Tennessee: Certificate holders out-earn 4-year grads

Tennessee workers with associate degrees and long- term certificates often start at higher wages than four-year graduates, according to a new College Measures study. It takes five years for graduates with bachelor’s degrees to catch up.

“You don’t need to go to a flagship university to get a good job. There are many successful paths into the labor market,” said Mark Schneider, author of the report. “Students have the right to know before they go and know before they owe.”

The EduTrendsTN website, a joint venture of the American Institutes for Research (AIR) and the Matrix Knowledge Group, has detailed data on labor market returns in Tennessee.

At the end of the first year in the workforce, long-term certificate holders earned more than $40,000, those with associate degrees, $37,000 and those with a bachelor’s, $34,262. After five years, the median wages of bachelor’s graduates were similar to two-year graduates’ earnings  ($41,888 versus $41,699), and slightly trailed certificate holders ($42,250).

“Many sub-baccalaureate credentials can be entryways to the middle class,” Schneider said.

Learning how to fix things or fix people pays off, writes Schneider on The Quick and the Ed. For associate degree graduates, electric engineering technicians earned the most ($61,000) after five years. Graduates in nursing and allied health fields also did well.

Graduates in business, liberal arts and management and information systems earned less than the state median. Human Development and Family Studies graduates earned much less.

After five years, associate degree graduates average $41,699, a few dollars more than Tennessee’s median household income.

“Five years after graduation, the 15 Tennesseans who got bachelor’s degrees in ethnic, cultural minority, or gender studies were making an average annual wage of $26,000, actually about $2,000 per year less than they were making one year after graduation,” notes Fawn Johnson on National Journal. 

In a recent survey, 99 percent of parents with children in college said that college is “an important investment in one’s future.” Yet, “only about half of students, graduates, and parents of college students had engaged in an ‘in-depth’ conversation about how student loans would be managed or paid for after graduation.”

Colleges get break on default penalties

Only 21 colleges with high default rates — 20 for-profits and one public adult education program — are set to lose access to student aid this year. Many more were at risk. At the last minute, the U.S. Department of Education decided to omit some defaulted loans when calculating default rates

The rate is based on the percentage of borrowers who defaulted three years after entering repayment. Tuesday, the department announced it wouldn’t count borrowers who defaulted on one loan but not on a second loan. In some cases, borrowers must repay different loan-servicing companies, which can cause confusion. The adjustment was made only for colleges that risked losing eligibility for student aid.

It’s a Get-Out-of-Jail-Free Card applied selectively with no transparency, writes Clare McCann on EdCentral. Cherry-picked colleges now have lower default rates than colleges that weren’t at risk of sanctions. “There’s no indication of which institutions benefited, in which sectors, or by exactly how much.”

 Federal regulations already provide opportunities for colleges to appeal their default rates based on a variety of factors, including poor-quality servicing. Why not simply run this process before finalizing the rates, rather than oddly offering up this upfront assistance?

High-default colleges get a break, but students don’t, adds McCann. Borrowers still are considered in default, even if it isn’t counted against their college.

Community colleges and historically black colleges and universities — both with low-income students and high default rates — had lobbied for relief, notes Inside Higher Ed. “On Tuesday, Education Secretary Arne Duncan said he was pleased that no historically black colleges and universities would face penalties for their default rates this year. Fourteen historically black institutions had default rates above the 30-percent threshold last year.”

Default rates fell slightly for community colleges, the Education Department announced. No community colleges face sanctions.

Critics said the last-minute adjustment undercuts accountability.

“If a school isn’t held accountable for a default, then the borrower shouldn’t be either,” said Debbie Cochrane, a researcher at the Institute for College Access and Success.

Representative George Miller of California, the top Democrat on the House education committee, was one lawmaker who pushed for the expanded three-year default rates. He questioned the department’s adjustment to the loan rates on Tuesday.

“Any changes in the student loan system that reduce transparency and consistency may compromise our ability to hold poor-performing colleges accountable,” Miller said in a statement. “The department should be doing everything it can to ensure student borrowers who have defaulted have every opportunity for redress.”

Community college advocates praised the adjustment. “We believe that the department has acted responsibly by not holding financially needy students hostage to the shortcomings of servicers and other parties involved in loan administration,” said David Baime, senior vice president for government relations and policy analysis at the American Association of Community Colleges.

Ratings may reward colleges for selectivity

Colleges should be rewarding for educating students, not for selecting only the best, said Andrew P. Kelly, who directs the American Enterprise Institute’s Center on Higher Education Reform, at hearings on the president’s proposed college ratings system.

Unfortunately, our ability to measure the “value-added” by a college program is almost nonexistent, and the measures that the Department of Education has proposed are woefully insufficient as an approximation of that quantity.

It is much easier for colleges to change the students that they enroll than it is to change the quality of education that they provide.

If the ratings system does not account for this, it will likely set up a scenario in which selective colleges are provided with even more resources, while open-access institutions work to become more selective in an effort to improve their outcomes

Federal ratings should not be linked to federal student aid, argued Kelly. Instead, the ratings should be designed to help prospective students evaluate different programs at different colleges.

The Education Department plans to use the percentage of students receiving a Pell Grant as a measure of access. The measure should be linked to Pell graduates, said Kelly.  

Outcomes measures will be based on flawed graduation data, said Kelly. “We need some validation that the diplomas colleges award are worth something,” such as whether graduates earn enough to pay off their loans.  In addition, those developing PIRS should include “rigorous pre- and post- measures of success, or at least identify relevant control groups to compare results.”

Smaller, more selective schools could raise their access ratings  and lower their net price easily by admitting more low-income students, Kelly said. That would help a small number of students.

Large, less selective schools with low rates of student success have a tougher choice. “They can embark on the hard, uncertain work of improving teaching and learning to boost student success. Or they can take the easier route and admit fewer low-income students.”

All of this is to say that if improvement is quicker and easier for low access/high success schools than it is for high access/low success schools, then rewards will accrue to the former. That will simply reinforce their place atop the higher education system and, frankly, waste taxpayer dollars on schools that don’t need them.

Selectivity is the key to U.S. News’ prestigious “best colleges” rankings, Kelly wrote in an earlier Forbes column. “Those measures often have everything to do with who colleges admit and less to do with what colleges actually teach them while they’re there.”

For-profit students borrow more, but don’t earn more

For-profit college students borrow more than community college students, but don’t earn more, concludes a Center for Analysis of Postsecondary Education and Employment (CAPSEE) working paper.

Six years after enrollment, for-profit students are more likely than community college students to have earned a certificate or associate degree.

They have lower employment rates and earnings compared to all college-going students, but those disadvantages are “linked to their prior academic record and disappear when compared to community college students.”

However, in comparison with similar community college students, for-profit students borrowed about $13,300 more for their higher education. “This borrowing most likely reflects the higher tuition at for-profit colleges, which in turn may be driven by the students’ greater access to federal student loans.”

When students default, colleges pay

If too many students default on their loans, colleges risk losing access to federal student aid, writes Heather Boerner in Community College Journal.  As open-access institutions, community colleges enroll many low-income, first-generation and underprepared students.  So community colleges are developing default management plans.

If students can’t get Pell Grants, “You might as well close your doors,” says Anthony Zeiss, president of Central Piedmont Community College (CPCC) in North Carolina.

Kathy Blau, director of financial aid at Garden City Community College (GCCC) in Kansas, starts the year with a game of financial Jeopardy. Students know Justin Beiber’s ex-girlfriend, but not their credit score, she says. Then she asks how student loan debt can be discharged.

Bankruptcy? Nope. Only permanent disability, death or loan forgiveness through public service apply. And if you don’t pay, the government can garnish your wages.

“That usually hushes the room a little,” she says.

Only about 17 percent of community college students borrow money to attend college, but they’re more likely to default than borrowers who start at four-year colleges and universities. Twenty percent of community college borrowers default estimates the Education Department, compared with 14.7 percent of all student loan borrowers, and that number is rising.

Default isn’t the only problem, says Zeiss at CPCC. “If a student leaves before the end of the semester, the college has to reimburse the Department of Education for the loan.”

CPCC and other North Carolina colleges left the federal Direct Loan program in March to avoid federal penalties for defaults. CPCC hopes to replace federal loans with grants from its foundation’s endowment fund.

“Default rates aren’t destiny,” says Debbie Cochrane, research director at The Institute for College Access and Success (TICAS). “There’s a lot you can do to bring them down.” A new report by the Association of Community College Trustees and TICAS, Protecting Colleges and Students, looks at how nine colleges are reducing defaults.

Too much information

College students get more information than they can handle, concludes a report by the National Association of Student Financial Aid Administrators. Streamlining consumer information regulations — and eliminating some requirements — would help students focus on what they really need to know, advises NASFAA.

“The number of disclosures students receive from their institutions is overwhelming,” said NASFAA’s President and CEO Justin Draeger. “Today’s disclosures aren’t just unhelpful, they may actually hinder students from deciphering what is truly important when making college-going and financial aid decisions.” The report recommends:

Enhancing the U.S. Department of Education’s (ED) College Navigator to make it the primary tool for disseminating college information,

Making ED and loan servicers responsible for developing and distributing loan-related consumer information, including debt management, and

Repealing the ban on a federal-level student unit record, to develop a limited student unit record that collects more accurate and comprehensive data on contemporary student behavior.

Required information includes a Campus Security Report, Fire Safety Report and the Fire Log, Drug and Alcohol Prevention Information, notices about Constitution Day and Voter Registration and Athletic Disclosures, the report notes. It suggests studying whether these reports are useful to students or could be eliminated.

Families spend more for college

Parents are spending more to send their children to college, reports Sallie Mae’s How America Pays for College 2014.  Ninety-eight percent of families agree that college is a worthwhile investment.

Families spent more out of pocket (42 percent of college costs) while overall borrowing (22 percent of college costs) was at the lowest level in five years. Low-income students, in particular, reduced their reliance on borrowed funds when paying for college last year.

Average percentage of total cost of attendance paid from each source

To make college affordable, more students seeking bachelor’s degrees are starting at community colleges, the survey found. They’re also more likely to choose a college or university in their own state. More than half live at home or with relatives to cut costs.

Default penalties worry community colleges

Community colleges could be penalized for high default rates on student loans — even if few students are borrowing, reports Inside Higher Ed. Advocates are seeking changes in the student loan law.

Colleges face tough sanctions — including loss of eligibility for all federal student aid programs — if the default rate exceeds 30 percent for three consecutive years.  That means 30 percent of federal borrowers default within three years of entering repayment, explains Inside Higher Ed. The penalties could be imposed starting in September.

Congress was going after for-profit colleges, many of which have high default rates. But 15 community colleges are at risk with two years of 30+ percent defaults.

The sector’s overall default rate is up to 21 percent, according to the American Association of Community Colleges (AACC). And while only 19 percent of community college students take out federal loans, colleges can still face sanctions if they cross the 30 percent threshold.

Frank Phillips College in the Texas panhandle posted default rates of 34 percent in 2009 and 31 percent in 2010. That represents 58 defaulters out of 186 current and former students who owed on federal loans during the three-year window for 2010. It would take four more students paying off their loans to get the rural college out of hot water. But it looks like the rate for 2011 will exceed 30 percent.

The college hired a default management consultant. Counselors make sure borrowers know about repayment, deferment or forbearance options. But it’s still tough for graduates to find jobs in the weak local economy.

The default rate jumped to 31 percent in 2010 at Lane Community College, in Oregon. It had been 20 percent the previous year. “The jobs weren’t quite there yet, even in nursing,” said Mary Spilde, Lane’s president.

The college is requiring more counseling for borrowers, but can’t deny loans to high-risk students. “We have very limited abilities to say no to students,” Spilde said. “But at the end of the day we’re held responsible.”

Colleges with few borrowers can appeal the penalties. ACCT proposes a “student default risk index” that would kick in before the third year in a report produced with the Institute for College Access and Success (TICAS). The report also calls for letting colleges appeal sooner, automatic enrollment in income-based repayment for delinquent borrowers and improved financial aid counseling.

North Carolina colleges are opting out of the federal student loan program, or considering it, to avoid high default rates, reports the News & Record.

How colleges can prevent default

Protecting Colleges and Students looks at how nine community colleges are helping student borrowers avoid default. The Association of Community College Trustees (ACCT) and The Institute for College Access & Success (TICAS) collaborated on the report.

CDR Report Cover Small for WebNot surprisingly, borrowers who left college without earning at least 15 credits were much more likely to default than more successful classmates at the nine colleges.

The default rate for low-income students varied. For example, Pell Grant recipients — typically with family incomes below $40,000 — were four percentage points more likely to default than non-recipients at one college, while the gap was 20 percentage points at another college.

Only 17 percent of community college students use federal loans, but more than a third of graduates “needed loans to get to graduation,” said J. Noah Brown, president of ACCT.

The report recommends that the U.S. Department of Education provide guidance on colleges’ options for managing student debt, make the National Student Loan Data System more user-friendly, improve counseling tools and streamline loan servicing.

Community colleges should  analyze who borrows and who defaults to inform their default-reduction strategies, the report recommends. In addition, colleges should provide counseling and information to borrowers when they need it and participate in the federal loan program.

Completion, default rates can be misleading

Commonly used college quality measures, such as graduation rates and loan defaults, are inadequate and sometimes misleading, writes Ben Miller, a senior policy analyst for the New America Foundation, on EdCentral.

Completion statistics for community colleges and other two-year-or-less institutions are especially inaccurate, he writes. It’s not just that the federal data misses part-timers and transfers. Completion data also confuses success rates in short-term certificate programs with longer-term associate degrees.

. . . many certificate programs run for no more than a year. These programs thus present fewer opportunities for students to drop out. That’s why colleges that predominantly grant certificates tend to have quite high completion rates and also the reason that for-profit institutions often appear to have better graduation rates than the largely associate-degree-granting community colleges.

A low completion rate is a sign of low quality, but a high completion rate may signify a quick, easy program with very little return on students’ time and money.

Cohort default rates also can be misleading, especially for community colleges with very few borrowers, writes Miller.

For example, Gadsden State Community College in Alabama has a 20 percent default rate but that’s based on five borrowers out of an enrollment of over 8,967. This makes it impossible to draw any conclusions about a college based upon less than 0.05 percent of the college.

On the other side, a low cohort default rate might be just as much an indication of successful loan management than success. The cohort default rate only measures whether students default within a certain time window. Students who default after that period or who are extremely delinquent but never default are not counted in the rate. The usage of income-based payment plans can also distort cohort default rates, since a borrower could be earning such a low income from their program that they have to make little to no payments, making it more difficult to default.

Passage rates on licensure or certification exams, such as in nursing, do measure learning outcomes. However some programs — especially in teaching — ensure a 100 percent pass rate by denying diplomas to students who haven’t passed the exam.