AUSTIN – Today, the Texas Public Policy Foundation published its first annual ranking of state higher education systems determined by the ability of students to repay student loans based on post-graduation income.
“More than 5,000 programs at public universities do not pass this debt-to-earnings test which indicates approximately 500,000 graduates per year are using federal financial aid to attend financially risky programs,” said Andrew Gillen, Ph.D. economist and senior policy analyst at the Texas Public Policy Foundation’s Center for Innovation in Education. “While there is more to college quality than the economic return, it is an important factor that shouldn’t be ignored by the students, parents, and taxpayers funding a state’s colleges.”
A state’s ranking is determined by the percentage of its college graduates who complete their degrees at programs that pass a debt-to-earnings test. This test measures post-college earnings versus student debt to help distinguish college programs that are sound economic investments for their students from those that leave their students heavily burdened with student loans.
North Dakota performed the best with 89 percent of the state’s graduates finishing programs that passed the debt-to-earnings ratio test while Montana had the worst debt-to-income ratio with only 45 percent. California and Texas had similar numbers with 84 and 80 percent respectively.
The debt-to-earnings ratio applied in these rankings is an update of the old U.S. Department of Education Gainful Employment (GE) regulations introduced by the Obama administration and generally applied to for-profit institutions. Programs that failed the GE debt-to-earnings tests would be cut off from federal financial aid.
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