Consumers often look for external validation that what they are purchasing is of good quality. Goods such as cars, food, among others, are often given external certification to attest to the validity of the product. The accrediting body which grants that certification is responsible for measuring the quality of the product, and will only issue a certification if the quality is high enough. This means that, for consumers, accreditation on consumer goods is reliable — they know which goods are of a high quality, and which may not be as good.
The U.S. higher education system also depends heavily on accreditation by institutions, although accreditation was developed by the colleges themselves, rather than an external body. In higher education, accreditation is designed to show that a college is performing well and is offering students a good education, but the system has fallen short of achieving that goal. One of the only things both Republicans and Democrats agree on in Capitol Hill is that the accreditation system is deeply flawed. Prior investigations have demonstrated that accreditors, over the years, have failed to ensure a high quality in higher education. Despite these flaws, the entire industry depends on the work of accreditors to verify the authenticity and quality of colleges — therefore, subpar accreditation standards affect the entirety of higher education.
Why the Accreditation System is Broken
The accreditation system is incredibly complex, and is comprised of dozens of different agencies that offer certification to colleges. In order to access federal student aid, all colleges — public, non-profit, and for-profit — must gain accreditation from one of the many accreditation bodies. Federal student aid is a critical part of student financing packages, and so most colleges would not be able to survive without access to the capital. Further, though, accreditation acts as a signal to the public of the quality of a school’s education, and institutions that are not accredited cannot legally confer degrees — thus, nobody would attend the institution. Accreditation plays a key role in higher education, but accreditation bodies have a poor track record when it comes to evaluating schools, and revoking certifications from institutions that are no longer performing. Further, the Department of Education has not been active enough in overseeing the actions of accreditors; many accreditor sanctions do not see a response from the Education Department.
The first problem with the accreditation system is that accrediting bodies do not focus enough on student outcomes at colleges — the success rates of graduates, usually measured by salaries, job placement rates, graduation rates, or through other similar metrics. There are no legal guidelines in the Higher Education Act — legislation that governs a significant portion of higher education — surrounding how accreditors should evaluate student outcomes. There are references in the Act to evaluating “student achievement in relation to the institution’s mission”, but the lack of specifics mean that most accreditors do not weigh outcomes as much as they should. Instead, accrediting bodies heavily weigh the financial health of an institution. Schools — especially for-profits — that are not generating enough revenue are more likely to receive a sanction or have their accreditation revoked, even if they are generating good outcomes. Indeed, financials are important — and, to an extent, give an insight into student success — but this creates a poor incentive for institutions.
Financial health also allows an accrediting body to determine whether or not a school will fail, which will generate bad publicity for the accreditor. Colleges going bankrupt or suffering financially often make the headlines more than low graduation or placement rates — although this is changing as the debate over skin in the game evolves — and so accreditors are more likely to focus on financial metrics. If financial health is so heavily weighed, then colleges are incentivized not to innovate, but to increase their bottom line. Therefore, they are more likely to increase tuition — evident by the significant increases in tuition over the last few decades — and focus more on revenue-generating operations over services the college offers at a loss.
The Accreditation System Stifles Innovation
Another problem with accreditation is that they have a lot of sway in how colleges offer their educational services, and so have the ability to stifle innovation. Tiffin College, based in Ohio, was issued an order in 2013 by their accrediting body to shut down their Ivy Bridge program. This program was an autonomous online department that was designed to help increase access to their services and was an exploration of how internet-driven learning could help the school offer better quality services to their students. The program — despite being given initial applause by their accreditor, the Higher Learning Commission (HLC) — was eventually shut down because HLC said that the body had too much control. This program could have had a major impact on the higher education landscape and yielded valuable information about the efficacy of digital learning solutions, but the accreditor shut it down.
Southern New Hampshire University created a program called College for America (CfA) in 2012 which was a competency-based, self-paced, online program that cost students $3,000 per year. This program, like Tiffin’s, was an autonomous entity and thus given a lot of control over its operations. However, unlike Tiffin, the school’s accreditor, the New England Association of Schools and Colleges, approved the structure and allowed the program to go ahead. Institutions that are able to innovate are those who have a good and progressive regional accreditor as well as strong finances — if a college has a restrictive accreditor, it could significantly influence their ability to innovate. At a time when more people are calling for college to move into the 21st century, colleges are suffering due to the heavy control that accreditors have over their operations.
These are only two of the flaws in the system, but there are many more. Accreditation being combined with federal student financial aid has meant that the government has been given a large amount of influence on the higher education industry — perhaps leading to the industry becoming more centralized. Further, accreditation agencies have historically been very secretive when it comes to school accreditation evaluations. The school may be accredited but have a few flaws in their programs — for example, its computer science program is underfunded — and the public would likely never hear about that issue. Accreditation reports provide very little useful information to consumers, despite the fact that they evaluate a large amount of information about a college when determining whether or not to accredit — or maintain the accreditation of — an institution.
The accreditation system is driven too much by inputs. College accreditors evaluate a school’s finances, student policies, planning, governance, among other things — the size of libraries and teacher ratios are often used, for example — but those are inputs of a college experience, not outputs. Students who attend an institution are less interested in the size of their library or their student policies and more interested in their graduation rates, student outcomes, average salaries after graduation, among other key metrics. These would allow students to make a more informed decision about whether or not a specific college will provide them with value. Programs like the Department of Education’s College Scorecard have increased access to this information. However, accreditors still fail to weigh outcomes heavily in their evaluations. This is — according to accreditors — because it is difficult to accurately measure outcomes over the long-term, but also because they are more interested in the financial health of schools than outcomes.
Moving to Outcome-Driven Accreditation
There have been several proposals made about how to reform accreditation — consolidating accreditation bodies, so that there are not dozens of them offering credentials, for example. However, one that has not yet been mentioned is how Income Share Agreements could help accreditors transition to an outcome-based evaluation criteria. Income Share Agreements, or ISAs, are a type of financing instrument that allows a student to raise the money they need for their education in exchange for a percentage of their future income. If a student does not earn over a certain amount, then they are not required to make payments toward their ISA. This means that if a student commands a job with a low salary or becomes unemployed after graduation, they will not be burdened with payments until they earn over a certain amount, or their ISA expires — whichever comes first. Thus far, colleges around the country such as Colorado Mountain College, Purdue University, Norwich University, and the University of Utah have started to offer ISA-based financing options to their students.
One of the major benefits of Income Share Agreements is that they are a version of outcome-driven financing. This means that the student will only pay money back to the school if they succeed — payments are contingent upon their future income. Therefore, if a student goes to college and gets a low-paying job after graduation, the school will have to carry the financial burden of the money they gave the student to attend their college, rather than the student. This means that students can hold colleges more accountable for their outcomes — if they don’t succeed, the college has to foot the bill.
Income Share Agreements would help tie the financial health of an institution to outcomes which would mean that when accreditors are evaluating an institution’s bottom line, that number will be directly influenced by the success of their graduates. Accreditors are concerned about accrediting institutions that have bad financials because that would make for negative press, but ISAs would help link financials and outcomes. If the student has high job placement rates, that number will be higher; conversely, if students struggle to find a job, that number will be lower. Therefore, accrediting institutions would only have to make small changes to their evaluation criteria in order to take into account more student outcomes.
ISAs would also allow the institution to gather more data about student outcomes, which would encourage accreditors to spend more time evaluating outcomes when deciding whether an institution should be accredited. For example, an ISA would allow a college to gather more information about the average first-year salary, and subsequent salaries — students are required to report their income under an ISA to ensure they make the correct payments, often through submitting their tax returns. ISAs would also make it easier for colleges to understand the distribution of salaries, student placement rates after graduation — both months and years after graduation — among other things. These metrics would be very useful to accreditors in evaluating student outcomes, who have previously claimed that the primary reason they don’t consider outcomes more is due to how difficult it is to calculate these metrics. Accreditors could then compile all of this data and give a school a score between one and 100, and then the federal government could set a minimum score under which schools would not be eligible for federal student aid and/or accreditation.
Critics have highlighted a few concerns with ISAs, however. Senator Elizabeth Warren, in a recent letter to the Secretary of Education, Betsy DeVos, referred to ISAs as “predatory” and highlighted how they could result in discrimination by institutions. Other critics have also cited the lack of legislation as being an opening for bad actors to enter the space and take advantage of students, and the fact that students in an ISA may pay back more than they would through debt. Schools and companies that offer ISAs have developed a strict set of best practices to mitigate many concerns about ISAs, which have proven effective thus far. In addition, last month the ISA Student Protection Act was proposed with bipartisan support in the Senate which would aim to create a regulatory framework under which ISAs would operate. This would pave the way for more certainty in the industry, and would also help ensure that ISAs are appropriately governed.
The Future of Accreditation
Accreditation serves a critical role in the higher education industry. Indeed, accrediting bodies help ensure a consistent quality of services offered by institutions, and help ensure that colleges are held accountable — at least in part — if they fail to provide a good quality education. However, there is a significant need for reform in accreditation. Right now, accreditation is governed by dozens of different institutions, each with their own evaluation criteria, which makes it very difficult for students to understand the system. Further, accreditors have a poor track record of revoking certification from schools that do not perform well in terms of outcomes, and weigh the financials of an institution more than their outcomes — outcomes are, of course, the most important thing for students. Accreditation needs to be streamlined, made more transparent, and account more for student satisfaction and success. ISAs would help colleges gather the information that the accreditor need to make informed decisions about accreditation, and hold colleges to account for their outcomes.
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