Education

University of Maryland University College: A ‘Respected State University’ No Better Than Its For-Profit Peers

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Its students have the same difficulty paying back their loans.

Anyone living in the Washington, D.C., metro area has surely seen or heard advertisements for the University of Maryland University College, an open-enrollment branch of the state’s university system. The school saturates the TV and radio airwaves, as well as city buses and the metro subway system, with ads promoting its programs for working adults and non-traditional students. And UMUC isn’t just a local school. It is largely online, with 44,000 undergraduates and 13,000 graduate students enrolled across the U.S. and even internationally.

UMUC’s aggressive advertising is unusual for a state university but common among its for-profit counterparts such as the University of Phoenix. Note, however, that UMUC goes out of its way to tell prospective students that it is not a for-profit university. One large UMUC banner in a Philadelphia train station brags that UMUC is a “respected online state university.”

Why does UMUC tout its state-university status? Probably because, at least relative to “for-profit,”  “state” or “public” is associated with quality. It also implies that students can trust UMUC; as a state school, UMUC is surely not a diploma mill or an unscrupulous business trying to make a quick buck by enrolling thousands of students in programs that never pay off.

In fact, that was the very rationale the Obama administration used to target for-profit colleges with a “gainful employment” regulation several years ago. These schools need extra regulatory scrutiny, the administration and many Democratic lawmakers argued, because their profit motivation gives them an incentive to rip students off. In response, the regulation assessed students’ debts and incomes after leaving a for-profit institution. If they were too far out of line, the program would lose access to federal grants and loans. Public universities were effectively exempt from this test.

So how does UMUC, with its online degree programs for working and non-traditional students, stack up against its for-profit peers? Does the “state university” wrapper really add value? Looking at how well UMUC students pay down their student loans suggests otherwise.

The rate at which students repay student loans is considered a proxy for whether they — and taxpayers in the case of federal loans — made a worthwhile investment. Failure to pay back debt at an acceptable rate suggests students’ earnings are not high enough to support the loans.

According to a Department of Education dataset hosted at the Brookings Institution, undergraduate students at UMUC paid down only 7 percent of their outstanding student-loan balances within five years of entering repayment. That is a lower share than students at most of the major for-profit institutions. It’s less than half the amount that students at the University of Phoenix and DeVry University had repaid over that time period. It’s also less than what students paid down at Strayer University and Kaplan University.

Looking at graduate programs, UMUC’s students fare worse than those at most large for-profit institutions. Its graduate students as a group owed 1 percent more on their debts five years after those loans came due, meaning accruing interest exceeded total payments. Of all large for-profit institutions, only graduate students at the Academy of Art University in San Francisco had paid down less of their debts (−2 percent) than those at UMUC. Name a large for-profit university, and chances are its graduate students have a better track record paying down their loans than do those from UMUC.

UMUC enrolls a lot of students in the military, which in theory could explain the low repayment rates. These students’ loans are put in deferment while on active duty, so they do not need to make payments. Yet deferment rates at UMUC, while elevated, are not high enough to explain away the low repayment rates.

Policies to protect consumers and taxpayers should be based on evidence, not partisan preferences.

The UMUC case demonstrates that being a public university does not guarantee student outcomes will be better than those at for-profit institutions. Outcomes can be worse. It also suggests that the educational model (open enrollment, aggressive promotion, largely online classes) and the types of students a university serves (older, working, nontraditional) — not profit motive — are the big factors behind weak student-loan repayment.

That is why consumers and policymakers need information on student outcomes for all types of higher-education institutions, not just for-profit universities. Unfortunately, the Department of Education data used in this analysis were produced for only one cohort of students. Releasing more numbers would help check the ideological biases that have led many policymakers to give public universities the benefit of the doubt when it comes to student outcomes.

Policies to protect consumers and taxpayers should be based on evidence, not partisan preferences. UMUC shows why those policies should apply to all universities.

Jason Delisle — Jason D. Delisle is a resident fellow at the American Enterprise Institute.

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