To Improve Colleges' Performance, Start With the Worst Ones, Report Urges

June 18, 2014

While the White House proceeds with a proposed system to rate all colleges, in part to change the behavior of underperforming institutions, a new report from Education Trust suggests cutting to the chase: focus only on the worst ones.

In the report, released on Wednesday, the public-policy group calls for exercising "tough love" on institutions in the bottom 5 percent on three measures: the percentage of students eligible for Pell Grants who enroll, the overall graduation rate, and the student-loan repayment rate. Colleges identified as underperforming would receive "targeted assistance" and several years to improve their performance. If they failed to do so, the report’s authors suggest, they would lose access to federal dollars.

Every year the federal government writes "essentially a $180-billion check to institutions of higher education" in the form of federal student aid and tax benefits, said Mary Nguyen Barry, a co-author of the report, in an interview. "But virtually no form of outcome has been requested in return for those dollars. We’ve seen a lot of requests for inputs, but not in terms of outcomes." In this regard, Ms. Barry contrasted higher education to elementary and secondary education, where federal oversight is more widespread and penetrating.

Michael Dannenberg, another co-author and a former U.S. Education Department official and counsel to Sen. Edward M. Kennedy, said that he supports President Obama’s rating system "in concept," but added that it seems clear "that the administration would rate every individual college, and figuring out how to do that accurately and fairly is very hard."

A much easier task, he said, would be to identify and address institutions "at the extremes of quality, the best and worst." The Education Trust’s report is aimed at dealing with the latter, which "contribute disproportionately to our problems with college success," he said.

‘Engines of Inequality’

Two standards defined in the report, titled "Tough Love: Bottom-Line Quality Standards for Colleges," are among those widely used by analysts of higher education’s shortcomings. The report singles out "Dropout Factories," or four-year colleges that graduate 15 percent or fewer of their freshmen in six years as of 2011, the benchmark year of federal data used. Among the institutions in that category, 56 percent were for-profit institutions, 32 percent private nonprofit, and 11 percent public.

The report also focuses on "Diploma Mills," or four-year colleges whose students have trouble repaying their student loans. Mr. Dannenberg and Ms. Barry argue that institution-level student-loan repayment data would be the best for determining which colleges graduate the most students who can’t make ends meet with their degrees, but that information is not currently collected by the federal government. Using existing federal three-year cohort-default rate data for 2010, the authors define the bottom 5 percent as colleges from which 28 percent of graduates default on their loans within three years. Among those institutions, 66 percent were for-profit, 30 percent were private nonprofit, and 4 percent public.

But "Tough Love" also takes to task "Engines of Inequality," or the 5 percent of institutions—many of them wealthy—that enroll fewer than 17 percent Pell-eligible students. Only 2 percent of the colleges in this group were for-profit while 83 percent were private nonprofit and 15 percent were public. The latter category includes several state flagships, including the Universities of Colorado at Boulder, Maryland at College Park, and Virginia, as well as Auburn and Pennsylvania State Universities.

‘Grace Periods’

The report suggests that institutions in the bottom 5 percent be given "grace periods" of three or four years to pull themselves out. (Institutions showing progress on their graduation rates could have up to six years.) If an institution failed to crack the top 95 percent at the end of its grace period, it would lose access to federal money, depending on the standard it had failed to meet.

Colleges that failed to raise Pell-eligible enrollment above the fifth percentile would lose federal charitable tax deductions, for both the institutions and their foundations, and federal campus-based aid. Colleges that failed to raise their graduation rates or student-loan repayment rates would lose the deductions and grants as well as access to Pell Grants and Stafford and PLUS loans.

California has already set minimum standards for colleges to receive government aid, Mr. Dannenberg noted. To be eligible for the state’s Cal Grants, institutions must maintain a six-year graduation rate of 30 percent and keep their three-year cohort-default rate below 15.5 percent.

Mr. Dannenberg acknowledged that he’s concerned that readers might focus more on the "tough" and less on the "love." The report states that "the goal should be to spur institutions to improve, not to shrink or close them." He added that ideally aid would be provided to institutions trying to meet the standards to help them team up "with nonprofit enterprises with a proven track record of effectiveness with improving student outcomes," as well as to form public-private partnerships.

But when it comes to providing taxpayer dollars to colleges that continue to rate near the bottom on certain performance measures, he said, "at some point we have to ask ourselves, how low is too low?"