Earlier this month the White House launched a new web tool, the College Scorecard, designed to make it easy for prospective students to find financial information about colleges. The tools reports institution level information on net cost, graduation rates and student loan debt default – elements needed to make a wise choice about investing in a college degree. Unfortunately data on earnings and employment rates of graduates are missing from the reports, but a placeholder for this information suggests a desire to develop this functionality. It might seem that this is a pretty innocuous innovation, but some are already objecting to the notion that information on financial returns should be used as a basis for college enrollment decisions.
In a recent letter to the editor of the New York Times the President of Harvard University, Drew Gilpin Faust, argued that policy makers should not be emphasizing the financial returns of college education. She explains that salaries of graduates serve as a poor measure of institution quality because many, like her, voluntarily take low paying positions in public service after graduation. The President of Trinity Washington University, Patricia McGuire, echoed these sentiments in her Huffington Post Blog post. Making a tongue-in-cheek criticism of the College Scorecard, she points out that it is missing the “checkbox for the fact that I am immensely satisfied with my career choices, life's work and personal fulfillment.” I can’t argue with the notion that financial metrics fail to capture the full value of a degree, but I do believe that these arguments against the College Scorecard are off the mark.
Faust and McGuire present narratives in which post-graduation employment and financial security are taken as given. Unfortunately that is not the reality for most students who can’t afford the luxury of ignoring financial considerations. It is important that policy makers emphasize tracking graduate outcomes both for the benefit of individuals seeking to ensure good personal outcomes and for the health of the higher education system as a whole.
The availability of information regarding the employment and financial outcomes of graduates has clear benefits at the individual level. With information on the experiences of others that have earned a particular degree, prospective students can form realistic expectations about their own futures. This makes them able to effectively consider the tradeoff between costs of attendance and heightened future earnings. This is not to say that the optimal strategy is to select the institution that promises the greatest financial return, but rather to avoid purchasing a degree that has proven to be a poor investment for previous graduates. A degree that leaves a graduate unemployed and without the ability to repay debts is a bad investment, regardless of the intangible return that it provides.
In addition to the individual benefits, availability of information addresses systemic problems. Rising cost is one of the most often cited policy issue in higher education. As costs increase, higher education becomes accessible to a decreasing population. However, cost is only a problem insofar as it is out of line with value. As long as a degree proves valuable in the long run, the up-front cost shouldn’t be a concern. However, not all degrees are worth (financially and otherwise) as much as students pay for them. Introducing information in the marketplace for higher education will bring prices in line with value. Having an understanding of the outcomes they are likely face after graduation will decrease the likelihood that students overpay (or underpay) for a degree. Emphasizing college going without encouraging informed decision making leaves the market at risk for a crisis like the one seen in housing (investment encouraged by government rhetoric and tax incentives led prices to diverge from long-run value). That is certainly an outcome we should work to avoid.
In the same vein, information on graduate outcomes serves to drive failing institutions out of the market. In the existing policy environment the government has the responsibility to police institutions in order to protect students from making bad investments. The Department of Education uses access to federal financial aid programs as a policy lever. Institutions whose graduates are consistently unable to repay student loans debts are restricted from accessing aid dollars for their students. This is not bad policy, but allowing informed consumers to police the market themselves is a better alternative. The government should not be in the dicey business of picking winners and losers unless it is necessary.
One might be skeptical that simple tools like the College Scorecard can succeed in achieving these lofty objectives. However, there is reason to believe that small changes in the availability of information regarding college can bring about significant changes in behavior. A study published last year in The Quarterly Journal of Economics showed that presenting information regarding federal student aid eligibility to households increased college attendance and persistence relative to students in the control group. Another recent study shows that a minimal amount of college counseling had a large impact on the types of institutions that a set of low-income, high achieving students applied to attend. These findings suggests that the perceived (or actual) barriers to information regarding college are high and that lowering the barrier by providing tools like the College Scorecard can have sizable effects.
As government officials consider how to move forward in this transparency initiative, they might draw guidance from the small number of states that have already created data systems capable of linking employment outcomes with post-secondary institutions. While several states are working on creating data sets capable of this analysis, a few states, including Florida and Virginia, have already made this resource available to the public. These tools are superior to the existing College Score card because they provide earnings and employment information, but also because outcomes are broken down by major (field of study) within institution. Federal policy makers should develop the College Scorecard to have these capabilities as well.
It would be great to live in a world where all students have the luxury of seeking personal fulfillment over financial considerations, but that isn’t our reality. Transparency in student outcomes is good for all consumers of higher education. The College Scorecard isn’t the silver bullet for all problems, but it is certainly a step in the right direction.