Thursday, October 11, 2012

UT's Plan to Promote On-Time College Degrees: Will Financial Incentives Help?

The good folks out at Texas's other flagship research university have concocted a plan to create incentives for undergraduate students to complete their degrees on time. The university will forgive portions of students' unsubsidized federal student loans (those are the student loans that accrue interest while the student is in school) for students who stay on schedule to complete their degrees. The press release announcing the plan says, in part:
The University of Texas at Austin is testing a program to measure whether students can be encouraged to complete their degrees quickly by offering them forgiveness of the most expensive loans they must borrow to attend the university....

For this pilot project, the university will select 200 freshmen entering in the fall of 2013 who have been awarded Federal Direct Unsubsidized Loans on the basis of financial need. Half of the students would be offered loan forgiveness in the amount of $1,000 on the principal, plus interest accrued if they successfully complete 15 hours of their degree requirements by the end of each semester. The other half would be offered $2,000 in forgiveness, plus interest accrued, if they successfully complete 30 hours of applicable degree requirements by the end of the academic year.
UT's goal to increase timely completion of students' degree programs is laudable. Yet, I doubt that this program will successfully reduce students' time to completion.

In-state tuition at UT is roughly $10,000 a year for in-state students and $25,000 annually for out-of-state students. Throwing in room, board, fees, books, transportation, and other costs, and Texas residents can can expect to spend over $24,000 a year to attend UT with nonresidents shelling out between $40,000 and $50,000 annually. An incentive of $2,000 for staying on track to complete a degree in four years is great and all, but it amounts to something like 2-4% of the average cost of attendance at UT. If a student is not dissuaded from extending their time at the University of Texas by the relatively large price-tag of staying an extra year (or two), it seems unlikely they will be convinced to do so by the pilot program's relatively modest tuition rebate.

A bigger problem is that the program seems to misconceptualize why students aren't finishing degrees on time in the first place. Students (and their families) have huge financial incentives for finishing degrees on time. By doing so, they avoid the expense of additional education and earn the ability to work full-time with the wage premium that accompanies a college degree. Many students stay in school longer than four years despite costs (and opportunity costs) for doings so that are orders of magnitude larger than the UT pilot program's rebate. The problem, therefore, is unlikely to be redressed by marginal and naive price adjustments.

In my experience, many students who extend their time in college beyond four years tend to fall into one of two categories. The first are students who were not academically or personally ready for college when they arrived as freshmen and have stayed beyond a fourth year to re-take courses they failed or did poorly in when they first arrived. The second are students who got off-schedule due to various circumstances beyond their control: illness, childbirth, financial problems that required leaving school or taking on paid work at the expense of a full course load, etc. Neither of these groups are likely to be pulled onto a four year degree program by the lure of a couple of thousand dollars of tuition remission.

Instead, universities, including UT, will have to do the harder work of making sure that incoming freshman are placed in appropriate courses given their level of preparedness (including remedial courses if need be) and providing services and support to students with common personal and economic problems to help them stay on track for timely completion of degree programs when possible or to return to a normal academic program as soon as possible. These tasks are especially daunting for public institutions like UT and Texas A&M, who have limited control over their own admissions and enrollment given various state mandates. Yet, universities that take seriously their educational missions in general, and the growing imperative to help students manage the costs of their education by completing their degree programs in a timely fashion in particular, should not be satisfied with superficial efforts. Indeed, a serious effort to investigate the problem of extended degree completion, to understand its causes, and to develop effective interventions should be a top priority for UT and higher education as a whole.

1 comment:

  1. If this plan would be pursued, then a lot of locals from Texas would surely give try on having classes that could help them have online college degrees.