US Chamber of Commerce

We started the lead-up to the June 19th release of our report, Leaders & Laggards: A State-by-State Report Card on Public Postsecondary Education, with a look at the skyrocketing costs and inefficiency of higher education in the blog “One Really Expensive Graduation Party.” The second part of the series went into more detail on one of the leading causes of that inefficiency, discussing outcomes in “Completion Rates Still Smell Bad by Any Other Name.” In part three of the series, we’re taking it one step further by examining state higher education policies, and whether or not they’re supporting greater efficiency.

One of the leading contributors to the inefficiency of institutions in producing degrees is that students too often have to take far too many credits in pursuit of completion. This phenomenon was best illustrated by a 2011 report by Complete College America, titled Time is the Enemy. That report showed the average student pursuing an associate’s degree takes 79 credit hours before graduating—nearly a third more than the 60 credits they should need to take. The average bachelor’s candidate takes 136.5 credit hours instead of the typical 120 hours, or nearly 14% more credits than they need. That all adds up to a rather significant—and wasteful—sum of money for both students and taxpayers.

State policymakers can do their part to help by creating robust, well-defined policies regarding the transfer of credit from one institution to another. As nearly half of all students are taking classes somewhere other than the institution at which they will ultimately earn their degree, having clear policies in place to help students transfer their paid-for credits easily can take a significant financial load off of state systems.

Unfortunately, while most states do have an established credit transfer policy, too many of them are ill defined. Many leave it to the arbitrary discretion of the recipient institution, which has a direct financial incentive to decline the transfer of credits in order to force the student to re-take those courses and pay additional tuition to the school. Worse, these policies make it unnecessarily difficult and confusing for students who wish to take courses elsewhere. This is a growing problem with the rise of online learning, which enables students to take particular courses at other schools easily if, for example, they need a specific course to graduate that is not being offered at their home institution.

Credit transfer is far from the only policy states can adjust to improve efficiency. Another example teased out in part 2 is the concept of outcomes-based funding. Most states appropriate funding for institutions solely on the basis of enrollments. Since schools will receive their funding regardless of outcomes, there is no direct, financial incentive for them to improve graduation rates. In fact, as I previously mention, there is often a financial incentive in place to erect barriers to on-time completion. Outcomes-based funding changes that by linking a portion of a school’s annual funding to one or more performance metrics, such as graduation rate. We don’t pretend to know what portion constitutes the proper balance—that’s best left to an individual state to determine. However, having outcomes-based funding in any capacity demonstrates mindfulness to efficiency that is generally lacking in higher education.

Of course, the simplest thing a state can do to improve its higher education system is to just establish goals. It’s fairly straightforward—if states care about the performance of their institutions, it should set non-arbitrary benchmarks for success. Those benchmarks can be to beat a national average, to gain over prior year performance, or just be the best in the region. Here again, however, we found a saddening disinterest in self-reflection and improvement on the part of most states. California, however, set a new low, with their own 2010 Master Plan brazenly stating directly that, “The State of California has no articulated, comprehensive statement of goals for California’s system of higher education.” If that doesn’t send a particularly strong message of “we don’t care,” I’m not sure what would.

However, it’s important to note that they’re able to get away with not caring because they don’t provide either students or stakeholders (policymakers, employers, taxpayers, etc.) with the kind of information they need to properly scrutinize their investments in higher education. In part four of the series, we’ll examine the state of transparency and accountability in higher education. Of course, you can find out how your state is performing in all of our metrics on June 19th, when we officially unveil Leaders & Laggards. We hope you’ll join us, and you can start by registering for the event here for free.

Domenic Giandomenico is Director of Education and Workforce Programs for ICW