College Financial Incentives Need To Emphasize Student Progress And Completion

July 19th, 2010

Currently, most public colleges are paid  by the state for full time enrollment or student credit hour  The credit hour and enrollment-based incentive structures that currently shape access institutions’ financial decision making was probably not as unreasonable at a time when resources were plentiful.  There was literally more room for failure and second (and third) chances at college success when there was plenty of organizational capacity.  Failure was less costly to students themselves when out-of-pocket tuition costs were low.  Today, however, when courses and classrooms are scarce and the rise of tuition continues unabated, the cost of failure to students, schools, and government is much higher.

At present most access colleges receive government support based on their full-time enrollment (FTE) base, or enrollment in courses (such as after third week of class in many community colleges). The result is often enrollment management that churns students: As long as the number of new students equals the number of dropouts, revenue remains stable.  An axiom among enrollment managers is telling: It is usually easier and less expensive to recruit a new student than to provide the necessary services for an existing student in academic trouble.

State subsidy to schools based, for example, on the common standard of third-week enrollment leads to such practices as not dropping “no-shows” during the first portion of the term; delaying exams or quizzes until the fourth week; even providing free parking for the first three weeks of each term.  Even colleges with ample enrollments face perverse incentives regarding student persistence and completion.  For example, some community colleges that turn away students because of state cuts simultaneously implement heavy reductions in their student services and developmental courses in order to fund advanced classes.  In another common phenomenon, states that compensate schools by student contact or credit hour encourage practices like adding hours but not requiring students to do more work.

These perverse financial incentives must change!

4 Responses

  1. Publius says:

    If institutions respond in preverse ways to the current FTE based funding system, don’t you think they will also respond in perverse ways to a new funding system based on “progress and completion”? If funding is based on completion, the insitutional and political pressure on professors to reduce workload, ease grading standards, and create an articifical floor where no students gets an “F” will be intense. These pressures will be just as strong as the current pressures to postpone the first quiz or test and to hang onto students for the first three weeks. The incentive, money, stays the same. We will simply trade one set of perverse outcomes for another.

  2. admin says:

    Good point and I am working on how to overcome this . Mike Kirst

  3. […] but not to help them complete a degree, writes Michael Kirst on College Puzzle. That encourages churning; Colleges bring in new students to replace the dropouts. An axiom among enrollment managers is […]

  4. I 100% agree with Publius. To be honest, it’s a question of picking the lesser of the two evils and the lesser of the two evils seems to be basing incentives on enrollment because at least that way it seems that the quality of the courses wouldn’t suffer as much as if they switched to the student progress and student completion model.

    The lesson of the story is that no matter what model is adopted there will always be pros and cons, it’s just a matter of choosing the model with pros that accomplish the end goal and cons that you can live with and that don’t ultimately undermine the goal. But the question then becomes, what’s the end goal? And for each individual politician, school administrator, student, etc. that may actually be different.

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