Revealing the Dirty Little Secrets of Higher Education

By Richard Vedder

The Secretary of Education's National Commission on the Future of Higher Education (of which I am a member) is converging on a report. I have alternated between being optimistic and pessimistic about the outcome, and am eagerly awaiting the next draft from the staff, due momentarily. I worry that the HEE (Higher Education Establishment) is being successful in watering down the report, and, above all, making it sound dull and uninspiring -- no Nation at Risk, to be sure. But the next draft may prove me wrong.

But one very good thing the Commission is almost certainly going to call for is greater transparency in the operations of universities. It will urge universities to release data in a common format that will allow parents, students, policymakers, and higher education scholars to do better comparisons between schools, and get some straight information that will allow for more informed decisions. Hopefully, the commission will also call for schools to report in a easy-to-understand form some data on the "value added" by the college -- what did the kids learn? That, in turn, may force schools to do some testing as to what their students are learning. Also, some common financial standards hopefully will be developed in order for the public to see what the schools are spending their money on.

Perhaps the biggest dirty little secret that colleges prefer to hide is that the cost of higher education is grossly understated because a large percentage of kids take five or six years to graduate -- if they graduate at all. The IPEDS data of the U.S. Department of Education are not perfect, maybe not fully and correctly accounting for interinstitutional transfers for example, but they still give some good insight into the problems.

Looking at four year schools in 2004, and weighting the numbers by enrollment, it appears that for the U.S. as a whole 47 percent of entering freshmen do not graduate, at least within six years. At the average school, only 30 percent graduate in four years, another 17 percent take five years, and 6 percent take an astonishing six years to get through. For the 23 percent of freshman taking five or six years to graduate, tuition and related costs are 25-50 percent higher than expected (assuming they anticipated they would graduate in four years).

Looking at data for my home state of Ohio, where the statewide data almost perfectly mirror the national average, we learn that the lowest dropout rate is at tony Kenyon College (14 percent), but that many public universities have a vast majority of their students drop out. For example, at Central State University, more than three-fourths of freshman do not graduate -- at least within six years, and for every new student graduating in four years, there are seven who do not (most never graduating). Vast amounts of money are spent educating kids who ultimately fail to accomplish the iniital objective of a college degree. Why?

More importantly, what can we do as a society to change this? Doing some or all of the below probably would help:

1) Do not admit students for whom high school performance, test scores, etc., indicate a high probability of failing; give those students a chance to succeed by attending lower cost community colleges before being admitted to more costly four year universities;
2)Cut all institutional assistance off to state colleges and universities for students in attendance more than four years, ending direct assistance payments to students also after four years;
3)Give performance vouchers to students (in lieu of state government subsidies to institutions), where the voucher amount varies directly with student performance, and where the voucher sharply declines in size after four years of attendance;
4)Allow bright and able students to take college courses in high school, often at public expense, to assist students complete college in a timely fashion;
5) Reduce barriers to transfering majors or academic units within institutions.
6)End or drastically reduce educational subsidies to institutions with high dropout rates.
7) Force any institution receiving federal aid to publish in a prominent place on its web site, in big print, the 4, 5, and 6 year graduation rate -- and how the school compares with state and national averages.


Right now, there are few incentives for colleges to get students through school. Vast human resources are being wasted with students lingering around institutions, or dropping out of them short of a degree. In many states, total payments to universities are greater the longer the student sticks around -- the incentive system favors prolonging the educational experience.

Let us change those incentives, and also shine the light on this dirty little secret.