College Affordability: The Untold Story

President Obama spent much of last week speaking about the need to improve access to and successful completion of a college education for more people.  He rightly asserts that this is key to America’s long-term viability and leadership on the world stage.  But, if you read the press coverage, it is a lot about the ‘access’ part of the story, and very little about the ‘successful completion’ part of the story.  What you read over an over again is about reducing the cost of tuition.  You hear less, or nothing at all, about improving graduation rates for those who DO begin a college education.  I believe that improving graduation rates is at least equally important as improving affordability, and within this, there is an untold story.

Let’s start with the part of the graduation story which HAS been covered.  Study after study shows that college graduates thrive more than those with less education:  Jobs, earnings power, career acceleration.  So, despite the growing college tuition affordability challenge, you are better off with a degree than not.  In order to lay the groundwork for the untold story, I need to turn to student loans.  This, too, has gotten a lot of coverage, mostly about huge, $100,000 loans being borne by someone working as a barista or worse.  This is, indeed, sad.  But what is the worst possible situation, and what does it say about what we should focus on?

Let’s use default rates on student loans as a proxy for the worst situation someone can face.  They’re obviously in serious financial crisis if they default on a loan.  I plowed through the data on student default rates, and looked at the relationship between loan default rates and:  Size of the Loan; Tuition Cost; and Graduation Rate.  If you’ve read the press coverage about college affordability, you would probably predict that default rates go up as the size of the loan goes up, and as the tuition cost increases.  You would be wrong.  The LOWEST default rates are with student who borrowed the most.  And, default rates are virtually the same across all tiers of tuition.  Magnitude of the loan and tuition cost do not predict loan default rates.

What IS related to default rates?  Graduation rates.  Students from schools with the highest graduation rates have the lowest default, and it gets worse and worse as graduation rates go down.  I won’t bore you with all the data, but it is compelling.  Those of us in the world of higher education should be obsessed with graduation rates, because graduating is the gateway to all good things, and graduating also best helps avoid being in a financial situation that leads to defaults on loans.  If we are really, really concerned about college affordability, our focus should be on —  here comes the untold story —  Students who take out modest loans, and then don’t graduate.  I wish someone would tell this story, and I wish the entire system of higher education got itself focused on improving on this untold, and sad, story.

So, you ask, what leads to high graduation rates?  This will be the focus of a future musing.

Stay tuned…

4 thoughts on “College Affordability: The Untold Story

  1. Tom

    Well, I believe someone DID just tell this story!! And, I intend to spread it around. Thanks for another fine piece, Chuck!

  2. Meghan

    Chuck, you site some interesting data. I’m wondering if you could share some of your data sources for those of us who want to dig a bit deeper. As always, you’ve given us a lot to think about!

    1. Chuck Maniscalco Post author

      The data comes from the US Education Department, and is collected for all students who are first time applicants for post-secondary education, and who apply for financial aid.


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