Report: Millions in Taxpayer Dollars Flow to 'Worst of the Worst' Institutions

By Allie Arcese, Sr. Director of Strategic Communications & Engagement

By Allie Bidwell, NASFAA Senior Reporter

While many institutions of higher education are serving their students well by helping them complete their programs, earn a living wage, and make headway in repaying their student loans, a significant amount of taxpayer money still flows to institutions that are falling far short, according to a new report published by Third Way, a center-left think tank in Washington, D.C.

The report—written by Michael Itzkowitz, a senior fellow for higher education at Third Way—analyzed data from more than 5,100 institutions of higher education reported to multiple sources, including the College Scorecard, the office of Federal Student Aid (FSA), the Integrated Postsecondary Education Data System (IPEDS), and the Performance by Accreditor Data File. The report analyzed college completion rates, post-enrollment earnings, and loan repayment rates eight years after entering a program.

"While single measures of success offer a glimpse into how well institutions are doing in one area, examining multiple measures provides a more complete picture of how well they are serving their students," the report said. By also showing the results for how many institutions are succeeding in all three measures, it gives "a rough sense of whether an entering student is more likely than not to succeed" in those areas.

And while past research has been limited to first-time, full-time students who receive financial aid, the new Outcome Measures survey from the Department of Education (ED) allowed the report to also include data from part-time and transfer-in students. The analysis removed transfer-out students, because federal data is unable to determine how many students completed a credential after transferring out of an institution. The report presented data from four-year, two-year, and certificate-granting institutions, and also broke down the data by sector.

Overall, the results were mixed. Among four-year institutions, the median completion rate was 77%, the median percentage of graduates earning above the average high school graduate was 64%, and the median loan repayment rate was 68%.

At more than half of those institutions (53%) 3 in 4 students graduate, but at 33 schools, fewer than one-quarter of students complete their programs. Broken down by sector, 87% of both public and private nonprofit four-year institutions graduate at least half of their students, but just 40% of for-profit institutions graduate more than half of their students eight years after entering.

Earnings outcomes at four-year institutions also varied. While most four-year institutions (83%) had at least half of their students earning more than the average high school graduate (above $28,000 annually), 14 institutions receiving federal funds showed less than one-quarter of their students earning above that threshold. Broken down by sector, the majority of public and private nonprofit four-year institutions (87% and 82% respectively) showed the majority of their graduates earning above that threshold, but just 40% of for-profit institutions met that same benchmark.

Similarly, on loan repayment most four-year institutions (85%) showed that the majority of their graduates were making progress toward paying down their student loan debt, but 237 institutions showed that most of their students were unable to do so. The same trend as other benchmarks followed when broken down by sector. More than 85% of public and private nonprofit four-year institutions showed most graduates were able to make progress paying down debt, just 41% of for-profit institutions showed the same result.

The analysis also looked at how many institutions hit the 50% mark across all three outcomes. More than one-third of public institutions (35%), the majority of private nonprofit institutions (71%), and 13 percent of for-profit institutions showed the majority of their students succeeding across all three measures.

"While some institutions show worrisome outcomes across multiple metrics, our higher education system still has more high performers than troublesome actors," the report said.

A total of 195 institutions showed that more than three-quarters of their students were succeeding in all three measures, while just four performed below 25% on all three outcome measures.

"And while this high performance should be celebrated, it is unfortunately predominantly available to a wealthier student population," the report cautioned. "No institutions that performed at this high level on all three metrics enrolled more than 50% Pell Grant recipients, and about 8 in 10 enrolled less than 25% Pell students."

The report also noted that while the number of institutions falling short on all three outcomes measures is smaller than the number of high-performing institutions, "too many" poorly performing institutions still receive federal funds.

"These results can be devastating for the students who attend these institutions, wasting their time and money with little to show in return. These schools also cost taxpayers millions of dollars every single year," the report said.

Itzkowitz found that $21 million in federal student aid flowed to institutions that performed below 25% on all three metrics, what he described as "the worst of the worst institutions." He added that just in the last year, $250 million went to 82 institutions where only 25% of students earned above the average high school graduate and were able to pay down their loans.

"While many institutions serve students well, too many still struggle to graduate the majority of their students. And with the cost of higher education growing, leaving without a degree makes it even more difficult to obtain a decent paying job and pay down educational debt over time," Itzkowitz wrote. "As Congress works towards reauthorizing the Higher Education Act, it is critical that federal policymakers put guardrails in place that will better target taxpayer subsidies toward institutions that are shown to increase opportunities for those who attend. If not, it is likely that performance at US institutions will stay stagnant, as too many schools will keep cashing taxpayer checks while failing to deliver on the promise of preparing the workers of tomorrow."


Publication Date: 4/10/2019

Jeff A | 4/10/2019 11:35:33 AM

To complete the summary:
At 2 year institutions, 71% of for profit institutions graduate the majority of their students, public colleges 15% and non profit colleges 63%.
In the multiple measures analysis, the data is not disaggregated by 2 year and 4 year institutions. That really should be done to provide meaningful comparisons between institutions serving students with similar socio-economic backgrounds.
If we get to where this data is disaggregated by program, then we will really have actionable data, for both policymakers and consumers! That is when the dial will move to improve higher ed for the consumers that have the most at stake when making a higher education decisions.

Rebecca P | 4/10/2019 10:47:38 AM

I don't see any information about Two Year Community Colleges in this report. The only institutions it talks about are Public/Private four year and Not For Profits. It would be interesting to know where the Two Year Community Colleges fall in this report.

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