New Report: How to Hold Colleges Accountable for Providing Value

Tying accreditation to student loan repayment rates could improve college quality and reduce cost

NEW YORK, NY — College has become a risky endeavor in the U.S., with fewer than six in 10 students finishing their degrees and fewer than 40% of student loans ever fully repaid. Colleges themselves, however, have little to lose, as their access to federal funds continues regardless of their former students’ financial success. In a new Manhattan Institute issue brief, senior fellow Beth Akers proposes a system in which colleges are held accountable for not only inputs like curriculum quality, but outputs like student loan repayment. This would incentivize colleges to invest more heavily in post-graduate outcomes as well as bring their tuition costs in line with their value.

The current system for college oversight, accreditation, is based on measuring “inputs” rather than “outputs.” Only those that consistently deliver the truly worst outcomes are ever held accountable by losing access to federal student aid funding. Akers argues that this bar is set far too low. Instead, a “risk sharing” system would put colleges on the hook financially when students face bad economic outcomes, such as an inability to repay their loans. Ultimately, a comprehensive, outcome-based accountability system could replace our current accreditation system, ensuring that only schools that create value for their students are able to thrive.

Akers makes three recommendations:

1. Use risk sharing to ensure that colleges compensate taxpayers for their students’ use of the government’s loan safety nets.
2. Use a measure of the student loan repayment rate, rather than accreditation, to determine whether colleges are eligible for federal aid.
3. Use targeted grants and scholarships to ensure that disadvantaged students can enroll in colleges that might otherwise be wary of these students’ ability to repay their loans.

Click here to read the full report.