The American higher education system is plagued by two chronic problems: dropouts and debt. Barely half of the students who start college get a degree within six years, and graduation rates at less-selective colleges often hover at 25 percent or less. At the same time, student loan debt is at an all-time high, recently passing credit card debt in total volume.1 Loan default rates have risen sharply in recent years, consigning a growing number of students to years of financial misery. In combination, drop-outs and debt are a major threat to the nation’s ability to help students become productive, well-educated citizens.
The federal government has traditionally tracked these issues by calculating, for each college, the total number of degrees awarded, the percentage of students who graduate on time, and the percentage of students who default on their loans. Each of these statistics provides valuable information, but none shows a complete picture. A college could achieve a stellar graduation rate by passing students
along and handing out degrees that have little value in the job market, making it difficult for graduates to earn enough money to pay off their debt. Alternatively, a college could keep tuition and loan default rates low while also providing a terrible education and helping few students earn degrees. Students choosing colleges and policymakers governing higher education need an overall measure of value, one that combines debt and graduation.
Education Sector has created such a measure, the “borrowing to credential ratio.” For each college, we have taken newly available U.S. Department of Education data showing the total amount of money borrowed by undergraduates and divided that sum by the total number of degrees awarded. The results are revealing: