A piece in The Chronicle of Higher Education recently asked, “Is college worth the price of admission?” A previous post here, Investment in Higher Education, made the case that there are many Catholic colleges where the answer is without any doubt "yes."
The federal government has proposed new rules regarding “gainful employment” accountability for access to public financial aid at for-profit colleges that may put the Chronicle’s question to an even more rigorous test for that sector. If approved, a for-profit college would need at least 45% of their former students to be paying off the principal on their student loans or their graduates must have a student debt-to-earnings ratio of less than 20% of discretionary income or 8% of total income for the campus to be eligible to continue offering federal student financing.
The federal government has proposed new rules regarding “gainful employment” accountability for access to public financial aid at for-profit colleges that may put the Chronicle’s question to an even more rigorous test for that sector. If approved, a for-profit college would need at least 45% of their former students to be paying off the principal on their student loans or their graduates must have a student debt-to-earnings ratio of less than 20% of discretionary income or 8% of total income for the campus to be eligible to continue offering federal student financing.
This proposal would essentially convert higher education at for-profit institutions into a commodity by linking benefits (accessibility to aid) to how their degrees are valued in the job marketplace (employment and income of graduates). As noted in the previous post, if applied to colleges more broadly (including non-profits... which is currently unlikely) it would potentially affect institutions and programs that primarily focus on areas such as elementary education, religion, theology, and social work where average incomes for graduates are well below those who study engineering, computer science, chemistry, mathematics, or biomedical science. Where access to aid is linked to future income, tuition would likewise need to be linked to the employment and potential wealth a graduate could earn. Some degree programs would likely get priced out of the market.
Therein is the potential oversight of these new policy proposals. Clearly not all college students view their education as a commodity. It ignores the possibility that some may choose to invest in obtaining a degree for benefits that are not primarily related to their future income. Some are not just in it for the money. Few go into education, religion, theology, or ministry to “get rich” and are willing to earn little on the investment to be in the occupation/vocation of their choice (or to attend a specific college of their choice). No college program should price itself at a level that prevents a responsible student from repaying the loans needed to enroll and attend. At the same time it is possible that the debt to earnings ratios in the new rule may not be consistent with what a student might be willing and able to borrow and repay to get a degree to enter the field of their choice.
The previous Nineteen Sixty-four post used data from the Department of Education to estimate which Catholic colleges and universities might be least likely to be affected by any application of the “gainful employment” rule to colleges more broadly. Another recently released analysis for U.S. colleges and universities by PayScale can provide additional context to this discussion.
PayScale bases its analysis on national surveys of full-time employees and includes only those who earn bachelor’s degrees (excluding those who went on to graduate or professional schools). Their recent report calculates estimates for the return on investment (ROI) of graduating from a specific college. This ROI is the estimated future additional income one receives from investing in higher education (paying for college and forgoing some income while being enrolled) that they would not have received if they had only a high school degree (see PayScale's complete methodology). The table below isolates the top Catholic colleges and universities in this study (newer colleges without income trends or small numbers of graduates were not included) where the estimated 30 year accumulated return on investment exceeds $600,000.
Yet, a cost factor (as far as I can tell) that is not fully accounted for in the PayScale study is the very one that the federal government’s rules and the previous Investment in Higher Education post highlighted: the necessity and costs of repaying a loan. The interest paid on a student loan could partially eat away at the estimated ROI for many graduates. However, for the colleges listed above the ROIs are so large that the investment is still a very sure bet. Yet it is important to note that the actual ROI for any specific student will differ by the necessity of having to use a loan or their ability to pay costs out of pocket. The colleges noted with an asterisk in the table met all four retention, graduation, and loan criteria outlined in Investment in Higher Education post and their ROI would be least likely to be affected by interest on loan repayments.
Of course any good educational analyst also must point out that the “real” return on investment in higher education is the knowledge gained rather than the future income earned. But it is also the case without such knowledge gained that income would unlikely be earned either—these go hand in hand. The only regrettable aspect of this equation is that there are some sets of knowledge that are significantly more valued than others in the job marketplace. One could argue that this is just market forces at work and that if more choose to study engineering, for example, that wages for those entering this occupation would not be as high as they are now (as there would be a surplus of available skilled labor). Yet there are other sectors like elementary education where wages are comparatively low for a college graduate and some are really challenged to repay their college loans in these fields. How many colleges would want to offer large high quality programs for education degrees and certificates if they would potentially be penalized (threatened with the loss of access to federal financial aid) because their graduates could not earn incomes in the marketplace that meet the arbitrary income standards applied in the rule? Within Catholic institutions there might be a similar scenario with theology and ministry formation programs. Could these programs cover their costs at a tuition level that is consistent with borrowing needs and future ministry incomes of graduates?
No one needs to do the math yet as the newly proposed rules, if enacted, would only apply to for-profit programs. However, if the government looks to cut federal college aid to perhaps reduce the deficit, a broader application of the “gainful employment” rule may capture the attention of public officials and voters who are concerned about the costs of higher education.
