Graduation rates and student debt are two of the hottest topics in higher education, and both connect to the question of whether colleges provide a good value to their students. But completion and borrowing are often discussed separately, says Kevin Carey, and "only by looking at the two things in tandem do you get a complete picture of value." So Education Sector, the independent think tank where Mr. Carey works, decided to create a measure that attempts to do just that.
In a report released on Wednesday, Mr. Carey, Education Sector's policy director (who also contributes to a Chronicle blog), and Erin Dillon, a senior policy analyst at the organization, looked at what they call the "borrowing-to-credential ratio."
The report, "Debt to Degree: A New Way of Measuring College Success," uses this new measure as a way of comparing the value of different sectors of higher education and of individual colleges.
The authors calculate a borrowing-to-credential ratio by considering the amount of money borrowed in federal student-loan programs by undergraduates and their parents at a college, and dividing that by the number of credentials that the college awarded in a particular year. The debt figure and degree count are both pulled from U.S. Department of Education data, for which 2008-9 is the most recent year available.
The debt figure includes both Stafford Loans taken out by undergraduates and Parent PLUS Loans used by their parents, but excludes Perkins Loans and loans borrowed by graduate students, Ms. Dillon says. Loans borrowed by undergraduates in any class year are included, and the report's authors use those totals to estimate what graduating students have borrowed throughout college. And while other studies have typically looked at the level of student debt at graduation only for students who borrow, the new measure estimates the average debt for all undergraduates, whether they borrowed or not. In a similar fashion, the measure accounts for loans students borrow as underclassmen even if they fail to graduate.
The report says that for each degree produced in 2008-9, students and their parents borrowed an average of $18,102 through the federal programs. That average has been rising, the authors found: It was $13,334 in 2006-7 and $14,560 in 2007-8.
Variations Across Sectors
For its analysis of sectors and individual colleges, the report uses borrowing and credential data from the last three available years, to smooth out any one-year fluctuations.
Unsurprisingly, the report found significant variation in borrowing-to-credential ratios across sectors of higher education. The average ratio for public four-year colleges was $16,247, compared with $21,827 at private four-year institutions and $43,383 at for-profit colleges.
The report also delves into differences among individual companies in the for-profit sector, and among top private research institutions. In the for-profit sector, two companies had borrowing-to-credential ratios of more than $100,000: Bridgepoint Education and Grand Canyon University.
Those high ratios are at least partly the result of a recent enrollment boom, the report notes—an issue that has affected the whole sector, and those two companies in particular. "In their case, there may be a lag between initial borrowing and subsequent graduation that artificially inflates their borrowing-to-credential ratio," the report says. But, still, "there may also be problems with graduation."
At the other end of the for-profit spectrum, American Public Education has a much lower borrowing-to-credential ratio: $9,728. The authors believe this is the result of the lower tuition at this company's institutions, American Public University and American Military University, and of the universities' large enrollment of current and former members of the armed services, who receive tuition assistance from the government.
The authors also found large differences in borrowing-to-credential ratios when they looked at the group of 33 private colleges classified by the Carnegie Foundation as top research universities. In that group, Princeton University had the lowest ratio: $2,385. Princeton is a wealthy university with a wealthy student body, and it is also one of 19 universities in this group to offer "no loan" financial aid. The average ratio for those 19 "no loan" universities was $9,688.
New York University, in contrast, had a borrowing-to-credential ratio of $25,886. The university has a respectable graduation rate, the authors point out, but it doesn't have the same level of endowment as some of the other research-heavy universities, and it is not part of the no-loan group.
The report also looks at the connection between state support for higher education and the borrowing-to-credential ratio at each state institution, finding that the two are closely correlated.