NCPA - National Center for Policy Analysis

The Crisis of Data in College Admissions

October 6, 2011

Compared to other large investments that Americans make, the information that prospective students have about college costs and quality is woefully incomplete, says Andrew P. Kelly, a research fellow at the American Enterprise Institute.

Prospective students even have a tough time finding out how much a degree will actually cost them.  Colleges engage in what's called "price discrimination:" they set a "sticker price" for their tuition and then tailor financial aid packages based on student characteristics to reduce the price that students actually pay.

These information asymmetries cut two ways.

  • On the one hand, they doom far too many students to invest their time and money (as well as your tax dollars) in colleges and universities that do not provide a return on that investment.
  • On the other hand, these underinformed decisions combine to create a market that cannot exert competitive pressure on low-performing colleges to improve.

In order to solve this market failure, we need to develop better measures of college costs and quality and more innovative ways of providing that information to consumers when they need it.

Fortunately, concerns about student debt and the performance of for-profit colleges have placed higher education transparency on the agenda:

  • As of October, federal law requires colleges and universities to host a "net price calculator" on their website that will enable prospective students to estimate what they can expect to pay given their family income.
  • The Department of Education is now linking to information about graduates' employment outcomes.
  • The Open Government Initiative has invited the country's top web developers to create applications that unlock federal data and provide it to prospective students in a format they can use.

Improved transparency is no panacea.  Without better information about quality and costs, too many college students will continue to make bad investment decisions, harming both their own economic prospects and those of the country.

Source: Andrew P. Kelly, "The University Is a Black Hole: The Crisis of Data in College Admissions," The Atlantic, September 26, 2011.

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