• A new report found that the federal government disbursed $22.6 billion to 2,076 higher education institutions that left most of their students earning less than a typical high school graduate.
  • Additionally, 223 government-supported institutions left more than 75 percent of students owing more school debt than the amount they initially borrowed.
  • The report’s findings, according to one expert, serve as a call for greater accountability and better rules governing how the federal government invests in higher education.

Federal support for higher education institutions is a big deal. About $120 billion flows from Washington to these institutions every year.

Safeguards are supposedly built in to ensure this money goes to schools and programs that are good at helping students graduate, find a job that allows them to earn a decent living, and pay off their loans. However a recent report from Third Way, a center-left think tank, found that a significant portion of higher education institutions that receive federal funding are failing abysmally at helping their students earn a better living than their peers with only a high school diploma. 

As Michael Itzkowitz, a Senior Fellow of Higher Education at Third Way, summarized in the report: “Last year, the government disbursed $22.6 billion to 2,076 institutions that left more than half their students earning less than their high school graduate peers.” Some institutions, he added, failed even worse, with nine out of 10 students earning less than their high school-educated peers.

One of the main reasons new students enroll in institutions of higher education, the report noted, is for better job opportunities. To determine whether the institution is helping students achieve this goal, the U.S. Department of Education defines this metric as the portion of student borrowers and grant recipients who make more than a high school graduate—$28,000 per year—within six years of starting at an institution. When an institution cannot do this with any consistency, Itzkowitz said, it’s fair to question whether it’s worth the time and financial investment for students—not to mention the taxpayers who help subsidize their educational endeavors.

The report goes on to zero in on higher education institutions receiving federal aid that have dismal completion outcomes, employment outcomes, and loan repayment outcomes. It found 18 institutions last year that failed to graduate more than 10 percent of their students within eight years. A whopping 409 institutions left more than 75 percent of students earning less than the aforementioned high school benchmark of $28,000. And 223 institutions left more than 75 percent of students owing more school debt than the amount they initially borrowed five years after leaving the institution. Put another way, these students were unable to even keep up with the accruing interest from their loans.

The report’s findings, according to Itzkowitz, serve as a clarion call for greater accountability and better rules governing how the federal government invests in higher education.

“It’s time that the federal government start better targeting its money toward institutions that are proven to serve students from all backgrounds well,” Itzkowitz wrote. “As Congress works toward reauthorizing the Higher Education Act, it’s critical that policymakers demand better outcomes for federal funding. If they don’t, it’s likely that students and taxpayers alike will continue to provide billions of dollars to institutions of higher education that fail to provide the socioeconomic mobility that they promise.”

A survey from Third Way earlier this year found that most voters agree. More than two-thirds said the federal government “should provide basic guardrails to ensure that students aren’t encouraged to take out loans to attend predatory institutions that will leave them worse off than when they first enrolled.” It also found that a significant majority of voters from both parties support broad accountability frameworks. 

Voters’ sentiments on specific policy proposals was less clear, according to coverage from Inside Higher Ed, due to their complex details and in-the-weeds nature. 

Read more from Third Way about higher education institutions receiving federal aid that are failing to help their students earn a better living.

Photo Credit: Photo by Charles DeLoye on Unsplash