Republicans and Democrats are fighting over education issues at every level of government. But when it comes to one topic in education, there seems to be a meeting of the minds: tuition prices are out of control, and the federal government—which finances most colleges through grants and loans for tuition—needs to do something about it.

Republicans announced that “staggeringly high prices” at colleges and universities would be a prime target at the first hearing of the House Committee on Education and the Workforce, and Chairwoman Virginia Foxx joined a number of her colleagues in introducing legislation that would open up Pell Grants to short-term programs, but only if they could show that they increase earnings more than the tuition they would be charging. Meanwhile, the Biden administration, led by Undersecretary James Kvaal in the U.S. Department of Education, formally opened a thirty-day comment window on the question of how the federal government could identify college majors and training programs that are bad deals: a list of programs that offer “low financial value.”

Lobbying groups for colleges mostly weighed in defensively on the Department of Education’s question, arguing that the benefits of higher education are too varied and complex to be subjected to any financial measure. Comments from NAICU, the lobbying group representing nonprofit colleges, oddly raised as a supposedly ominous specter the government “directing students on where and what to study.” It is a strange argument, since their member colleges benefit enormously from the government providing grants and loans for their colleges in particular.

A former student who said her school turned out to be a “diploma mill” made clear the way that federal aid can prop up substandard, overpriced college programs: “I attended this school primarily because I could use FAFSA loans to pay tuition. By offering me government backed student loans, it appeared that the school had been vetted by the Department of Education and I would be provided with a quality education.” She argued that for-profit colleges, like the one she attended, should not be eligible for federal aid.

Some commenters recommended a measure based on the career success of the graduates of a program, such as salaries that—at least on average—are enough to cover tuition or pay off student loans. The Council for Christian Colleges and Universities countered that their colleges are focused not on future salaries but on preparing graduates “who make a difference for the common good as redemptive voices in the world,” including being “called to use their vocations as vehicles to aid the marginalized, the underserved, and the oppressed.”

Six Red-light Green-light indicators

The Christian colleges are right that the measures used for the career-focused programs through which for-profit companies are allowed to access federal aid—the Gainful Employment rule’s ratio of debt and earnings—is too narrow for traditional colleges. At the same time, prospective students at all colleges, including the public, nonprofit, and religious colleges, deserve to know if a program’s cost is far out of line with the likely monetary benefit.

In my comment I suggested that the Department of Education avoid the use of a single measure of a college program’s value, and instead provide information—using a traffic light system of green, yellow, or red—on six different indicators. Under the approach I recommend, no college program could boast of having green lights on every indicator, underscoring for prospective students the importance of studying and comparing their options.

In addition to an indicator based on the Gainful Employment measure, the approach I suggest would alert a student—using a red traffic light—when the company recruiting the student is for-profit. That would include any program at for-profit colleges, and would also include programs being promoted by for-profit contractors, such as online program management (OPM) companies, getting tuition bounties from nonprofit and public institutions. A company that enrolls students for profit has a higher likelihood of using aggressive sales practices and failing to adequately counsel students. Prospective students should be aware of this greater risk. No school—for-profit, nonprofit private, or public—would get a green light on this indicator, since any school may have reasons to be overly aggressive in their recruitment. Students should always be cautious, knowing that there could be an element of selling going on.

Another indicator would relate to how the college spends its tuition money. If a student’s tuition dollar is largely spent to provide instruction and student support, then the program is green lighted. Less so, it gets a yellow or red light.

Since nearly half of students who start college do not finish, I recommend an indicator that focuses on the financial consequences for those non-completers: How many of them leave college with substantial debt?

Finally, I recommend including an indicator on the measure of market price. If employers or students and their families are paying the tuition without federal aid, that suggests that they have judged the educational experience—whatever the earnings or other outcomes—as worth the tuition price. Programs in which a critical mass of domestic students are paying the tuition without aid would get a green light. For those that do not have a critical mass, the red or yellow would depend on the other indicators: the danger that an institution is taking unfair advantage of students by inflating tuition is lower, for example, if it is putting the resources into teaching and learning and graduates are seeing the financial benefits.

Accounting for the Indicators

While discussions of the value of college often refer to the value of particular programs, reporting out these indicators at the program level doesn’t always make sense. A “program” as currently defined by the U.S. Department of Education is too narrow to make sense for many prospective students as—particularly at the undergraduate level—students often enter without a declared major, and even when they do have a major in mind they frequently change their minds. For some indicators, I recommend a measurement at the “division” level. A division would be the combination of programs at a particular degree level that students enter into. For example, at a comprehensive university, the arts and sciences college (into which students matriculate with one tuition price and one set of admissions standards) would be one division, while the law school would be a separate division. The business school might have two divisions, one for the on-campus selective MBA program, and another for the less-selective, online executive MBA program. In schools with in-state versus out-of-state tuition, the two should be treated as separate divisions (solely for the purpose of calculating value).

Division-level accounting will emulate the natural categorization that a university already uses when it determines how much of a financial drain or gain a particular portion of the college is to the institution overall.

Looking Ahead

Choosing a college or a college program is a complicated endeavor, involving numerous considerations that are financial and emotional, and that often shift with time and experience. The availability of financial aid makes enrolling in college easier for those with limited resources, but in the process the prospective students may not be aware of signs that an option they are considering comes with risks. The multiple indicators I recommend give prospective students a variety of ways of judging the value and risks of the choices they are considering.

Steps beyond providing students with these indicators are warranted, however. In the past, “information” has proven to be an ineffective solution to the problem of overpriced and substandard educational programs. The federal government must recognize that the availability of its grants and loans for a program are tantamount to an endorsement, regardless of any other information that is provided. Therefore, the federal government should take additional action to ensure that they do not finance programs that fail to meet minimum measures of value.