Good Call’s Terri Williams quotes Dr. Richard Vedder, Distinguished Professor of Economics Emeritus at Ohio University and Director of the Center for College Affordability and Productivity, in an article headlined “Should Colleges Provide Money-Back Guarantees?”
Schools that choose to offer money-back guarantees will undoubtedly be more popular among cost-conscious students, and Mamie Voight, vice president of policy research at the Institute for Higher Education Policy, tells GoodCall® this practice would be used as a recruiting tool in marketing materials, etc. A handful of schools already offer either free tuition for students who don’t graduate on time, or they guarantee grads will land a job within a certain time frame or earn a certain income.
However, Voight warns students to thoroughly read and research the fine print accompanying these promises. “Many of these guarantees come with strict eligibility requirements, such as taking a full course load, signing a contract, maintaining a resume and a certain GPA, and being willing to move for a job.”
Richard Vedder, distinguished professor of economics emeritus at Ohio University and director of the Center for College Affordability and Productivity, tells GoodCall®, “Conceptually, I like the idea of some accountability for schools, and if large numbers of a school’s students are unable to get a job, there should be consequences.”
A possible downside is that adopting this policy could result in a more selective admission process, which could negatively impact all of the school’s students in general, and certain applicants in particular. “Ultimately colleges need to finance these guarantees – either by ensuring few students claim them or by raising funds elsewhere, perhaps through tuition hikes,” Voight says. She believes schools would either become more selective with applicants or create a rigid set of requirements to restrict access.
According to Vedder, there would have to be some sort of criteria or the program wouldn’t be fair and students wouldn’t be incentivized. “If a student is partying, and not studying or going to class, the school should not have to pay them back for making bad decisions.”…
There’s another idea gaining popularity: income-share agreements. According to Vedder, “This is a way for wealthier schools, in particular, to make investments in their own students by paying part of the tuition with their endowment and the student pays the school back after graduation.” For example, he says graduates could pay 10 percent of their incomes for the next 10 years. “The schools are taking some of the risk, and the student doesn’t have to pay all of that tuition up front.”