A massive fail on ROI calculations for community colleges

Last spring, I posted about the challenge of calculating a return on investment (ROI) for individual colleges. The problem is with obtaining accurate data on the earnings of the graduates of a given college or university. I described there the problem with a ROI website created by the firm PayScale, which relies on self-reported data from individuals. There are a number of issues with PayScale’s methodology, but the biggest is that there is just no way to know how representative the respondents to their surveys are of the totality of the graduates for any single institution. There is also no way to judge the accuracy of the data reported.

Now there is another report out that uses the PayScale data to calculate ROI measures for community colleges. Last week, a study issued jointly by theNexus Research and Policy Center and the American Institutes for Research (AIR) took on the challenge of calculating the returns to associate’s degrees not just for individuals, but also for taxpayers in the form of the government subsidy provided to community colleges. There are a number of methodological problems with this study, which examined 579 community colleges around the country, but key among them is the study’s reliance on the PayScale data as the outcome measure for the ROI calculations. AIR is also the author of the College Measures website which, as I described in last spring’s post, shares the same flaw in using the PayScale data for some of its analyses.

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The unintended consequences of linking earnings and college performance

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Artist’s rendering of the new Theatre School building at DePaul University (Photo courtesy of DePaul University)

In one of my posts on President Obama’s college costs proposals, I described how the president is proposing to link eligibility for federal financial aid to the earnings of the graduates of colleges and universities. The general idea is that only those colleges that produce graduates who earn reasonable salaries should benefit from federal financial aid.

Last week I attended the dedication of the new Theatre School building at DePaul University (shown above), where I am a trustee. The building, designed by renowned architect Cesar Pelli, is a beautiful and functional space. The dedication was a wonderful event that included short performances by students in the acting programs at the Theatre School.

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President Obama on college cost (Part 3): Pay for student performance

affordable_promoIn my last post on President Obama’s proposals to help control the growth in college costs, I described how the president hopes to influence institutional behavior. Another key part of his proposals is to try to influence student behavior through the federal financial aid system, known as Title IV aid.

In what is a very brief part of his proposal, but yet may turn out to be one of the most controversial, is this:

Demand Student Responsibility for Academic Performance: To ensure students are making progress toward their degrees, the President will also propose legislation strengthening academic progress requirements of student aid programs, such as requiring students to complete a certain percentage of their classes before receiving continued funding. These changes would encourage students to complete their studies on time, thereby reducing their debt, and will be designed to ensure that disadvantaged students have every opportunity to succeed.

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President Obama on college costs (Part 2): Pay for institutional performance

SCRANTON, PA - AUGUST 23: U.S. President Barack Obama (L speaks at an event as U.S. Vice President Joe Biden (R), looks on at Lackawanna College on August 23, 2013 in Scranton, Pennsylvania. Obama is on his second day of a bus tour of New York and Pennsylvania to discuss his plan to make college more affordable, tackle rising costs, and improve value for students and their families. (Photo by Jessica Kourkounis/Getty Images)
Photo by Jessica Kourkounis, Getty Images

One of my favorite phrases when teaching educational policy is “the devil is in the details” (I once wrote an article that used that phrase as the title – it’s chapter 2 of this report). Politicians and policymakers will often issue grand policy proposals that address issues from an altitude of 35,000 feet, and until the details of the new policy are fleshed out it is difficult to determine what the impact will be at ground level.

This is very much the case with President Obama’s announcement last week of a new set of proposals to address the issue of the rising price of college and how Americans pay for it. As I described in my post last week, the president articulated a series of proposals that are very broad in scope and for the most part will require Congressional action in order to implement them. Thus, it is difficult at this point to determine with any degree of certainty what impact the proposals will have on colleges, universities, and students, but I will do my best to analyze them from the information the White House has provided.

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More from President Obama on college costs (Part 1)

hero_college_affordability2This week President Obama outlined a new series of proposals to help Americans deal with the rising price of college. Addressing college costs has been a priority of the president’s from early on in his first term, but this is probably the most comprehensive set of proposals that have been released at one time. He described them on a two-day, two-state bus tour of college campuses.

There is a lot packaged in the president’s proposals, and in the next couple of blog posts I will provide analysis of some of the key pieces. The proposals fall under three main topics:

  • Provide incentives for both higher education institutions and students to link financial aid to performance;
  • Encourage innovation on the part of colleges and universities to come up with new pathways toward less expensive degrees and provide better information to students and parents; and
  • Make loan debt more manageable for those who borrowed to pay for college.

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Measuring the return on investment of attending college (Part 1)

Last month I described my testimony at a U.S. House of Representatives hearing on getting better information about college. One of the topics mentioned by a few of the House committee members was the issue of the return on the investment in college as measured by what students are earning today. There has been much interest in getting better data about what graduates of different colleges earn when they enter the labor markets, so that prospective students can get an idea of what the return on their investment in postsecondary education will be.

While measuring the return on investment (ROI) of attending different colleges sounds like a good idea, in reality it is a complex and challenging task. To calculate an ROI, one has to have accurate data on both the value of the investment as well as the value of the return, or the earnings that the investor receives from her investment. While we have lots of data on the cost of attending different colleges, including some data on net prices (as I described in my testimony), we have very little accurate, reliable, and comprehensive data on what the graduates of different colleges earn.

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Better information about college

shutterstock_119536138Earlier this week I testified at a hearing held by the Subcommittee on Higher Education and Workforce Training of the U.S. House of Representatives Committee on Education and the Workforce. The hearing, titled “Keeping College Within Reach: Enhancing Transparency for Students, Families, and Taxpayers,” examined what type of information about colleges is available to students interested in enrolling in postsecondary education, and what can be done to improve the quality of the information.

This is one of a series of hearings being held in both the House and the Senate in preparation for the reauthorization of the Higher Education Act of 1965 (HEA), the primary legislation that outlines the federal government’s role with respect to postsecondary education. The HEA was last reauthorized in 2008, and is due to be reauthorized again this year.

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Education in the news again. . . and again. . . and again. . .

 

When I co-taught a graduate seminar in The_New_York_Times_logoeducational policy, my colleague and I would often use examples from the news media. We would discuss with our students the frequency with which educational issues are discussed in the news, and why. Education is a topic that is often at the forefront of discussion among the general public as well as policymakers, and because of this, it merits attention from the media.

Even with all this focus I am still struck, however, by the high volume of stories about education you will find in the press. I often start my day at work by looking online at some key media for stories about education. This may include the websites of The New York Times, the Washington Post, The Chronicle of Higher Education, and Education Week. On rare occasions, I actually get to read the hard copy of these publications, and yesterday was one of those occasions. I was flying to Boston, so I grabbed The New York Times to take with me on the plane.

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