Can Data Reduce The Impact of College Debt?
by Roman Mashchak
Earning a college education in America is an expensive endeavor that burdens students with debt for many years, if not decades to come. Finding ways to reduce this debt, or at least the impact of it, is increasingly important.
Only recently, private equity billionaire - with an estimated fortune worth $5 billion - Robert F. Smith - generously offered to wipe the debt of the entire graduating class at Morehouse College of 2019, for around 400 students, worth $40 million. However, that kind of offer doesn't happen to most students.
College debt makes it more difficult for graduates to get onto the property ladder and achieve the same kind of middle class lifestyle that older generations can benefit from. Because of the long-term economic and societal impact, people and companies are looking at ways to reduce the impact of college debt and make majors pay more effectively once graduates hit the jobs market.
How much debt do graduates accumulate?
College is expensive. Not only do students pay for courses, there are housing and living expenses, course materials, books, computers and a whole load of other costs involved. Loans can come in many forms, typically federally-backed students loans, with students often taking out private loans, credit cards; their parents giving or lending them money, and working during college is usually required too.
For the first time ever, the Department of Education released open-source data on the cumulative loan debt of graduates by field of study. Now this college scorecard can be used to identify which courses result in the highest or lowest levels of debt. Previously, information surrounding how much debt students accumulated was only focused on the college level, instead of individual courses.
Putting this data out in the open is part of a wider move towards higher education reform in the United States. In February 2019, Senator Lamar Alexander (Tennessee), Chair of the Senate Education Committee - and a former university president - spoke about the need for reform.
Can data reform college debt?
Senator Alexander wants a “new accountability system”, looking at loan repayment rates for individual courses and programs. At present, federal accountability only looks at overall rates of repayment from graduates. If the number of students able to start repaying loans drops too low, a college will stop receiving federal funding. Although the current system rewards colleges with a high enough percentage making repayments, it fails to adequately account for courses that have a lower rate of repayment.
What Senator Alexander is proposing “should provide colleges with an incentive to lower tuition and help their students finish their degrees and find jobs so they can repay their loans.” This is one area where the Trump administration is following in the footsteps of President Obama, with a regulatory tightening on for-profit colleges and short-term certificate programs.
Effectively in support of a series of transparency rules detailing program outcomes, there is a bipartisan congressional coalition to vote the College Transparency Act into law. Senators Joni Ernst and Elizabeth Warren have co-sponsored the bill. It is calling for comprehensive and transparent college program-level data to show which courses are more likely to result in promising careers for graduates and which aren't as supportive of those goals and ambitions.
How data can transform how students pick college majors
Take the University of Virginia, one of the most prestigious public universities in the country with average freshman SAT scores in the 1400 range and an admittance rate around 25 percent. New data published in the state shows a divergence in the earning potential of graduates, depending on the courses they major in.
In some cases, graduates can be earning $70,000 to $80,000 within 3 years of graduating. Whereas others are still in the $35,000 to $50,000 range. Systems engineers graduates can earn double what environmental science majors can earn within 3 years of graduating. In comparison, George Mason college, also in Virginia, is less prestigious, with graduates earning between $60,000 and $45,000 in 3 years after graduating.
The key, however, is not the differences in earning potential between courses. For the most part, we can accept - and students should expect - to have a higher earning potential when they go to a more prestigious university and usually pay more for the premium.
An academic researcher, Mark Schneider, now a director of the Department of Education’s institute of education sciences, working on the program-level data collection program, found that the key is the difference in earnings within colleges.
With these proposed regulatory changes, the hope is, with more data available to students, they will pick academic programs and majors that should increase their earnings potential after graduating.
Students shouldn't be getting into massive debt, or wealthy parents paying huge bribes, for the sake of putting a prestigious university brand on a resume when the earning potential doesn't exist for some courses and majors. With 1 million defaults on student loan payments every year (some forcing graduates to declare bankruptcy), every useful piece of data students and parents can access should contribute towards lower fees, increased up-take on courses that improve potential earnings and increase the rate of repayments. Data on this level could forever change the higher education sector and student experiences.