Income Data and the Degree
From health care to major league baseball, entire industries are being shaped by the evolving use of data to drive results. One sector that remains largely untouched by the effective use of data is higher education. Fortunately, a recent regulation from the Department of Education offers a potential new tool that could begin driving critical income data into conversations about higher education programs and policies.
Last year, the Department of Education put forward a regulation called gainful employment. It was designed to crack down on bad actors in investor-funded higher education (sometimes called for-profit higher education). It set standards for student loan repayment and debt-to-income ratios that institutions must meet in order for students attending a specific institution to remain eligible for federal funds.
In order to implement the debt-to-income metric, the Obama administration created a system by which schools submitted social security data for a cohort of graduates from specific programs. As long as the program had over 30 graduates, the Department of Education could then work with the Social Security Administration to produce an aggregated income for the cohort. Department officials used this to determine a program-level debt-to-income metric against which institutions would be assessed. This summer, the income data was released publicly along with the rest of the gainful employment metrics.
Unfortunately, the future of the gainful employment regulation is unclear. A federal court judge has effectively invalidated it. We, at Capella University, welcome being held accountable for whether our graduates can use their degree to earn a living and pay back their loans. While we think that standard should be applied to all of higher education, we also believe there is an opportunity for department officials to take the lemons of the federal court’s ruling and make lemonade.
They have already created a system by which any institution can submit a program-level cohort of graduates (as long as it has a minimum number of graduates in order to ensure privacy) and receive aggregate income data. Rather than letting this system sit on the shelf and gather dust while the gainful employment regulations wind their way through the courts, they should put it to good use. The Department of Education could open this system up and make it available to any institution that wants to receive hard income data on their graduates.
I’m not proposing a new regulation or a requirement that institutions use this system. It could be completely voluntary. Ultimately, it is hard to believe that any institution, whether for-profit or traditional, would seek to ignore this important data if it were available to them. Just as importantly, it is hard to believe that students wouldn’t expect an institution to provide this information if they knew it was available.
Historically, the only tool for an institution to understand the earnings of its graduates has been self-reported alumni surveys. While we at Capella did the best we could with surveys, they are at best educated guesswork. Now, thanks to gainful employment, any potential student who wants to get an M.B.A. in finance from Capella can know exactly what graduates from that program earned on average in the 2010 tax year, which in this case is $95,459. Prospective students can also compare this and other programs, which may not see similar incomes, against competitors.
For those programs where graduates are earning strong incomes, the data can validate the value of the program and drive important conversations about best practices and employer alignment. For those programs whose graduates are not receiving the kinds of incomes expected, it can drive the right conversations about what needs to be done to increase the economic value of a degree. Perhaps most importantly, hard data about graduate incomes can lead to productive public policy conversations about student debt and student financing across all higher education.
That said, the value of higher education is not only measured by the economic return it provides. For example, some career paths that are critical to our society do not necessarily lead to high-paying jobs. All of higher education needs to come up with better ways to measure a wide spectrum of outcomes, but just because we don’t yet have all those measurements doesn’t mean we shouldn’t seize an a good opportunity to use at least one important data point. The Department of Education has created a potentially powerful tool to increase the amount of data around a degree’s return on investment. They should put this tool to work for institutions and students so that everyone can drive toward informed decisions and improved outcomes.
It should become standard practice for incoming college students or adults looking to further their education to have an answer to this simple question: What do graduates from this program earn annually? We welcome that conversation.
Scott Kinney is president of Capella University.
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