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Accreditation vs. Eligibility

Accreditation vs. Eligibility

June 17, 2011

Student loan defaults are rising, sparking real concern among policy makers and the higher education community. At the same time, there is confusion about the respective roles of accreditation and U.S. Department of Education's determinations of institutional eligibility for federal student aid programs. Moreover, the current law provides inadequate standards and tools to make and implement those eligibility decisions, especially as they relate to default rates.

The federal government plays a large role in providing student financial aid. But the default rates on student loans are unacceptably high, even as recently adjusted. The fiscal year 2008 national two-year cohort default rate averaged 7 percent, but the trial three-year cohort default rate is 22.4 percent for for-profit colleges, 9.7 percent for public colleges, and 6.7 percent for private nonprofit colleges, according to the Education Department.

While some loan defaults are the result of bad economic times, the situation requires scrutiny. Are students given enough protection and taxpayers provided enough accountability?

We believe the situation calls for a refocusing on how the government ensures that federal student aid funds are being used wisely. We propose that accrediting agencies focus on institutional quality and the Education Department -- armed with higher standards and some new tools -- undertake a more rigorous financial review to determine which institutions should be eligible to award federal student aid.

Clear Responsibility for Distinct Roles

The public expects accountability for the billions of dollars in financial aid given to students annually. A critical question is how to provide accountability while avoiding government-established learning outcomes. We oppose government prescriptions for learning outcomes as a means to achieve accountability because it would stifle the vitality, independence and diversity of our member institutions. We do support outcome measurements that are voluntary and publicly disclosed, such as the Voluntary System of Accountability and the College Portrait.

The best means to achieve reasonable accountability is: (1) accrediting agencies should be responsible for academic considerations without determining learning outcomes; 2) the Education Department should be responsible for fiscal considerations necessary to determine institutional eligibility.

These combined but distinct roles will help achieve the requisite accountability and necessary public credibility.

Accreditation and Academic quality

The accreditation system was designed as a collaborative self-improvement process to gauge and enhance academic quality as appropriate to institutional mission. Through this process, the determination of academic content and quality remains in the purview of academe.

Of course, accreditors must be informed by the default rates and related matters as they review academic effectiveness. However, accreditors are not qualified to be auditors or credit officers and should not have front-line responsibility for default-rate triggered actions.

The accreditation process no doubt should be improved, but overall accreditation has enhanced higher education quality. If we did not have accreditation, we would create something like it. Accreditation should, at its essence, continue as a self-improvement process to enhance academic quality. Individual institutions should measure learning outcomes that they determine are appropriate to their mission and institution type, and accrediting agencies should expect them to do so.

The Education Department and Institutional Eligibility

The Education Department, not accreditors, has the ultimate responsibility to determine whether an institution is eligible to participate in the federal student aid programs. This is the letter and intent of the law. Fiscal reviews by the Education Department should be done regularly, not just in an accreditation cycle or process, to catch default and related troubles early. Such problems often get worse, not better, with age. Moreover, the Education Department appropriately has the responsibility for investigating fraud in connection with financial aid.

An institution cannot keep its eligibility under the law unless it also keeps its academic accreditation. However, some do not know that by law eligibility and accreditation are two separate processes. In fact, many have begun to confuse or partly merge the two processes, as accreditors have been pushed to make loan default rates a primary factor in accreditation decisions.

Accordingly, the Education Department should once more be very clear to Congress and the public that it is responsible for eligibility determinations, particularly those driven by the level of default rates and not the accreditors. Of course, institutional accreditation should continue as a condition of eligibility for federal student aid programs.

Comments on Implementation

Apparently a major accountability challenge is the high default rates of a small number of institutions -- institutions that frequently have very low graduation rates. For-profit colleges are not the only institutions with high default rates, but the recent data from the Education Department show they have about 10 percent of the students and approaching half of the defaults.

The default issue is complex because many of the institutions with high default rates serve a disproportional number of low-income, minority, first-generation and nontraditional students. Student financial aid provides access to opportunity, and some loan losses are to be expected. Nevertheless, with these considerations objectively weighed, the Education Department’s eligibility process should deal with problem institutions.

The true default rates of some institutions might be substantially higher than the rates commonly cited because of how the rates are calculated under the law. The only defaults considered in making eligibility determinations are those that occur during the three years after the student leaves school. In addition, because of how the default rates are calculated, even some of those defaults are not counted. Apparently a whole business has grown up to help some institutions manage default rates.

Note that the repayment rates under the new gainful employment regulations are calculated differently and for separate purposes than the default rates discussed here. We have concerns about the rigor of those regulations but that is beyond the scope of this piece.

The criteria should be strengthened to incorporate more comprehensive default rates, a step that will require changes in the law. In any case, the Education Department should have a full set of options in dealing with problem institutions. Fines can now be imposed, but many believe the fines are generally not large enough to change institutional behavior. Decisions on eligibility itself too often drag on for years while the institutions continue to receive federal student aid funds. The eligibility decision is often a life-or-death decision -- either full access to student aid programs or no access at all. This all or nothing approach has made effective enforcement more difficult. Intermediate sanctions would be easier to make politically and may be more effective to drive changes in institutional behavior.

An intermediate sanction might work as follows: an underperforming institution could have the number of students eligible for student loans limited to 85 to 90 percent of the prior three-year average. Such restrictions would greatly impact an institution. Qualified students denied use of their financial aid at one institution would generally go to another institution.

We are concerned about the current law and the confusing expectations for accreditors and the Education Department, not the people involved in applying the law or doing the accreditation.

Conclusion

Accreditation should remain a collaborative self-improvement process to gauge and enhance academic quality. The Education Department should be held accountable for making the decisions on default rates as part of eligibility decisions. The law should be changed so that eligibility decisions will be made with more appropriate criteria and the proportional penalties suggested above.

Bio

Peter McPherson is president and R. Michael Tanner is chief academic officer and vice president, respectively, of the Association of Public and Land-grant Universities.

 

 

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