Report: American Higher Education Falling Short on Key Outcomes

By Allie Bidwell, Communications Staff

It's becoming increasingly important for Americans to earn a postsecondary education to remain competitive in the changing economy, but many higher education institutions are falling short when it comes to helping students graduate, increase their earnings potential, and repay their loans, according to a new report from Third Way.

The Washington-based think tank examined data from thousands of four-year, two-year, and certificate-granting institutions to evaluate their college completion rates, the post-enrollment earnings of their students (compared with those with no education beyond high school), and how much progress students make toward repaying their loans three years after attending. The report also compares institutions across different sectors, including public, private nonprofit, and for-profit schools.

The author, Michael Itzkowitz, makes the case that it's worth investigating whether public investment in higher education – in the form of federal financial aid – is helping American workers stay competitive at a time when other countries are outpacing the U.S. in terms of postsecondary attainment, and many of the fastest-growing professions will require education beyond high school.

"With so much at stake, it's critical that we understand the outcomes that federally-funded institutions produce," the report said. "Some institutions graduate most of their students, increase earnings potential, and enable them to adequately repay their student loans. However, there are also many others that do not."

Overall, among four-year institutions, the report found:

  • About 45 percent of four-year institutions graduate less than half of their first-time, full-time students.

  • At 85 percent of four-year institutions, at least half of federal aid recipients were able to earn more than the typical high school graduate six years after enrollment, but in 222 four-year colleges, the majority of their students earned less.

  • At about one-quarter of four-year institutions, more than half of their students are unable to pay down at least $1 of their loan principal after three years.

Among two-year institutions, the report found:

  • Only 15 percent of two-year institutions graduate more than half of their first-time, full-time students.

  • More than half (59 percent) of two-year institutions see most of their former students who took out loans earning less than the average high school graduate six years after attending.

  • Fewer than one-quarter of two-year institutions (21 percent) see the majority of their students beginning to pay down their loans within three years.

The report noted, however, that two-year institutions serve a very different type of student than four-year institutions, and that the outcomes should be viewed in a way that reflects that difference. For example, two-year institutions are less likely to enroll first-time, full-time students.

"Most two-year institutions graduate less than half of their first-time, full-time students," the report said. "Some argue that this figure should not be used to evaluate institutional effectiveness, as it fails to represent a majority of a two-year college's student body who are not first-time, full-time, and fails to capture transfer students who move on to four-year schools, which should be viewed as a measure of success. However, as previously mentioned, even though today's first-time, full-time graduation metric only covers a certain portion of an institution's student body, the inclusion of part-time students would likely lower this figure at most institutions, as only a fraction of those students graduate in comparison to first-time, full-time. And while the inclusion of transfer student outcomes may raise the graduation rate at some high-performing institutions, those increases are likely to be inconsequential across all two-year institutions."

Among certificate-granting institutions, the report found:

  • More than three-quarters of certificate-granting institutions graduate more than half of their students, but 10 percent fail to graduate even one-quarter of their students.

  • Slightly more than one-quarter (27 percent) of institutions see the majority of their graduates earning more than high school graduates six years later.

  • More than three-quarters of institutions (77 percent) see the majority of their students unable to begin paying down their principal loan balances within three years.

  • Overall, no certificate-granting institutions performed above 75 percent on all three measures.

"Each institution of higher education has its own unique mission. They each serve different types of students, aim to prepare their students for diverse post-collegiate experiences, and have varying time and effort requirements for graduation," the report said. "However, even with these key differences, we still see some trends that persist within and across different types of institutions."

Overall, private nonprofit institutions were the most likely to graduate a majority of their students, increase their earnings, and see them repaying their loans. Fifty-three percent of private nonprofit institutions reached majorities on all three measures, compared with 19 percent of public institutions, and 5 percent of for-profit institutions.

Itzkowitz also pointed to a "troubling" trend among some public institutions, with more than one-third (35 percent) failing to reach a 50 percent success rate on all three measures, compared with 8 percent of private nonprofit institutions, and 13 percent of for-profit institutions. Still, he wrote that there are more institutions with very strong outcomes than those with very poor outcomes.

"This look at the State of American Higher Education Outcomes demonstrates that there is more work to be done," the report said. "We will not be able to compete globally or provide increased economic opportunities for most Americans unless we improve the quality of our higher education system."


Publication Date: 7/25/2017

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