.
These schools didn’t improve their outcomes by changing the kinds of students they admit. They did it by placing priority on supporting the students they already enroll. And it worked.
Federal Policy Choices
Why don’t more institutions use these proven methods to increase their completion rates? The existing system gives them little to no incentive to do so. Despite the fact that institutional choices drive graduation rates, federal policy has focused almost entirely on access—allowing schools to cash checks when students walk through the door and never asking how many of those federally funded students complete their degrees. College completion matters to students and taxpayers, and it should matter in federal policy as well.
What can policymakers do? First, they can ensure that the accrediting agencies that function as the gatekeepers for federal funding are looking at student outcomes. If a school isn’t providing a real return on investment to students, and if most of its students are leaving without a degree, that school should not continue to be accredited. Second, in the reauthorization of the Higher Education Act, Congress can mandate that if a school fails to graduate a specified percentage of its students within eight years, it will lose eligibility for federal grant and loan dollars. And third, the government can invest in the schools that actually do want to improve their outcomes, by funding the expansion of evidence-based programs to increase completion rates—particularly for low-income students and students of color. Together, these three simple steps would send a powerful message to the higher-education system: make sure that more students get the degree they need to set them up for success in the future.
Some have raised concerns that emphasizing completion through federal policy will cause colleges to become diploma mills that hand out degrees even to those who don’t earn them. But the policy ideas outlined here are a light touch and do not get anywhere close to over-correcting. If paired with other outcomes-focused reforms that look at indexes like post-enrollment earnings and loan repayment, they can help create a multiple-criteria system that ensures students and taxpayers are getting the value they deserve from colleges and universities.
Design matters, and certainly any federal policy around completion should be approached thoughtfully and paired with bulwarks against unintended consequences. Senator Chris Murphy (D-CT), for example, has suggested that we put in place a federal bottom line on completion together with a “maintenance of effort” provision requiring schools to remain consistent in the number of low-income students they enroll—to ensure we support real improvement, not higher completion rates that arise from tighter admission standards. Others have suggested using disaggregated data to measure not just completion on average but for specific kinds of students. Still others advocate for graduated sanctions, to avoid the problem of politicians swooping in to “save” every failing school with exemptions and excuses. Clearly, there are policy pitfalls here, as initial performance-funding models in some states have shown, but there are myriad ways to counter the possible downsides and still take action that will make a real difference for students.
The truth is that apathy toward completion at the federal level has created this problem, by incentivizing access only and ignoring the outcomes of students once they enroll. Recalibrating will ensure that we aren’t pushing more and more students to start college, take out loans, and then leave without the degree in hand that will enable them to get a good job and repay those loans. That is the worst-case scenario, and we can no longer afford to let our higher-education system leave students worse-off than when they started.
This piece is part of the forum, “Should Congress Link Higher-Ed Funding To Graduation Rates?” For an alternate take, see “Performance-Based Funding Produces Mixed Results” by Robert Kelchen.