The Need for Strong State Postsecondary Education Systems
Postsecondary education is an engine of states’ economies, supporting local and regional labor markets, attracting well-paying employers, and bolstering states’ finances through higher-earning graduates. For individuals, earning a college credential is associated with higher employment rates and wages, better health, and strong civic participation, among other benefits.
However, there are far too many students who do not reap these benefits: Nationally, 2 in 5 students do not graduate even six years after they start school.4 And too many programs and colleges charge too much while leaving graduates in jobs that pay too little, undermining the promise of higher education.
State policymakers have an important role to play in driving change to better support students and the communities in which they live.
Challenges
GOVERNANCE
States oversee public colleges, which enroll three out of four undergraduates nationwide, and authorize public and private institutions to operate in a state. This oversight is conducted largely through the approval and review of public colleges’ programs that often ask simply whether the programs are aligned with the institution’s mission, whether they duplicate similar programs at other institutions, and whether they are generally aligned with student and workforce demand – not whether they ultimately pay off for students and taxpayers. There is an opportunity for states to leverage their oversight authority more effectively to ensure higher education programs offer meaningful value.
STATE FUNDING
States invest more than $110 billion each year in support for colleges – nearly as much as the federal government spends through Pell Grants and student loans. However, most dollars do not flow to institutions in ways that incentivize performance or support evidence-based improvement efforts. States can develop funding formulas and direct investments that better incentivize and support stronger outcomes for students and increased ROI for the public while also addressing the unintended consequences seen in past iterations of outcomes-based funding.
Policy Solutions
GOVERNANCE
- Ensure Appropriate Governance of State Data Systems
State data policies must provide a sustainable governance structure and enable meaningful analysis to improve postsecondary student outcomes. To do so, state legislation could require:
- The statewide longitudinal data system (SLDS) to connect student-level higher education data with labor-market and other outcomes data in a timely and transparent fashion
- Data partnerships across agencies, enabling policymakers and researchers to assess institutional and programmatic outcomes or conduct rigorous independent analysis
Data analysis tools that provide information for both students and policymakers to inform decision-making
2. Define Credentials of Value
Having access to data is a necessary first step, but it is not enough on its own to improve outcomes. Data can be used to identify high-performing programs for increased investments and low-performing programs to be improved or eliminated. To do so, states could:
- Develop a clear definition of “credentials of value” by establishing a minimum threshold to ensure the typical student earns more than the average high school graduate in the state
- Develop higher thresholds for continuous improvement, offer incentives and rewards for high performance, and use these to signal greater value to students and the public
3. Leverage the “Credentials of Value” Definition for Programmatic Approval, Renewal, and Oversight
States can strengthen their programmatic oversight of higher education by incorporating data on the labor market needs and likely returns for students and taxpayers into their oversight and review of new and existing programs.
States could improve the approval and review process by:
- Requiring all new program approval requests to include analyses of labor market need and show how new programs will prepare graduates for high-wage, in-demand jobs
- Ensuring all academic programs are regularly reviewed to assess whether a given program is meeting its state’s established credential of value criteria
- Developing a system of graduated accountability to address programs that do not meet a state’s credential of value criteria
- Regularly reviewing the authorization of private and out-of-state colleges to ensure institutions meet the state’s criteria for offering credentials of value
STATE FUNDING
Establish funding formulae that reward schools that deliver positive outcomes, adopt effective student success practices, and ensure graduates receive credentials of value.
States could use their funding formulae to reward positive actions and incentivize improvements while preventing unintended consequences. To do so, states could:
- Ensure an outcomes-based funding formula ties aid to the completion of credentials of value and construct the formula to reward institutions that increase access and success, especially for low-income and underserved students
- Include necessary operating funds for colleges to invest in improving student outcomes
- Avoid capping the total amount of funding available statewide through the outcomes-based funding formula, which can disincentivize institutions from making strategic decisions to improve ROI
- Require the adoption of evidence-based practices at underperforming institutions
- Establish dedicated funding streams for student support interventions that have rigorous evidence of impact
