Higher education has long been recognized as a critical driver of economic mobility and workforce skill development. However, alongside the benefits of postsecondary education, there has been a growing concern over the individual and societal costs of financing higher education. One of the primary issues is the opacity of these costs for prospective students. Students often make one of the largest financial decisions of their lives with incomplete information about the total costs they might incur while pursuing a credential. This lack of transparency is largely due to the complex strategies colleges use to award financial aid, which is tailored to each student’s unique situation. While this customized approach aims to allocate scarce financial aid dollars effectively and address students’ financial constraints, it makes it nearly impossible for students to understand the total cost of a credential at any given institution until after they have been accepted.
To address these challenges, several approaches can be implemented to produce better information about the costs and returns to college and to disseminate that information more effectively to students and the intermediaries who advise them:
1. **Improve Data Sharing Across Federal Agencies**: Establishing a federal student unit record system would enable the calculation of net price and earnings for all students, not just those receiving federal aid. This system would also facilitate the calculation of value-added measures for institutions by accounting for students’ pre-entry characteristics. This enhanced data sharing would provide a more comprehensive view of the costs and outcomes associated with higher education.
2. **Ensure Sufficient Staff Capacity**: The Department of Education (ED) needs additional capacity to analyze data on student outcomes. Even before recent reductions in force, ED had insufficient capacity to fully utilize available data. To leverage the data described above, additional hiring in key data-analytic units, such as the National Center for Education Statistics (NCES) and the Office of the Chief Economist, is recommended. This increased capacity would support more robust accountability and policymaking efforts.
3. **Better Account for Variation in Degree Costs**: Existing net price calculators and cost estimates often make assumptions that may not hold true for all students. For example, college reporting on average tuition rarely accounts for differential tuition charged for certain majors. Federal data collections should include items to flag whether institutions charge differential tuition and work to communicate this information to students via platforms like the College Scorecard and other student-facing websites. This would provide students with a more accurate understanding of the costs associated with their chosen major.
4. **Account for Time-to-Degree**: Many students take significantly longer than the advertised time to complete a credential. For instance, the six-year graduation rate for the cohort of students starting a bachelor’s degree in 2016 was about 65%, but the four-year graduation rate was only 49%. The College Scorecard also gives students an inflated sense of graduation rates by reporting the eight-year graduation rate. Taking longer to complete a credential increases the total cost. Students should have a clear understanding of how long a credential will take to accurately estimate the total cost of college. This information should be prominently featured in all student-facing materials.
5. **Focus on Institutional Accountability**: The financial aid system is notoriously complex, and new college students often have little direct experience with loans. In an environment where extensive financial aid and loans are being offered for consistently poor-performing programs, consumer-facing interventions will only go so far. Restricting borrowing for institutions or programs that do not pay off is necessary, alongside financial education, to protect borrowers and taxpayers alike. This approach ensures that federal student loans are not being used to support programs that do not provide a return on investment.
While improving cost and value transparency for students and families is crucial, it is also important to recognize that information alone is often not enough. Deciding what post-secondary education to pursue and how to finance it remains a complex and challenging task, especially for first-generation students. Many students rely on a range of intermediaries to guide them on their journey to and through college. These intermediaries include high school counselors, university financial aid administrators, and researchers developing and testing different outreach strategies. Any efforts to enhance cost and value transparency should also consider those who advise students and how best to equip these advisors to support students to and through college.
Transparency efforts may ultimately benefit students through these intermediaries. High school counselors can guide students to their next step, university financial aid administrators can discuss loan tradeoffs, and researchers can develop and test different outreach strategies to students. By equipping these advisors with better information and tools, students will be better positioned to make informed decisions about their educational and financial futures. This holistic approach ensures that transparency efforts are not only focused on students but also on the ecosystem that supports them, ultimately leading to better outcomes for all stakeholders involved.
