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How Information Can Affect Choice in Higher Education

Executive Summary

Spurred on by the Obama administration, and supported by the Bill and Melinda Gates Foundation and the Lumina Foundation, the United States has embarked on a "college completion agenda" to increase the number of American adults with postsecondary degrees. Given the current rate at which students fail to complete associate's and bachelor's degrees, the challenge goes beyond simply increasing the number of students who start a degree at our colleges and universities. One barrier to making progress on this front is simple: colleges that admit similar students often have widely different graduation rates, and far too many fail to get a majority of their students across the finish line. As a result, every year hundreds of thousands of students enroll in schools where they will fail to make it through their first year--let alone receive a degree within six years--when they could have enrolled in schools where their chances of success would have been far higher.

While many disagree about the causes of such failure, analysts of all stripes agree that one step toward better college performance is improving the information about quality and costs that is available to prospective students and their families. The logic behind this argument is clear: if, when faced with the choice between two colleges with different records of success, students and their families had comparable measures of college performance at their fingertips, they would choose the one with the better outcomes. At the individual level, such informed decisions could increase students' probability of successfully completing a degree. At the systemic level, as individual consumers make these choices, lagging colleges and universities will lose students to better-performing ones, and the resulting market pressures will hold institutions accountable for how well they educate, retain, and graduate their students.

We believe our results show that parents can and will evaluate colleges and universities and choose higher-performing ones, provided they have access to indicators of college performance that they can use.

While the push to improve consumer information in the higher education market has gained momentum, whether these improvements will lead to increases in degree completion depends on the answer to a basic question: if we provide consumers with better information on quality and costs, will they use it? This report aims to answer this question, using an experiment embedded in a survey of parental attitudes about higher education.

We asked a representative sample of one thousand parents of high-school-age children in five states to choose between two public colleges in their state on the basis of their own judgments and real information that we provided to them. We randomly assigned parents to a control group in which respondents were given some basic information about a pair of colleges (for example, cost and selectivity) or a treatment group that received the same profile plus the graduation rate for each institution. Overall, we found that providing graduation-rate information increased the probability that parents would choose the institution with the higher graduation rate by about 15 percentage points.

Perhaps most importantly, parents with less education, lower incomes, and less knowledge of the college application process experienced large and significant information effects, while more advantaged and better-informed parents did not significantly change their preferences. These findings suggest that providing additional information about college quality could lead less-informed and lower-income parents to make decisions that are similar to those made by the savviest consumers in the market.

We believe our results show that parents can and will evaluate colleges and universities and choose higher-performing ones, provided they have access to indicators of college performance that they can use. One concrete policy change that the Department of Education could make immediately is to require all colleges participating in federal student aid programs to report their graduation and retention rates clearly on all admissions and financial aid correspondence with students. Such a "nudge" could pay dividends in the quest to match more students to high-performing colleges at a low cost to the federal government.

We further argue that the findings illustrate why we need to develop the means to collect and convey an array of institutional quality measures that allow students and their families to easily distinguish colleges from one another. Providing such information to enhance market efficiency and consumer choice in higher education is a governmental objective that policymakers of all ideological stripes should agree on.

Read the full paper as an Adobe Acrobat PDF.

Andrew P. Kelly is a research fellow at AEI. Mark Schneider is a visiting scholar at AEI.

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