Data and Research

State-by-state analysis looks at the share of family income needed to cover net price of public two- and four-year colleges, as well as number of work hours needed for the lowest income students.

This post originally appeared on the Association of Community College Trustees (ACCT) blog

By Lindsay Ahlman and Debbie Cochrane, The Institute for College Access & Success (TICAS)

Students, schools, and policymakers are increasingly concerned about college affordability, and with good reason. Yet many conversations about college affordability focus on dollar figures of the price of college, as opposed to putting that cost into context to determine whether that price is affordable. Lower income students generally face lower net prices, but even a very low cost might be unrealistic for a family with extremely limited resources. Looking at both the cost and available family resources provides a useful picture of how manageable different prices are for families with different resources.

In a new research brief, College Costs in Context: A State-by-State Look at College (Un)Affordability, we looked at the share of family income that is needed to cover that net price to explore the degree to which net prices[1] reported by colleges are manageable for families. Using a state-by-state analysis of public four- and two-year colleges, we find striking inequities in both two- and four-year public college affordability both within and across states, with the lowest income students facing the most extreme and unrealistic financial expectations.

With lower tuition costs than four-year public colleges, community colleges are frequently assumed to be the most affordable college option for students. Yet our analysis shows that community colleges are far from affordable for many students: students from families earning $30,000 or less must spend 50 percent of their total income to cover the net price of public two-year colleges. As shown below, this is a far greater burden than is placed on any other group.

The share of income required to pay for college costs varies by state. At community colleges, the lowest income students in New Hampshire would need to spend 120 percent of their income to cover net costs, while those in Michigan would need to spend 35 percent. In 31 states, the net price of community colleges is more than half of the total family income for the lowest income students.

The data presented here underscore the difficult choices many students must make to attend and complete college, including potentially working long hours while enrolled full time and compromising their odds of graduating as a result. When we looked at the number of hours the lowest income students would need to work to cover the net price of community colleges, we find that students in 28 states would need to work more than 20 hours per week at their state’s minimum wage to earn enough to cover their net price. In New Hampshire, community college students from low income families would need to work more than 50 hours per week.

The inequitable burden of college costs on the lowest income students not only contributes to wide college enrollment and completion gaps by income, but also disproportionately affects underrepresented minority students. Among undergraduates, more than half of Latino students (52%), about three in five Native-American students (59%), and almost two-thirds of African-American students (64%) have family incomes under $30,000.

These are sobering findings, documenting an affordability problem that demands attention and underscoring the need to focus resources where the problems are most severe. TICAS recommends strengthening Pell Grants, which currently cover the smallest share of college cost in more than 40 years, improving and increasing state grant aid, and promoting state investment in higher education through a new federal/state partnership aimed at maintaining or lowering the net price of public college for low- and moderate-income students.

Read the full brief, and also download a sortable spreadsheet with state and sector level data:

[1] Net price is the total cost of college – including not only tuition but also textbooks, transportation, and living expenses – minus any state, federal, and institutional grants or scholarships the student receives.

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Last week the Government Accountability Office (GAO) released a report highlighting weaknesses in the Department of Education’s budget estimates for income-driven repayment (IDR) plans for federal student loans. The Department agrees with and is already working to implement many of the GAO’s recommended changes to its methodology, some of which will increase estimated costs, while others will decrease them.

Meanwhile, most of the media coverage of the report has focused on GAO’s projection that $108 billion of loan principal will end up being forgiven under IDR and Public Service Loan Forgiveness (PSLF) for loans taken out between 1995 and 2017. However, this does not mean those loans will cost taxpayers $108 billion. The amount of debt forgiven is only one part of the equation to determine the net cost of IDR plans to the federal government. A borrower can receive forgiveness in an IDR plan and still pay more in total than she would have under a different repayment plan.

Consider a borrower with $40,000 in federal loans and $40,000 in adjusted gross income (AGI) in her first year out of school. She would pay almost $8,000 more in total in the Pay As You Earn (PAYE) plan than in a 10-year fixed repayment plan ($57,000 versus $49,000), even though she would receive nearly $8,000 in forgiveness under PAYE.* The GAO recognizes this fact in their report, agreeing that “it is possible for the government still to generate income on loans with principal forgiven, particularly if borrower interest payments exceed forgiveness amounts.” (p. 50).

Ultimately, the cost of the federal student loan program is determined by comparing how much the government lends with the amount that borrowers pay back and the cost of administering the program. Doing this, analysis of CBO data reveals the government is actually making money from the federal student loan programs. In fact, CBO estimates savings of $81 billion from federal student loans over the next 10 years alone, even after accounting for increased enrollment in IDR plans.   

Access to affordable, income-driven payments and a light at the end of the tunnel are essential for borrowers in an era of rising college costs and student debt. The GAO reported last year that 83% of borrowers in PAYE earned $20,000 or less in annual income, and recommended that the Department increase outreach to help more struggling borrowers learn about and enroll in IDR plans. IDR provides real relief for borrowers and helps them stay on top of their payments. Data show that borrowers in IDR are less likely to default or become delinquent than borrowers in standard plans.

Nonetheless, while IDR helps ensure that federal student loan payments are affordable and helps prevent default, it neither reduces college costs nor ensures that students and taxpayers are getting value for their investment in college. More needs to be done to strengthen college accountability and reduce student debt. For example, students need better information on program costs and outcomes, and the gainful employment rule needs to be enforced to ensure taxpayers are not subsidizing career education programs that consistently leave students with debts they are unable to repay. You can read more about our national policy agenda to reduce the burden of student debt here

* Note: these calculations assume that the borrower is single, her AGI increases 4% a year, and the average interest rate on her loans is 6.8%. Total amounts paid and forgiven are adjusted for inflation.

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This post was updated on 3/20/17 to reflect repayment rates revised in January, 2017

In an effort to hold colleges accountable, the U.S. Department of Education measures how many borrowers from a college default on their loans – a “cohort default rate” which measures just the tip of the borrower-distress iceberg. In conjunction with its College Scorecard, the U.S. Department of Education has also begun releasing college repayment rates, which measure the share of borrowers paying down the principal balance on their federal loan debt.  

As the Department states in its College Scorecard documentation, default rates “can be manipulated through the use of allowable nonrepayment options like deferments and forbearances” which serve to temporarily keep default rates down and colleges in compliance with federal limits on defaults. Indeed, some for-profit colleges have admitted to doing just that.

While available default and repayment rates have some differences (most notably, default rates include graduate students and the repayment rates do not), they are comparable enough to identify trends and outliers. Comparing default rates and repayment rates tells you about how many students have avoided default but still aren’t paying down their loans: perhaps they’re delinquent, in forbearance or deferment, or in a repayment plan where their balance is growing rather than shrinking. And in schools where default rate manipulation is occurring, this group of borrowers – the missing middle group of those neither in default nor paying down their loans – will be atypically large. 

Across all schools, this missing middle group makes up about 44 percent of borrowers three years into repayment on average. But at 456 schools, 60 percent or more of borrowers are neither in default nor paying down principal. The vast majority of these schools (78%) is for-profit colleges, including Kaplan University which previously hired private investigators to track down former students to put them in forbearance. It includes CollegeAmerica, sued by the U.S. Department of Justice for violating rules on incentive compensation and by the Colorado Attorney General for fraud. It includes National College, which last August was ordered to pay $157,000 to the state of Kentucky for its years-long refusal to comply with a subpoena related to potential job placement rate falsification. It includes now-shuttered Westwood College, which had faced charges of deceptive marketing and recruiting for years and been sued by the Colorado and Illinois Attorneys General. Computer Systems Institute and Marinello Schools of Beauty, both of which were cut off of federal aid after this year having been found in violation of several federal rules, also made the list. This group of schools also includes some Everest College campuses that remain open for business. While Everest schools have new corporate management, the former CEO had this to say about managing cohort default rates during a 2011 investor call: “Forbearance, as you well know, is a pretty easy, just a question you have to agree to it and you’re on your way.”

​Forbearance abuse for the purpose of evading accountability is well documented in the for-profit college sector, but has not been documented at other types of institutions. The pie chart below shows the distribution of schools where 60 percent or more of borrowers are neither in default nor paying down their loans three years into repayment, and the list of schools is available here

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This post was updated on 3/20/17 to reflect repayment rates revised in January 2017

New Department of Education data released in conjunction with the College Scorecard clearly show how much student loan repayment rates vary by whether or not a student completes their program and the type of school a student attends. Repayment rates in the College Scorecard measure the percent of undergraduate federal student loan borrowers making any progress on paying down their debt (i.e. the share that have paid down at least $1 of their balance when they entered repayment).

As shown in the table below, borrowers who do not complete their program are less likely to be paying down their debt than those who graduate (34% versus 60%). We also found that, for both students who finish their programs and those who do not, repayment rates vary substantially based on the type of college they attend, with students who attend for-profit colleges being the least likely to be paying down any of their federal student loan balance. 

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This post was updated on 3/20/17 to reflect repayment rates revised in January 2017

The U.S. Department of Education recently released new data on college costs, outcomes, and debt in conjunction with their College Scorecard – a helpful tool for students and families and a treasure trove of data for analysts. 

We took a look at the data to find some of the schools where debt problems are particularly severe: the schools at which the majority of students borrows, and a minority of borrowers is paying down their debt three years into repayment. We identified nearly 1,500 schools that met these criteria. For-profit colleges make up 70% of the 1,478 schools. Of the remaining 447 colleges that meet these criteria, 247 are nonprofit colleges and 200 are public colleges. These data are detailed in the table below, and a list of the 1,478 schools is available here

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The cost of going to college is more than just tuition: it includes textbooks, transportation, housing, food, and other personal expenses. Long defined by federal law, these combined costs are called the “cost of attendance” (COA). Colleges are required to give the U.S. Department of Education (the Department) estimated COAs for their students every year. These estimates play an important role in determining students’ financial aid eligibility, and in helping students and families understand the full cost they’re likely to face at a particular school. But some estimates greatly understate those costs because of the way the Department collects them.  

Bear with us while we explain the problem and what we learned about its implications.

How Costs are Estimated and Reported

Because students’ costs can vary widely depending on their living situation, colleges often develop three distinct COA estimates: for living on campus, at home (with family), and off campus (without family). Colleges have considerable discretion over how they estimate each type of cost that comprises the COA, but federal law specifies which types to include: some are for all students, such as textbooks and room and board (housing and food), while others, such as childcare or disability services, are applied only to students who need them.[1]

Schools report their COA estimates[2] by type of cost and by living status through the Department’s Integrated Postsecondary Education Data System (IPEDS) Student Financial Aid (SFA) survey. These figures are used in consumer-facing websites, as well as to calculate the “net price” estimates displayed on tools like the College Scorecard and on many colleges’ Net Price Calculators. (Net price is COA minus grants and scholarships: it’s what students need to cover through savings, earnings, and/or loans.) 

These tools provide students and families with more meaningful cost estimates than typical sticker price listings, but their accuracy is undermined by the fact that they rely on incomplete COA data. This is because the IPEDS SFA survey does not let schools report estimated room and board expenses for students living at home as they do for students living on campus or off campus without family. Why not? It may be that those who designed the IPEDS COA survey questions presumed that schools do not account for any room and board costs in their COA budgets for students living at home, or even that these students don’t incur living costs in the first place. However, for many students, living at home isn’t free; a 2015 survey of low- and moderate-income Wisconsin students found that three in four students living at home purchased food and 39 percent paid rent. Unsurprisingly, then, we have seen that many colleges do recognize that students living at home incur expenses for room and board, and factor them into their COA estimates as federal law allows (and used to require). Wherever this is the case, federal data on college costs and net prices are understated.

Our Analysis

To better understand the scope of the problem and its implications, we selected a random sample of 50 colleges (25 public four-year and 25 public two-year schools) and collected COA data from an alternate source: student aid budgets posted on college web sites or available from financial aid offices. We limited our analysis to schools that reported at least 10 percent of students living at home.[3] For each of these schools we examined whether their COA estimate for students living at home included a room and board allowance, and, if so, how much that allowance was. Our findings confirmed colleges’ widespread acknowledgement that students living at home face significant room and board expenses.

Of the 41 colleges for which we were able to collect alternative COA data to compare with IPEDS,[4] we found:

  • All 41 colleges assume some room and board cost for students living off-campus with family, contrary to assumptions that schools provide no such allowance.
  • Room and board allowances for students living at home range from $1,350 to nearly $8,000 per year. Two-thirds of the colleges (27 out of 41) listed allowances of $3,000 or more.
  • Two of the 41 colleges appear to have reported room and board allowances for students living at home to IPEDS by adding them into the “other expenses” category. While doing so results in more comprehensive federal calculations of costs and net price, this practice runs counter to IPEDS instructions, which state that room and board costs are not to be reported for these students.[5]
  • Thirty-nine of the 41 schools provide room and board allowances that are partially or completely excluded from IPEDS reporting.

         Las Positas College Net Price Calculator*

        *Results for a student living at home with less                            than 30,000 in family income

Implications for Cost and Net Price Estimates

These exclusions have significant impacts on colleges’ cost and net price estimates. For example, Las Positas College – a community college in California – estimates that students living at home have room and board costs of $4,518 in 2013-14. Yet the institution’s net price calculator (NPC) lists an estimated room and board budget of $0, because the school used a federal NPC template that drew on incomplete IPEDS COA data for 2013-14. Had the NPC properly factored in room and board costs, the net price listed for a low-income student living at home would have been $7,407, more than two-and-a-half times the listed net price of $2,889.

How much of an impact it has on college-level figures, or aggregate figures at the state- or national-level, depends on the share of a college’s student body that lives at home. At 24 of the 41 colleges we analyzed, more than half of the students used in the calculation of federal net price by income lived off-campus with family. This means that:

  • Federally collected and widely used COA figures for these colleges are often understated by thousands of dollars, as they don’t reflect the comprehensive COA budgets colleges develop.
  • The net price calculations displayed in consumer tools like the College Scorecard can be substantially understated.
  • Personalized estimates provided by colleges’ own NPCs might be understated if they use the federal NPC template.

The exclusion of these room and board costs in the federal data affect net prices for community colleges more than other types of schools, because community colleges have the greatest share of students captured in the data living at home. However, the problem isn’t limited to public, two-year schools. There are more than 1,000 colleges in other sectors across the country where at least half of students counted in the federal net price data live at home.

The Solution: Collect Room and Board Estimates for All Students

Consumer tools that rely on federal data are designed to provide students and families reliable and comparable college cost estimates – something they cannot do given the way COA data are currently collected in IPEDS. Fortunately, the solution is simple: Expand the IPEDS SFA survey to include room and board estimates for students living at home.

[1] The standard cost categories are tuition & fees, room & board, books & supplies, and other expenses (transportation & miscellaneous personal expenses).

[2] Colleges report COA estimates for first-time, full-time, full-year students. Estimates include standard cost categories that apply to all students, but not specialized cost categories.

[3] Enrollment by living status is reported for first-time, full-time Title IV aid recipients.

[4] At the remaining nine colleges, we could not find COA budgets listed on their websites and did not receive responses to our queries about COA. Our analysis incorporated the latest available cost of attendance budgets through the 2015-16 academic year, and cost of attendance data reported to IPEDS for 2013-14, the latest available survey year for IPEDS SFA net price by income cohorts.

[5] 2015-16 IPEDS survey materials make clear that for students living off-campus (with family), room and board costs are not reported, only other expenses.

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The final gainful employment rule released last week eliminated a key accountability measure for career education programs. As a result, many programs that would have failed the draft rule will now pass the final rule.  While some have argued that this change was made to benefit public institutions, it’s clear that for-profit colleges – and the University of Phoenix in particular – were the biggest winners.

The draft rule released in March measured career education program outcomes in two ways. First, the debt burdens of program graduates who received federal aid would be compared to their later earnings. Second, students’ ability to repay their loans – including both graduates and noncompleters – would be measured through a program-level cohort default rate, or pCDR. But the final rule uses only one measure: the debt to earnings ratio of program graduates, or DTE.

There are 682 programs that failed the draft rule’s pCDR test but pass the final rule (including those exempted because they have very few graduates). The vast majority of these programs - 89% - are at for-profit colleges, and for-profit college programs account for 97% of the now-passing programs’ defaulters. University of Phoenix programs alone account for 43% of the defaulters at programs that pass the final rule because the pCDR was eliminated.

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In May, we wrote about the 114 career education programs from which more students default than graduate (it’s actually even worse than that since they have more defaulters in one year than graduates over two years). With Corinthian Colleges now preparing to sell or close all of its campuses, it is worth noting that Corinthian runs 25 of the 114 programs with more defaulters than graduates.

These programs are shockingly bad. Everest College Phoenix Associates’ programs in Securities Services Administration and Management, and in Business, Management and Marketing both had more than three times as many defaulters as graduates. Everest University in Tampa has an Associate’s degree program in Computer and Information Sciences that also has three times as many defaulters as graduates.

An effective gainful employment regulation would help protect students and taxpayers from schools like Corinthian. By enforcing the law requiring career education programs to prepare students for gainful employment in a recognized occupation, a strong rule would hold programs to clear outcome standards and measure their performance against those standards regularly. It would force the worst performing programs to improve or lose eligibility for funding before burying countless students with debts that may haunt them for the rest of their lives.

We and more than 50 other organizations submitted written comments urging the Education Department to improve its draft gainful employment rule to better protect students and taxpayers, including by requiring schools to provide financial relief for students in programs that lose eligibility, limiting enrollment in poorly performing programs until they improve, and closing loopholes and raising standards. If a rule with the changes we called for had already been in effect, Corinthian would long ago have had to rapidly improve or close programs in a way that better protected students and taxpayers.

The final gainful employment rule will be too late to protect Corinthian students, but it is not too late to protect the millions of students enrolling in other schools’ career education programs and the taxpayers who subsidize them.

Click here for a sortable list of the 114 programs with more defaulters in one year than graduate over two years. To read the New York Times editorial on our May blog post, click here.

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As the Department of Education works on a final rule to stop federal funding for career education programs that over-promise and under-deliver, it needs to close loopholes to prevent unscrupulous colleges from gaming the system.

Under the draft regulation, career education programs would be judged by two different tests: how the debt of their graduates compares to later earnings, and how many of the programs’ borrowers default on their loans.  Programs that consistently exceed allowable thresholds of debt-to-earnings or rates of default would lose eligibility for federal aid.  While many in the for-profit college industry complain that the tests are too stringent, the data show the exact opposite and that the rule needs to be strengthened.

Exhibit A for a tougher rule is the fact that 20 percent of the 114 parasitic career education programs – those where more students default than graduate – would pass the proposed tests. And exhibit B would appear to be Education America Inc.’s Remington College, a formerly for-profit chain that began operating as a nonprofit in 2011.

Data released by the Department in conjunction with the rulemaking show three large certificate programs that have a collective repayment rate of 12 percent – meaning only 12 percent of borrowers are paying down their debt. The three are large medical/clinical assistant certificate programs at what appear to be Remington’s Texas, Ohio and Alabama campuses. (Some of the data files released by the Department do not include college names so only the Department can confirm which college’s programs these are.  However, looking across multiple data files, including a file with college names, strongly suggests these three low-repayment programs are the Remington programs.)

To make matters worse, these three programs would not fail under the Department’s draft regulation– the one that industry complains about being too strict.  Despite the extremely low repayment rate, the aggregate cohort default rate for the three Remington programs is only 14 percent, far below the threshold of 30 percent. Such a low rate of borrower default from programs where hardly any borrowers are paying down their loans suggests the college may be manipulating their default rates by putting former students in forbearance during the window when default rates are being measured – regardless of whether it is in the borrowers’ best interest to do so. In fact, a Remington College executive said as much in 2009, noting that “we’ve known all along what [the Department] finally figured out,” that borrowers receiving forbearance and deferment were later defaulting on their loans once it stopped tracking defaults after two years. The Department then changed its default monitoring to a broader three-year metric. “They [the Department] decided we were getting off too easy,” the Remington executive noted. (Note that colleges can and do manipulate three-year default rates, but it takes more work to do so than for two-year rates.)

Programs where most students borrow and the vast majority of borrowers cannot repay their loans should not keep enrolling students receiving federal aid. The Department could close this loophole in the gainful employment rule by instituting a repayment rate in addition to the other tests. It must also prohibit unscrupulous schools from manipulating their program default rates or their repayments rates by making small payments on behalf of former students.

Read more about these issues and recommendations in our comments on the Department’s draft gainful employment rule. -Debbie Cochrane

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