The Obama Administration recently turned its focus to non-profit higher education releasing plans to create government rankings for colleges that would eventually be linked to the availability of federal financial aid. As The Washington Post reports, "Obama aims to use executive authority to begin rating colleges by the fall of 2015 on criteria such as average tuition, scholarships and loan debt; the share of students receiving need-based Pell grants; graduation and transfer rates; graduate earnings; and the number of graduates who obtain advanced degrees." The aim of the plan is to make more information available to parents and students and to create pressures that might make college more affordable. For-profit colleges have already faced a similar treatment (...oddly enough triggering the recent sale of The Washington Post).
How might this affect the 226 Catholic colleges and universities in the United States listed in The Official Catholic Directory? It would certainly shake up the traditional rankings one sees in the U.S. News & World Report (...methodology. Note that new rankings were released on Sept. 10). According to the most recent set of rankings the top 10 national Catholic colleges and universities are:
2. Georgetown University [#21]
3. Boston College [#31]
4. Fordham University [#58]
5. Marquette University [#83]
6. Saint Louis University [#92]
6. University of San Diego [#92]
8. Loyola University (IL) [#106]
8. University of San Francisco [#106]
10. University of St. Thomas (MN) [#113]
The traditional rankings also include a separate listing for national liberal arts colleges. Here the top 10 Catholic institutions are:
2. St. John's University (MN) [#75]
3. Thomas Aquinas College (CA) [#82]
4. Saint Mary's College (IN) [#87]
5. Saint Michael's College (VT) [#90]
6. College of St. Benedict (MN) [#96]
7. Stonehill College (MA) [#100]
8. Sienna College (NY) [#112]
9. Saint Anselm College (NH) [#130]
10. St. Norbert College (WI) [#138]
One of the factors common to the traditional rankings and those proposed by President Obama is the use of graduation rates. For both parents and the government alike there is certainly an interest in students finishing their program and earning a degree. The Catholic top 10 for graduation rates includes some of the campuses ranking highly in the traditional ranks:
2. Georgetown University [93%]
2. College of the Holy Cross [93%]
4. Boston College [92%]
5. Villanova University [88%]
6. Providence College [87%]
7. Santa Clara University [86%]
8. Loyola University (MD) [84%]
9. University of Scranton [83%]
10. St. Michael's College (VT) [82%]
Moving on to "graduate earnings" the ranks begin to shift. One of the available measures here, from PayScale, is the 30 year return on investment (ROI) representing "net return on investment after the opportunity cost (High School Graduate Earnings) and cost of investment (tuition, room, board, books, etc.) have been taken into account" (...methodology). These data are far from perfect (more on this below) but they represent a glimpse at what the government rankings may find. These of course are important because they measure the ability to pay for the financing of college during one's career and also the degree to which the college provides "gainful employment." Here is the top 10 for Catholic colleges and universities:
2. University of Notre Dame [$1,250,000]
3. Manhattan College [$1,216,000]
4. Villanova University [$1,019,000]
5. Iona College (NY) [$958,700]
6. Saint Martin's University (WA) [$907,100]
7. Saint Mary's College of California [$904,300]
8. Christian Brothers University (TN) [$883,300]
9. Georgetown University [$881,100]
10. St. John's University (MN) [$860,800]
Before any student graduates or earns money from their degree, they must first pay for or finance their college education. Here the average net annual price of college is useful (...methodology). This measure "moves beyond an institution’s 'sticker price' and provides students and families with an idea of how much a first-time, full-time undergraduate student who was awarded aid pays to attend a particular institution after grant or scholarship aid is subtracted from the published cost of attendance." The top 10 here (i.e., with the lowest price) does not include almost every college as yet named above—the one exception being Christian Brothers University (...this list excludes specialty colleges focusing on one particular type of 4-year degree, such as nursing):
2. Calumet College of Saint Joseph (IN) [$10,617]
3. Our Lady of the Lake College (LA) [$11,392]
4. Our Lady of the Lake University (TX) [$12,580]
5. Mount Mary College (WI) [$13,586]
6. Christian Brothers University (TN) [$13,748]
7. Villa Maria College (NY) [$13,901]
8. Madonna University (MI) [$14,034]
9. Marygrove College (MI) [$14,059]
10. University of Mary (ND) [$14,077]
The Obama Administration also plans to include a measure in the rankings that indicates how many students receive Pell grants in an effort to find "best value" colleges and universities. These grants are government needs-based assistance. Below we show the top 10 ranked Catholic colleges and universities on The Washington Monthly's "Best Bang for the Buck" list (factoring in Pell grants, graduation rates, loan default rates, and net price) in terms of percentage of students receiving these grants. These are high-quality low-cost schools that enroll many students in need. Once again this list has no resemblance to the traditional rankings:
1. Georgian Court University (NJ) [55%]
3. St. Catherine University (MN) [54%]
4. Ursuline College (OH) [53%]
5. Marian University (WI) [50%]
6. Mount Marty College (SD) [49%]
7. Walsh University (OH) [46%]
8. Gannon University (PA) [45%]
9. La Roche College (PA) [44%]
10. Marian University (IN) [43%]
Perhaps the biggest problem with the proposed ranking is the inclusion of "graduate earnings." Where will these data come from? There are survey-based measures (e.g., PayScale) but these can lead to inferences about colleges and universities based on very small sample sizes. It is not easy to find a significant number of graduates from small colleges and universities in a random sample national survey. There is simply no existing infrastructure that could provide an income census that would allow for reliable and valid estimates for graduate income by college. Perhaps the reform could require individuals to name colleges attended on their IRS tax forms. Without something like this, there is no existing methods that will provide reliable and valid data for every college in the country.
Yet even if we did start putting our colleges on our tax forms how do we disentangle these data for students who attend multiple colleges and earn multiple degrees? I may attend a junior college and then transfer into a small four-year liberal arts college and then go onto medical school. As a surgeon I will likely earn a very high income. My undergraduate education played some role in this (it helped me get into graduate school) but would it be fair to link my mid-career salary back in full to the junior college and liberal arts campus?
No matter what shape the formula takes, any major policy change could have a number of unintended consequences. For example, The Affordable Act will undoubtedly provide more people access to health insurance but the employer mandate may also make it more difficult to get a full-time job (i.e., 30 hours or more) and some employers appear to be dropping coverage for spouses.
If the proposed college rankings are linked to federal financial aid, colleges may look to boost their position by cutting tuition costs by freezing hires of new professors and using more part-time adjuncts and graduate students to teach classes. To improve prospects for graduate earnings and employment they may drop degree programs and majors that "under-perform" in the job market. Colleges may forgo offerings in social work, humanities, and liberal arts for more engineering, computing, mathematics, and health programs (...the top school in the country for 30-year ROI is Harvey Mudd College which focuses on engineering, science, and math. Graduates from this campus receive an average $2.1 million 30-year ROI). Many may say that's just what America needs! But there will always be a need for liberal arts—even for engineers.
If a college is faced with losing access to aid why would they ever accept students who could "jeopardize" their scores? Students (and their parents) might be required by colleges to undergo background and credit checks before being accepted as a means to predict their likelihood of default on any loans. They may become even less likely to enroll potential students who do not have the best test scores and grades as these individuals may be deemed less likely to get a high paying job after graduation. The reform may make colleges for the "privileged" and "elite" even more fitting of this stereotype. It has the potential to put a hard brake on the socioeconomic mobility college has traditionally provided students (...one positive unintended consequence might be an increase in resources for career services and post-graduate job placement on campuses in an effort to maximize graduate earnings).
Catholic colleges and universities are also private institutions operating without state subsidies. This creates a built-in disadvantage when it comes to tuition cost. Students attending public institutions pay lower tuition, on average, as the taxpayers of the state they are in often help underwrite the operations of those colleges and universities (these benefits are usually focused on students with in-state residency). It is unclear if the new system would take this institutional difference into account and factor in costs to taxpayers as well as parents and students.
The proposal also may end up limiting choice. Under the current system, the federal government invests in students not institutions with grants and loans leaving it up to the individual to select the accredited college of their choice. The proposed reform would presumably limit aid for colleges that do not rank highly and thus steer students to federally preferred institutions (...if the policies mirror the reforms used in for-profit higher education minimum performance benchmarks may be set. Campuses who fail to meet these benchmarks would either have their access to aid reduced or cut off). The national perspective of the rankings would ignore the reality that many students choose a college within a local region and save significant money by living with their parents or other family. Thus a college that may not be deemed by the government as "affordable" in the abstract may actually be the most affordable to that student geographically speaking. If aid is limited on this campus they may be forced to look elsewhere and pay significant room and board costs.
The proposed ranking system also over-emphasizes monetary factors. It would deny the reality that some people do not make career and education decisions based on simple dollar costs and benefits. For example, many Catholics choosing to go into ministry are not chasing engineer-like incomes. Yet it may cost them significant sums to obtain degrees and certifications to work in this field. They may be willing to make a greater sacrifice to earn these for their love of a vocation—even if the government tells them that this is a "bad value" (note the starting annual salaries for undergraduate religious studies/theology degrees average $41,000 with mid-career earnings rising to $48,000).
The rankings may also be a big problem for many of the newer small Catholic colleges that have emerged in recent decades. Some of these campuses market themselves as "traditional" or "orthodox"—a place where parents can feel "safer" sending their children and having them graduate with even more faith than they entered with. I am unaware of any academic or other professional study that has systematically measured the success of these claims. However, there is some existing data for how well some of these campuses may rank under the proposed system and the news there could be problematic. As with any new campus there are growing pains in establishing an identity and credentials (e.g., obtaining accreditation, developing a reputation with employers). These colleges also have small numbers of alumni making it difficult to make inferences about career success and salaries of graduates. Some of these schools could struggle under the proposed ranking system.
When the government says it is introducing legislation to make something more "affordable" this doesn't necessarily mean it will cost less. I am not sure the proposed college rankings and reforms would, as intended, make college any cheaper. Yet, with or without government intervention, a market correction to college costs is likely on the horizon. Similar to the dynamics of the housing crisis there is a real limit to what Americans can pay for college—their income. College costs can only consume so much of income before the bubble bursts. For example, from the 1970s to the early 2000s housing prices hovered around 300% of income in the United States. During the housing bubble, with exotic mortgages available (e.g., interest only, ARMs), housing prices approached 500% of incomes. There is only so much house a family can afford if incomes are not growing with prices (...and housing will not really recover until incomes grow, which will require significant reductions in unemployment. The current housing "recovery" may be a new bubble fueled by institutional investors targeting real estate). The same economics works for tuition or tulips.
The figure below shows median incomes and average college costs (tuition, room, and board) in recent years. In 1981, median income was just under $20,000 per year and annual college costs were just under $3,500. Thus, college costs represented 18% of income. In 2011, college costs made up 44% of income, on average.
Perhaps the simplest affordability reform available would be to cap the amount of federal financial aid available with annual adjustments linked to student population and an inflation index (CPI) or a measure of income growth to contain the formation of bubbles. Let parents and students continue to choose their campus (and major) but send a signal to colleges and universities that those choices will be made in an environment without rapid growth in the amount of federal financing available.
Another sorely needed reform would be to allow judges to fully discharge student loan debt in bankruptcies where this is deemed necessary. Neither political party should claim that they are "working for" college students/graduates until such a change is made. Someone fighting cancer who loses their job should not have to possibly deal with government debt collectors—especially when the government is slated to make a healthy profit off the guaranteed student loan business (as a monopoly lender since 2010). College loans should be treated no differently than other types of consumer debt. In President Obama's remarks announcing the proposed reforms he noted that without change "the government will run out of money." If that happens it likely won't be because of college loans as these are adding to public coffers not draining them.
In isolation, more information is also a welcome development. The marketplace certainly needs more than the traditional college rankings. But rather than coming up with another arbitrary single mechanism that can rank all colleges, perhaps the government could simply make existing resources, that would likely provide the backbone of the new rankings, more accessible and user friendly? Give people the information to find the exact type of campus that fits them rather than trying to press the higher education system into one mold.
Market corrections can be jarring and very painful and the government can try to foster a softer landing. Hopefully these reforms will be thoroughly examined and damaging unintended consequences identified. Sometimes the side-effects of a treatment can be worse than the disease. A single score-based ranking of colleges pegged to availability of aid could be lethal to some campuses and the dreams of many young Americans. Catholic colleges would certainly have no immunity to these changes.
Image above courtesy of Sean MacEntee at Flickr Creative Commons.