Risk Sharing: How to Hold Colleges Accountable for the Education They Provide. Issue Brief

College has become a risky proposition for students as well as taxpayers. Fewer than six in 10 students who start a degree will ever finish, which means that they won't see a return on the money they've spent to attend--and if they took out a loan from the federal government, they might be left with unaffordable debt. In the latter case, the government's loan safety nets will bail them out. Colleges, it seems, are the only players who can't lose in the $1.9 trillion-per-year business of higher education. There is a system in place to hold colleges accountable for the services they provide, but that system is failing students and taxpayers. This issue brief analyzes how the federal government can better measure college quality in order to police access to its student aid. There are three recommendations: (1) use risk sharing to ensure that colleges compensate taxpayers for their students' use of the government's loan safety nets; (2) use a measure of the student loan repayment rate, rather than accreditation, to determine whether colleges are eligible for federal aid; and (3) use targeted grants and scholarships to ensure that disadvantaged students can enroll in colleges that might otherwise be wary of these students' ability to repay their loans.