Going
to college generally pays off. But not all colleges are the same, and
not all students end up at places where they’re likely to fare well.
Dropping
out or overborrowing—or both—are widely recognized problems. To try to
prevent them, the federal government has unveiled a bunch of new tools
to give prospective students more information. College Navigator offers a
trove of searchable data. The College Scorecard features comparative
performance measures. The Shopping Sheet is a standardized financial-aid
award format.
In August, President Obama announced plans to
develop a college-ratings system. Yes, more consumer information. But it
could go further, if Congress, as the administration hopes, ties the
ratings to financial aid.
The plan has proved unpopular with
college leaders, who seem more comfortable with information itself, sans
value judgment. As one president wrote in The New York Times, “The
administration should make many types of data easily available and let
people rate schools for themselves.”
Several existing tools, the
ratings plan, and the do-it-yourself counterproposal all boil down to
disclosure. But is more consumer information enough to steer students
toward better choices?
It’s tempting for the government and
colleges to think so. Requiring disclosure is among the cheaper policy
options, and higher education, like any industry, would probably prefer
it to other kinds of regulation. It’s much less taxing to tell consumers
about shortcomings than it is to fix them.
Providing information
is one of three traditional approaches—along with incentives and
education—to change behavior, says Katie Martin, managing director of
ideas42, a nonprofit group “using behavioral economics to do good.” But
those approaches don’t necessarily work.
Giving people more
information, for instance, won’t always change what they do. That’s
because despite hard facts, people’s decisions can work against their
own interests, Ms. Martin says. Present bias leads people to choose
short-term satisfaction over long-term goals. Inattention means they can
focus on only so many things at once, especially if they’re short on
time or money.
Besides, consumers know less than experts might
think. College presidents and most of the people they talk with use
higher-ed jargon. They get what net prices, cohort-default rates, and
six-year graduation rates mean. Prospective students may not. Yet those
terms appear all the time in material geared toward them.
“We
unconsciously use a lot of inside-baseball terminology,” says Ben
Castleman, an assistant professor of education and public policy at the
University of Virginia. One of the recently announced updates to the
federal government’s financial-aid Shopping Sheet is a glossary.
In
other industries, when disclosure has worked, it was often because it
altered the actions not of consumers, but of the industry itself.
That’s
what happened when the European Union started requiring labels for the
sale of home appliances, specifying their energy efficiency. Even before
the information shifted demand, manufacturers began offering
more-efficient products, according to a forthcoming paper in Annual
Review of Economics, by George Loewenstein, Cass R. Sunstein, and
Russell Golman. Maybe the companies overestimated consumer response—or
maybe they were embarrassed selling poorly rated appliances.
In
higher education, disclosure requirements like net-price calculators,
which colleges must now post on their websites, and tuition watch lists,
which call out colleges with high prices or big increases, haven’t
resulted in major shifts in industry behavior. A ratings system might,
but not necessarily in the desired direction.
College presidents’
criticism of the plan centers on its potential to create perverse
incentives. Let’s say colleges are embarrassed by their graduation rates
and want to improve them. They might provide better support to students
to help them through. Or they might decide not to take a chance on
those who aren’t clearly cut out for college success.
What Matters Is Guidance
Swaying
consumers is another matter. That’s because “the problem is not really
lack of information,” says Mr. Loewenstein, a professor of economics and
psychology at Carnegie Mellon University. “The problem is that people
don’t know how to use it.”
A recent study by the Art &
Science Group, a higher-education consulting firm, suggests as much. The
study, commissioned by the College Board, compared SAT takers in the
bottom half of the family-income distribution with those in the top
half. Both groups of students had similar college aspirations, but based
on historical patterns, those in the bottom half end up enrolling at
considerably lower rates.
Both groups reported similar access to
information—from colleges, for instance, and from search sites. In fact,
the less-well-off students said they relied on that information more
heavily than their higher-income peers said they did. The difference,
the researchers concluded, was students’ ability to process and make use
of the information.
So what would help all students make good
college choices? Behavioral-economics research says information has the
greatest shot at changing behavior when it is simple, standardized,
salient, and available at key moments.
Even if it meets those
criteria, however, information doesn’t always have the intended effect,
says Lindsay C. Page, a research assistant professor of education at the
University of Pittsburgh.
For example, two pieces of information
the government wants prospective students to consider are net price and
graduation rate. The price figure, a dollar amount that would have to
be paid in short order, probably resonates, Ms. Page says. Graduation
rate, maybe not. Graduation, after all, is years away, and people are
optimistic: Confronted with long odds, they expect to beat them. So
looking at both data points, a prospective student might consider the
price and disregard the graduation rate. That’s probably not what the
government is going for.
Improving the design and delivery of
information could help, but only so much. After all, some high-school
students are in constant touch with adults who understand the college
process, can help interpret information, and will advocate for them.
Others may not know anyone like that.
“If the administration
really wanted to have an impact on getting people to make better college
choices,” Mr. Loewenstein says, “they would put resources into
guidance.”
That could take a number of forms: How to choose a
college woven into the high-school curriculum. A federal plan to reverse
the shortage of guidance counselors. Scaled-up models of the College
Advising Corps or College Possible, two groups that train recent college
graduates to guide high schoolers through the admissions process.
None
of those ideas are as easy or as cheap as giving prospective students
another website or piece of paper. But they might do a lot more to close
the real gap between more- and less-advantaged students: not in
information, but in help using it.
