Following the Fourth of July weekend, the "back to school" advertising campaigns will kick in and high school graduates around the country will begin stocking up on dorm room necessities for their first year of college. Going off to college is a big deal—a really big financial deal. It is typically the second largest lifetime investment for many (other than purchasing a home). Families must often rely on some form of aid in grants or loans to finance this education. This investment is typically made with the knowledge that a degree will help an individual obtain employment at a salary level that will make the benefits of this investment far exceed the costs (see: “The Big Payoff” from the Census Bureau). There is no guarantee but the statistics do provide strong evidence that it is well worth it to invest in higher education.
However, some are seeking a more regulated approach to higher education investment. In the last decade, the U.S. government has transformed its general approach to education with a focus on accountability. Starting with the No Child Left Behind Act of 2001 steps began to measure outcomes and making funding partially dependent on meeting measurable goals. These reforms have pushed standardized testing to the forefront of gauging how well students are doing at the primary and secondary school level. There are signs that the government is now seeking to implement a series of accountability reforms at the higher education level with a focus on indicators of graduation, employment, and income as the key outcomes.
For example, new rules are being considered that would impact the availability of public funding for students attending for-profit colleges and universities. Proponents of these new rules argue that the regulations would help ensure that students receiving federal aid are getting an education that leads to "gainful employment." The new rules would require for-profit colleges seeking federal student aid to show that their students are getting jobs after graduation with salaries that allow them to pay back their loans with 8% or less of their starting income. Opponents of these new rules point out that the 8% threshold is unstudied and arbitrary and that these steps would single out only for-profit campuses who are often enrolling students who are unable to enroll in non-profit colleges or who are seeking career and vocational training that is not provided on these other campuses (accreditation is not an issue as only accredited institutions—regionally or nationally—are eligible to receive federal aid).
There would presumably be multiple inputs for any new accountability equation. One is the level of tuition and the other might be the average earnings of graduates (retention and graduation rates would also likely be key indicators). A college would be able to charge higher tuition if graduates were obtaining higher income employment. However, if students are earning below-average incomes as they enter the job market, tuition levels would need to be adjusted down to meet the formula’s standard if the college or university wished to continue offering students the opportunity to obtain federal aid.
For example, if the average student left a college with $28,000 in loans ($7,000 per year) and these were to be repaid at 7% interest over 10 years, the monthly payments would be about $325. This would require graduates of this college to earn at least $49,000 a year initially to presumably meet the 8% income standard. If interest rates on the loan were higher or the students tended to earn lower incomes, the loan amounts would need to be reduced—presumably by lowering the college tuition—to maintain eligibility for federal assistance. If enacted, the proposed rules would only impact for-profit colleges and universities now and it is not yet entirely clear how they would be operationalized. Yet in the future the government may seek to impose some form of accountability on all colleges and universities that accept federal student aid.
If these rules were applied to higher education in general, rather than for-profits only, it would likely lead to dramatic changes. There is significant variation in the job market for graduates by the type of degree they earn. Some degree programs may come under pressure as they are less likely to produce graduates earning high salaries that could meet an 8% income threshold. Graduates in colleges focusing more on high paying fields such as engineering and the sciences would likely have no trouble at even the highest tuition levels. However, colleges primarily offering degrees in areas such as social work, education, theology, philosophy, and religious studies might find it challenging to charge higher tuition as these degrees have among the lowest entry-level salaries.
How would four-year Catholic colleges do if retention and graduation rates, as well as loan usage and loan amounts were heavily scrutinized (note that these factors are also commonly used by publications who “rate” colleges)? Below we use the most recent publicly available data from the Department of Education to study this question. The analysis uses the following criteria to select out institutions that would meet even the most highly rigorous
- Retention rates of at least 75% for full-time, first-time students pursuing bachelor's degrees (data are for students who began their studies in fall 2007 and returned in fall 2008).
- Graduation rates of at least 66% for full-time, first-time students within 150% of "normal time" to completion for their program (data are for students who began their studies in fall 2002).
- Use of loans of any type (public or private) by 50% or fewer students (data are for full-time, first-time degree-seeking students, 2007-2008).
OR
- Average total amount of loans of any type (public or private) are less than $7,000 annually (data are for full-time, first-time degree-seeking students, 2007-2008).
Of all Catholic colleges and universities with data available for review, about three dozen meet the thresholds outlined above (note: colleges without accreditation are not required to report these data to the Department of Education and some campuses report that no data is available for one or more of the criteria. Additionally, seminaries and nursing schools were not analyzed). Seven of these institutions meet all four criteria and have retention rates of 75% or higher, graduation rates of 66% or higher, 50% or fewer students using loans of any type, and average total loan amounts of less than $7,000. These seven Catholic colleges and universities are listed in the table below along with the estimated median starting salaries for graduates of these institutions. These colleges are listed in order of their graduation rates.
Of the seven schools above, Georgetown University and Boston College are on U.S. News and World Report’s Best Value National Universities list. Creighton University and Gonzaga University are on this publication’s list for Best Value Master’s Universities Midwest and West.
Overall, 35 institutions meet the general criteria and are organized by Census regions below:
Northeast
Boston College, College of the Holy Cross, Villanova University, Fordham University, University of Scranton, Stonehill College, Duquesne University, Siena College, Manhattan College, DeSales University, Le Moyne College, Misericordia University, Saint Vincent College, Marywood University, Saint Bonaventure University
Midwest
University of Notre Dame, John Carroll University, College of Saint Benedict, University of St. Thomas, Creighton University, Xavier University, Saint Norbert College, Franciscan University of Steubenville, Dominican University, Saint Mary's College
South
Georgetown University, Loyola University Maryland
West
Santa Clara University, Gonzaga University, Thomas Aquinas College, Loyola Marymount University, Seattle University, University of Portland, University of San Diego, University of San Francisco
It is unlikely that the arbitrary "gainful employment"/8% threshold rule would ever be applied to colleges generally and is not even likely to be applied to for-profit colleges. As one can see from the analysis above it would limit the ability for many college programs to continue offering their fullest enrollments.
It is also unclear how the rule would deal with economic changes. What would happen if unemployment rises and incomes stagnate? Must colleges respond by cutting tuition? How would the rule deal with the unemployed graduate or the graduate who enrolls in graduate school? What is the logic of 8%?
Such rules might also be especially challenging for some college programs designed to prepare students for Catholic ministry. These are not high income careers and these formation programs could struggle to cover their costs if tuition needed to be tied to income potentials.
At the same time the costs of college education are rising faster than inflation and the federal government will likely soon look to budget cuts to reduce the deficit. If the government sees education as an area for potential cuts the "gainful employment" rule or something like it may gain traction.
