Going to college generally pays off. But not all colleges are the same, and not all students end up at places where they’re likely to fare well.
Dropping out or overborrowing—or both—are widely recognized problems. To try to prevent them, the federal government has unveiled a bunch of new tools to give prospective students more information. College Navigator offers a trove of searchable data. The College Scorecard features comparative performance measures. The Shopping Sheet is a standardized financial-aid award format.
In August, President Obama announced plans to develop a college-ratings system. Yes, more consumer information. But it could go further, if Congress, as the administration hopes, ties the ratings to financial aid.
The plan has proved unpopular with college leaders, who seem more comfortable with information itself, sans value judgment. As one president wrote in The New York Times, “The administration should make many types of data easily available and let people rate schools for themselves.”
Several existing tools, the ratings plan, and the do-it-yourself counterproposal all boil down to disclosure. But is more consumer information enough to steer students toward better choices?
It’s tempting for the government and colleges to think so. Requiring disclosure is among the cheaper policy options, and higher education, like any industry, would probably prefer it to other kinds of regulation. It’s much less taxing to tell consumers about shortcomings than it is to fix them.
Providing information is one of three traditional approaches—along with incentives and education—to change behavior, says Katie Martin, managing director of ideas42, a nonprofit group “using behavioral economics to do good.” But those approaches don’t necessarily work.
Giving people more information, for instance, won’t always change what they do. That’s because despite hard facts, people’s decisions can work against their own interests, Ms. Martin says. Present bias leads people to choose short-term satisfaction over long-term goals. Inattention means they can focus on only so many things at once, especially if they’re short on time or money.
Besides, consumers know less than experts might think. College presidents and most of the people they talk with use higher-ed jargon. They get what net prices, cohort-default rates, and six-year graduation rates mean. Prospective students may not. Yet those terms appear all the time in material geared toward them.
“We unconsciously use a lot of inside-baseball terminology,” says Ben Castleman, an assistant professor of education and public policy at the University of Virginia. One of the recently announced updates to the federal government’s financial-aid Shopping Sheet is a glossary.
In other industries, when disclosure has worked, it was often because it altered the actions not of consumers, but of the industry itself.
That’s what happened when the European Union started requiring labels for the sale of home appliances, specifying their energy efficiency. Even before the information shifted demand, manufacturers began offering more-efficient products, according to a forthcoming paper in Annual Review of Economics, by George Loewenstein, Cass R. Sunstein, and Russell Golman. Maybe the companies overestimated consumer response—or maybe they were embarrassed selling poorly rated appliances.
In higher education, disclosure requirements like net-price calculators, which colleges must now post on their websites, and tuition watch lists, which call out colleges with high prices or big increases, haven’t resulted in major shifts in industry behavior. A ratings system might, but not necessarily in the desired direction.
College presidents’ criticism of the plan centers on its potential to create perverse incentives. Let’s say colleges are embarrassed by their graduation rates and want to improve them. They might provide better support to students to help them through. Or they might decide not to take a chance on those who aren’t clearly cut out for college success.
What Matters Is Guidance
Swaying consumers is another matter. That’s because “the problem is not really lack of information,” says Mr. Loewenstein, a professor of economics and psychology at Carnegie Mellon University. “The problem is that people don’t know how to use it.”
A recent study by the Art & Science Group, a higher-education consulting firm, suggests as much. The study, commissioned by the College Board, compared SAT takers in the bottom half of the family-income distribution with those in the top half. Both groups of students had similar college aspirations, but based on historical patterns, those in the bottom half end up enrolling at considerably lower rates.
Both groups reported similar access to information—from colleges, for instance, and from search sites. In fact, the less-well-off students said they relied on that information more heavily than their higher-income peers said they did. The difference, the researchers concluded, was students’ ability to process and make use of the information.
So what would help all students make good college choices? Behavioral-economics research says information has the greatest shot at changing behavior when it is simple, standardized, salient, and available at key moments.
Even if it meets those criteria, however, information doesn’t always have the intended effect, says Lindsay C. Page, a research assistant professor of education at the University of Pittsburgh.
For example, two pieces of information the government wants prospective students to consider are net price and graduation rate. The price figure, a dollar amount that would have to be paid in short order, probably resonates, Ms. Page says. Graduation rate, maybe not. Graduation, after all, is years away, and people are optimistic: Confronted with long odds, they expect to beat them. So looking at both data points, a prospective student might consider the price and disregard the graduation rate. That’s probably not what the government is going for.
Improving the design and delivery of information could help, but only so much. After all, some high-school students are in constant touch with adults who understand the college process, can help interpret information, and will advocate for them. Others may not know anyone like that.
“If the administration really wanted to have an impact on getting people to make better college choices,” Mr. Loewenstein says, “they would put resources into guidance.”
That could take a number of forms: How to choose a college woven into the high-school curriculum. A federal plan to reverse the shortage of guidance counselors. Scaled-up models of the College Advising Corps or College Possible, two groups that train recent college graduates to guide high schoolers through the admissions process.
None of those ideas are as easy or as cheap as giving prospective students another website or piece of paper. But they might do a lot more to close the real gap between more- and less-advantaged students: not in information, but in help using it.
