Asleep at the Wheel: Federal Accountability

The current federal accountability system in higher education is widely recognized as being inadequate and ineffective, despite the massive federal investment of over $150 billion annually.¹

Both macro-level outcomes, such as overall poor graduation rates and student loan repayment troubles, and micro-level outcomes, such as individual institutions with dismal educational track records, point to a systemic failure to hold colleges and universities accountable for their performance and to ensure minimum levels of quality throughout the system. The limited set of accountability provisions and metrics currently in the HEA (see Table 1) are wholly insufficient to meet the demands for better student outcomes and greater effectiveness and efficiency for federal student aid programs.

In terms of federal accountability mechanisms² and metrics that apply to all institutions participating in Title IV programs, the cohort default rate (CDR) and Heightened Cash Monitoring (HCM), only the former serves as a proxy for student outcomes and overall educational value, while the latter focuses primarily on the financial responsibility composite scores and compliance issues. The outlived usefulness of the CDR, mostly as a result of gaming and manipulation by institutions and the explosion of income-driven repayment programs that helps struggling borrowers stay out of default, has been examined thoroughly and today there is broad consensus that it needs to be either replaced or reformed. The limited impact of both measures is clearly demonstrated by the number of schools affected: In the most recent period, only 12 schools were subject to sanctions under the CDR and only about 63 were placed on the highest Heightened Cash Monitoring 2 (HCM2) list, which involves significant restrictions, out of approximately 5,750 Title IV schools.

The remaining accountability mechanisms and metrics are similarly either weak or of limited scope. The 85-15 rule for for-profit school revenue was weakened to 90-10 and excludes significant sources of non-Title IV student aid, such as the GI Bill for veterans and Tuition Assistance dollars for servicemembers, while the Gainful Employment (GE) regulations for career-programs were recently rescinded. The financial responsibility composite scores for private schools, in need of a significant update, have been consistently inconsistent in identifying at-risk schools, including due to manipulation. Overall, the picture is bleak for accountability in higher education at a time when more than two out of five students fail to graduate within six years after enrolling in either a two- or four-year college³ and student loan debt has hit a historic record, at $1.5 trillion.⁴ As more than 1,200 campuses have shuttered their doors in the past five years, of which 88 percent were for-profit colleges,⁵ including national chains that collapsed amidst scandal and shockingly poor student outcomes, the growing calls for accountability are not surprising.

Table 1: Current Federal Accountability Provisions & Metrics