Oct. 12 (Bloomberg) -- U.S. President Barack Obama says federal college-aid programs should be expanded, and in return the schools need to be held accountable for their costs and results. Republican candidate Mitt Romney thinks students should shop around for the best deal and get help from their parents.
Their plans may differ, yet they are similar in one way: They expose the glaring gap of reliable information about the colleges’ success rates. Parents can’t shop around and schools can’t be held accountable if there is no data available. So high school juniors from well-off families make their decisions based on how friendly people were during their tours of pretty campuses, while poor kids gamble that a college degree is worth the risk of going into debt.
A bipartisan initiative in the U.S. Senate, pushed by Democrat Ron Wyden of Oregon and Republican Marco Rubio of Florida, might help address this lack of information.
For universities to be efficient or produce better outcomes, we have to collect and disseminate data on both the costs of obtaining a degree and the payoffs. Although they are in the knowledge business, colleges are often ignorant of the “value added” their students might gain from critical thinking and leadership skills. They are also reticent to tell the public what they already know: for example, data on the costs versus the benefits of remedial education, on how many papers students write, and on what the average annual income is of graduates from their school.
The public craves information on colleges, as shown by the popularity of magazine college rankings. Although we learn about the earnings of some professional-school graduates, in general we don’t know much about the success of undergraduates. Why can’t the colleges themselves provide, in a uniform fashion, more information to potential customers, donors and taxpayers?
Enter Senators Wyden and Rubio. If Wyden, who is relatively liberal, and Rubio, who is conservative, agree that more is better than less when it comes to providing consumers and policy makers with facts about education costs, remedial instruction and postgraduate average annual earnings (the three areas the bill targets), then there is no reason colleges should resist.
Some educators will object that a focus on average future earnings is a misleading measure. Universities provide what economists call a signaling or screening function. The bachelor’s degree certification is supposed to give employers some reasonable assurance that the student is fairly bright, a pretty persistent and disciplined worker, and one who is quite knowledgeable about the world. Thus, college graduates earn more on average than those with high school diplomas. This isn’t necessarily because of what they learned in school -- the “human capital” they acquired. They may have inherently productive character traits or other advantages unrelated to their education.
But what if the earnings of graduates from College A average far more than those of College B? Going further than the Wyden-Rubio measure, I suggest that schools receiving federal aid should be required, with the mandated cooperation of the Internal Revenue Service, to provide average earnings on graduates one, 10 and 20 years after graduation. The schools give the IRS the requisite Social Security numbers, and the IRS churns out the descriptive statistics such as the average earnings and those at the 25th and 75th percentiles of the earnings distribution. That would allow prospective students to do more cost-benefit analysis on the merits of different schools.
Yes, earnings vary vastly by field of study. Philip Coelho and Tung Liu of Ball State University, using data compiled by PayScale.com, suggest in a new study that average annual earnings of aerospace-engineering graduates at midcareer is $109,000, compared with $42,400 for those who majored in elementary education. A helpful form of consumer information would be to provide average earnings by several broad areas of study, such as science, technology, mathematics and engineering, as well as humanities, business, communications and social science.
There are other forms of information not included in the Wyden-Rubio proposal that would be useful. Perhaps colleges should be required to administer and report results from the National Survey of Student Engagement, giving information on the number of hours a week students study, the number of lengthy papers they write, how engaged they feel about their academic work, and so on. Do students participate seriously in the academic programs on campus?
The Wyden-Rubio bill, which was unveiled last month, is far from perfect, but the concept behind it is sound. My prediction is that the higher-education establishment will fight its adoption. Maybe an elite private college such as Amherst wouldn’t care if its graduates knew they earned less than the alumni of Williams, but schools such as the University of Texas may not welcome unfavorable comparisons with archrival Texas A&M.
Just as performance evaluations from Consumers Reports, J.D. Power & Associates or Underwriters Laboratories LLC can help consumers choose products, so similar information can lead to better choices in higher education.
(Richard Vedder is director of the Center for College Affordability and Productivity and teaches economics at Ohio University. The opinions expressed are his own. Read his article on federal college loans here.)
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