Are Students Willing to Pay More for College if They're Guaranteed a Job?

By Joelle Fredman, NASFAA Staff Reporter

As the cost of college continues to rise, students and families increasingly expect to see a solid return on their investment—namely whether they will be able to secure a well-paying job in their field and pay off student loan debt after they graduate. 

Today, more than half of adults in America say that job and career outcomes were their primary motivation for seeking a higher education—and colleges and universities are responding to that driving behavior in a number of ways, such as by offering job guarantees, or programs that promise to help students repay their debt if they don’t find employment soon after graduating. While these initiatives address concerns many students and families have, some question whether they are willing to pay more for that security.

Beth Akers, a senior fellow at the Manhattan Institute, conducted a series of focus groups comprised of current students, recent graduates, and those with no degree to hear their thoughts on paying for these programs with increased tuition or taxes, which she detailed in a report last week. Akers told NASFAA that while students may not actually be charged extra tuition in some cases, the cost of such programs will indirectly fall on them. For example, Akers explained, funds that could have been used to offer more scholarships may instead be funneled into a guarantee program. 

“When a college, or a financial institution, accepts the risk that was formerly held by an individual student, it imposes a cost,” Akers wrote. “In a marketplace for education, such as the one we have in this country, the cost will be passed on, at least in part, to the student. So the future of money-back guarantees depends on whether students value the alleviation of risk enough to be willing to pay the additional expense.” 

Akers wrote that one tactic schools are using is promising students they will be employed after graduation in their field of study if they fulfill certain requirements. If they fail to find a job, the program offers them benefits such as free continued enrollment or career counseling.    

For example, to participate in Thomas College’s “Guaranteed Job Program,” students must maintain a 3.0 GPA, complete an internship, perform community service, and meet regularly with its career services department, among other requirements. If students meet all the criteria and are still unemployed six months after graduation, they can enroll in more courses for free, or the college will make monthly payments on their federal student loans for up to a year. If students secure jobs that are not in their field of study, they can also enroll in more courses for free.

Thomas College, however, has a job placement rate of 94%, and, according to Bob Moore, senior vice president of advancement, the school has only had to help five students with their loans since the program was created in 1999. This is true even though 90% of the college’s roughly 1,000 student population enter into the program. Moore said the entire Guaranteed Job Program is funded by the college’s operating budget.

Despite this, Moore said the program is a big draw for prospective students, adding that “it was an enhancement to help drive enrollment, and it worked.”   

“Now more than ever, students and parents are looking for what their return on investment is,” Moore said. “This is just another package we can offer to provide some assurance that they can find a job in a field they prepared for.” 

Akers reported that some focus group participants said this type of program would “provide relief to some of the anxiety that pursuing a higher education can create,” while some current students were confident they could find jobs without help, and some recent students were skeptical of what this tradeoff could cost them in increased tuition. In the example Akers proposed to participants, students would be required to pay 150% of tuition for a job guarantee program.  

Schools are also responding to higher education risks by making on-time graduation guarantees, in which they promise to help students complete their degrees in four years. If they fail to do so, schools such as Washington and Jefferson College (W&J) offer another year of classes free of tuition. 

W&J’s “On-Time Graduation Guarantee” requires that students meet 13 requirements—which they dubbed “academic expectations”—including things such as working closely with an academic advisor and maintaining a 2.0 GPA. However, similar to Thomas College, few students have needed to take advantage of free tuition, according to Steven M. Malinak, a chemistry professor and the associate dean for academic affairs at W&J.

“The guarantee, and the criteria for eligibility, are publicly available on the college’s website. Very few would need to invoke it, and of the small handful who have, they did not meet the criteria to be eligible,” Malinak wrote in the email. “Basically, if they have done everything right and the college somehow makes it impossible for them to graduate on time, we then offer whatever they need at no charge. But frankly, that has never happened.”

Malinak wrote in the email that this program comes at no cost to students. 

Another tactic that a growing number of schools are using is offering students income-share agreements (ISAs), which Akers called “a promising new model.” While the practice of taking a portion of students’ future income in exchange for immediate assistance began at training schools, according to Akers, it has been growing in popularity at more traditional colleges and universities.  

One such school is Purdue University and its “Back a Boiler - ISA Fund” program. On its website, the university writes that there are “more than 850 contracts with students enrolled in Back A Boiler - ISA Fund who have received funding totaling over $10 million,” which includes students pursuing more than 120 different majors.

Inspired by Purdue, the University of Utah began offering students its own form of ISAs this past fall. Their program—Invest in U—offers ISAs to students in certain majors who are within one year of graduating. Students may receive up to $10,000 to “fill funding gaps after grants and scholarships,” and once they find jobs, are expected to repay 2.85% of their monthly income for three to 10.5 years, depending on how much they received and their major. Students can pause their payments if they are pursuing another degree, performing volunteer work, or making less than $20,000 in a full-time job. 

Courtney McBeth, special assistant to the president and project director of the program, said that the school decided to offer ISAs to students after discovering that “[University of] Utah students are highly debt-adverse,” and are not willing to take out a high amount of loans, if any. This could result in them stopping out because they can’t afford to continue their education, McBeth explained.   

Invest in U is funded by the university with money from investors and donations, and student payments will support the program in the future—which Brenda Burke, the executive director of the university's office of scholarships and financial aid, said is a big appeal.

“Students see it more as a giving back tool versus paying [the university],” Burke said. 

Akers, however, found that ISAs saw “little outright support from our participants and largely produced mixed feelings,” adding that “many participants felt they would appreciate paying less if they were lower earners but would be upset if they had to pay more than others as high earners.” 

Across the board, focus group participants gave mixed reactions about whether these “guarantees” were worth paying more in tuition. While some felt it would reduce the anxiety associated with higher education, others said the added cost would invite more stress. Akers also recieved mixed reactions to the prospect of increased taxes covering the cost—some supported the idea, while others felt it was unfair to ask nonstudents to help fund such programs.

“Experience will show if guarantees play an important role in the future of U.S. higher education,” Akers wrote. “But with tuition prices continuing to rise year after year and the fact that many perceive that college degrees will be necessary to enable participation in the future economy, it’s very likely that we’ll see dramatic, systemic changes in the way we think about higher-education finance.”

 

Publication Date: 7/15/2019


David S | 7/15/2019 10:23:27 AM

Wow, what a slippery slope. Colleges have no control over the job market, and adjusting their business models and revenue streams to accommodate employment outcomes of alumni runs the risk of some changes being made to how programs are offered and how students are funded.

And this is why ISA's are a slippery slope too. We can chat all day as to why engineers are paid more than elementary school teachers and whether or not they should be, but the dollar sign bottom line right now is that they are. So what are ISA's - which face it, are designed at least in part to generate some return on investment - going to be focused on? The budding kindergarten teacher or social worker who will need to wait tables as a 2nd job to make ends meet, or a soon-to-be engineer who is likely to have a $70K job waiting for him (and they're usually "him," maybe one of the reasons engineers get paid more that the "her" that's going to teach elementary school, but I digress) by graduation.

Now, I have nothing against engineers, but I don't want to drive across a bridge designed by a civil engineer who really wanted to study English lit, but their school eliminated it because they could have an easier time guaranteeing a post-graduation job to an engineer...and that job generated lots more ISA ROI than English lit.

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