Report: Taxpayers Send Billions in Student Aid to Sub-Par Institutions

By Allie Bidwell, Communications Staff

It's a fraction of the total funding the federal government doles out in federal student aid, but still billions of dollars are being allocated to institutions with extremely poor student outcomes, according to a memo from Third Way, a centrist think tank based in Washington, D.C.

The memo, written by Michael Itzkowitz, states that of the nearly $130 billion in federal student aid the Department of Education gave to institutions last year, about $3.2 billion – or $8.7 million per day – went to 106 institutions that graduated fewer than 10 percent of their first-time, full-time students. While that data doesn’t take into account students enrolled part-time and those who transfer into or out of those institutions, their inclusion likely wouldn’t change the outcome in a meaningful way, the memo said.

Of the more than $3 billion allocated to these schools, $57 million went to campus-based aid, nearly $1.5 billion went to grants, and about $1.6 billion went to federal student loans.

The memo also provides a closer look at specific outcomes – such as earnings after graduation and institutional loan repayment rates – that tend to be reasons many students attend college in the first place.

Typically, college graduates can expect to earn more than the average high school graduate (about $25,000). But Third Way found that last year, the federal government sent $11 million to 12 institutions where the vast majority of students (9 in 10) earned less than a high school graduate six years after enrolling. Another $1.5 billion went to 331 institutions where fewer than 1 in 4 students met that measure.

Third Way also examined the loan repayment rates of institutions receiving federal student aid dollars. When students take out loans, “it’s because they believe that school will provide them with an opportunity to better their lives financially,” the memo said. But last year, the government allocated $164 million to 32 institutions where not even 1 in 10 students were able to begin repaying their loans within three years of leaving school. Another $15.3 billion went to 457 other institutions where fewer than 1 in 4 students met that benchmark.

Across the three categories, the federal government sent nearly $20 billion to institutions where the vast majority of students either do not graduate or are struggling financially.

“With billions on the line, not to mention students’ futures, it’s imperative that taxpayer-funded financial aid goes to institutions that actually serve students well,” the memo said. “Just as college students who don’t maintain a certain grade point average risk losing access to scholarship funds, colleges must also be held accountable for how well they perform and educate students, especially when they are receiving huge checks from the federal government to cover their costs.”


Publication Date: 4/20/2017

Tony L | 4/20/2017 3:44:05 PM

Looks like another opportunity for a new if the financial aid industry isn't regulated enough.

James P | 4/20/2017 8:25:46 AM

This is surprising? The majority of the institutions in this report are public institutions whose stated mission is to provide access to all, whether they are likely to be academically successful or not. Add to that, federal policy which forces schools' to allow students loan up, what do you expect?

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