College Accreditation Does Not Guarantee Good Student Outcomes

Key Points

• Colleges and universities must receive recognition from an accreditor to access federal student aid. Accreditation is intended to ensure quality in higher education.
• However, accreditation is not a reliable guarantee of student outcomes, as every institutional accreditor oversees colleges offering hundreds of programs that fail to produce financial value for students.
• Accreditors generally do not sanction institutions with low financial value, and accreditor actions against institutions rarely have to do with poor student outcomes.
• Congress and the Department of Education should aim to expose accreditors to competition, thereby allowing new, high-quality institutions to access federal funds.

Introduction

The Education Department (ED) relies on accreditation to ensure quality at the colleges and universities it funds with taxpayer dollars. Institutions require recognition by one of several accreditors to access federal student aid funding such as Pell Grants and student loans. Accreditors are private nonprofit agencies that originated in the 19th century as a sort of voluntary peer-review system for colleges and universities to share best practices and uphold academic standards. The federal government later enlisted accreditors as gatekeepers for federal funds.

Accreditation represents a steep barrier to entry for new colleges. The process of earning recognition from an accreditor takes years to complete. One study estimated that accreditation leads the average college to incur more than $300,000 in direct and indirect costs. Colleges must renew their accreditation periodically, usually every ten years. Moreover, accreditation commissions are typically constituted by representatives of the schools they oversee, meaning new institutions must effectively convince their competitors to allow them to operate.

Perhaps as a result of these barriers, the number of degree-granting, nonprofit colleges is no higher today than it was in 1990, even as the number of students has swelled.

These barriers might be justified if accreditation is an effective control on academic quality and ensures that students attending accredited schools realize good educational outcomes. It is possible to investigate this question by analyzing the return on investment (ROI) of accredited colleges and universities.

FREOPP has produced estimates of ROI for over 60,000 degree and certificate programs at federally funded (and thus accredited) institutions. The FREOPP ROI metric compares the lifetime increase in earnings associated with a particular degree to the costs of obtaining that degree, including tuition, time spent out of the labor force, and the risk of dropping out. If the lifetime increase in earnings exceeds these costs, that credential has a positive ROI and typically leaves students better off financially. If costs exceed benefits, the credential has negative ROI and students are typically worse off for having enrolled.

This issue brief matches FREOPP ROI data to ED’s Database of Accredited Postsecondary Institutions and Programs (DAPIP), which contains information on the accreditor overseeing each college or university and adverse actions that accreditors have taken against their institutions. Combining these datasets allows an evaluation of accreditor performance, as measured by their institutions’ ROI.

I find that thousands of programs at accredited, federally funded institutions leave their students worse off financially. Nevertheless, the institutions typically maintain their accreditation. No accreditor is effective at protecting students from low-quality programs; all oversee a significant number of programs with negative ROI. Moreover, while accreditors are somewhat more likely to take adverse action against institutions with low ROI, the agencies never sanction the vast majority of schools with poor student outcomes.

Which accreditors are best at quality assurance?

This section examines the distribution of postsecondary programs’ ROI by institutional accreditor. Institutional accreditors include seven regional accreditors, which historically accredited public and private nonprofit institutions in defined regions of the country. (Thanks to regulatory changes under the Trump administration, schools may now seek recognition from a regional accreditor outside their home region.) In addition, there are several national accreditors, which mostly oversee proprietary colleges and career schools.

The analysis examines institutional accreditors which recognized schools during the 2016–17 academic year, as that was the last year in which the student cohorts which inform the FREOPP ROI database were enrolled in school. One national accreditor, the Accrediting Council for Independent Colleges and Schools (ACICS), was terminated by ED in 2022, meaning ACICS-accredited schools are no longer eligible for federal aid. However, ACICS is still included in the below data as it was active during the analysis period.

The analysis includes only institutional accreditors, as these are the gatekeepers to federal student aid under Title IV of the Higher Education Act. Programmatic accreditors, which accredit specialized programs such as law schools rather than entire institutions, are excluded as they are typically not gatekeepers of Title IV funding.

Recognizing that different institutional accreditors oversee different types of schools, I break out the analysis by credential level to ensure comparisons between accreditors are apples-to-apples. Overall, more than 99 percent of the observations in the FREOPP ROI database match to an institutional accreditor.

The below chart displays the ROI of bachelor’s degree programs for each accreditor. The distribution of ROI is quite similar across different agencies. Between 26 percent and 33 percent of bachelor’s degree programs have negative ROI, regardless of accreditor. This suggests that no agency does a thorough job protecting students from low-financial-value programs. Even at the best performer — the Southern Association of Colleges and Schools, Commission on Colleges — more than a quarter of bachelor’s degree programs are negative-ROI.

The next chart displays the ROI of graduate degree programs for each accreditor. There is slightly more variation in ROI across accreditors at the graduate level, but all accreditors oversee a substantial number of low-performing programs. The Northwest Commission on Colleges and Universities oversees the smallest share of negative-ROI programs (17 percent), partially due to the large and relatively high-quality graduate programs of Western Governors University, which the agency accredits. By contrast, the New England Commission of Higher Education oversees the largest share of negative-ROI programs, at 40 percent.

The final chart of this section displays the ROI of subbaccalaureate credentials — associate degrees and undergraduate certificates — for each accreditor. In addition to the regional accreditors, which largely recognize public community colleges, this stage of the analysis can also evaluate the performance of national accreditors which more often recognize private trade schools.

The subbaccalaureate level demonstrates the greatest variation in accreditor performance. The Higher Learning Commission, a regional accreditor historically operating in the central United States, performs best: just 28 percent of the subbaccalaureate credentials it oversees have negative ROI.

The worst performer is the National Accrediting Commission of Career Arts and Sciences, where 86 percent of subbaccalaureate credentials are negative-ROI. The reason for this is clear: almost all the programs which this accreditor oversees are certificates in cosmetology, which is a notoriously low-return field of study.

Notably, ACICS — the accreditor which lost its federal recognition in 2022 — is not an outlier. Forty-six percent of the subbaccalaureate credentials it oversees do not yield a financial return. While this is above average, several other accreditors perform worse — including one regional accreditor, the Middle States Commission on Higher Education. To be sure, ACICS’ derecognition had much to do with the sudden and costly collapses of Corinthian Colleges and ITT Technical Institute, two large for-profit college chains which ACICS oversaw. More prosaic concerns about low financial value may have been a minor factor.

Still, the fact that authorities at ED allow several accreditors with worse performance than ACICS to maintain federal recognition suggests that both accreditors and federal regulators are neglecting issues of ROI in their oversight of colleges. The next section examines enforcement actions that accreditors have taken against institutions with low ROI.

Do accreditors take action against low-ROI institutions?

Accreditation is a barrier to entry for new institutions, but it can also be a barrier to exit for incumbent schools. Accreditors rarely take the drastic step of revoking accreditation from a college or university that currently has it, which would result in a loss of federal student aid funds. But there are plenty of enforcement actions that accreditors can take short of fully expelling a school, such as issuing a warning or placing the institution on probation.

The abundance of programs with negative ROI may be tolerable if accreditors are doing something about it: accreditors might sanction institutions with many negative-ROI programs and give the schools a timeframe in which to improve their outcomes. If institutions with negative-ROI programs maintain their accreditation, that might be acceptable if the accreditor is helping the institution fix the issue. Accreditors, after all, are more comfortable nudging institutions to improve than using derecognition as a scythe to clear the higher education industry of low-quality players.

DAPIP maintains a list of accreditor actions towards institutions, including affirmative and adverse actions. A renewal of accreditation is an affirmative action, whereas adverse actions include loss of accreditation, probation, warnings, heightened monitoring, and accreditor denial of a substantive change at the institution.

I calculate the median enrollment-weighted ROI of programs at each institution, calculating median ROI separately by credential level — subbaccalaureate credentials, bachelor’s degrees, and graduate degrees — to ensure an apples-to-apples comparison. I then match DAPIP records of actions taken by institutional accreditors towards colleges and universities with at least one entry in the FREOPP ROI database. This allows an examination of how often accreditors take adverse action against schools that typically leave students worse off financially.

Between 2010 and the present day, institutional accreditors took adverse actions against 16 percent of schools where the median bachelor’s degree is negative-ROI, compared to just 5 percent of schools where the median bachelor’s degree is positive-ROI. While accreditors are far more likely to initiate an adverse action against schools with lower financial value, the vast majority of four-year colleges and universities are never sanctioned by their institutional accreditor, even when ROI is negative.

Accreditors are somewhat more likely to take adverse action against less-than-four-year schools. Thirty-seven percent of schools where the median subbaccalaureate credential is negative-ROI experienced an adverse action by their accreditor, compared to 18 percent of schools where the median subbaccalaureate credential is positive-ROI. While enforcement rates are somewhat higher against schools offering associate degrees and certificates, the majority of less-than-four-year schools where ROI is negative nevertheless escape accreditor sanction.

In addition, accreditors typically don’t take adverse action against schools for reasons relating to student outcomes or academic quality. Using a definition of adverse actions related to these factors introduced by Leschly and Guzman (2022), I find that less than a third of accreditor sanctions against negative-ROI institutions cited student outcomes or academic quality as the reason for the action. The vast majority of adverse actions involve other factors such as the institution’s fiscal or administrative capacity.

That rates of adverse actions are higher at negative-ROI institutions is not proof that accreditors are focused on student outcomes. It merely suggests that students’ economic outcomes may correlate with other factors that accreditors care more about. While accreditors are more likely to sanction negative-ROI schools, the agencies may not put any real pressure on their institutions to improve student ROI. Moreover, most negative-ROI schools never face an adverse accreditor action at all.

Options for accreditation reform

Accreditation is not a reliable indicator of whether students can expect to derive financial value from postsecondary education. All accreditors oversee institutions offering many programs with low financial value. While accreditors are somewhat more likely to take adverse action against negative-ROI institutions, most such institutions never face a sanction, and when they do, the adverse actions are only occasionally related to student outcomes.

It is hard to escape the conclusion that accreditation in its current form has failed as a quality assurance mechanism for federally funded institutions of postsecondary education. In addition, the occasionally insurmountable barriers to entry that accreditation presents to new institutions suggests that schools with potentially better student outcomes may be unable to break into the market.

The federal government should allow more competition in the accreditation space, giving alternative entities a chance to try their hand at quality assurance. Startup institutions that produce high-quality education at a low price point shouldn’t have to spend years seeking recognition from an established accreditor to access federal funding, especially if that accreditor will not be able to effectively ensure academic quality.

The Trump administration took small steps in this direction. Secretary of Education Betsy DeVos ended the regional accreditation monopoly; colleges may now seek recognition from any regional accreditor, not just the one in their corner of the nation. This is a welcome change, but its impact will likely be limited since all the regional accreditors have similar problems. The Biden administration has also undercut the change by requiring colleges to secure ED approval before changing accreditors.

Rather than making it easier to switch among established accreditors, the government should allow new bodies to serve as quality-assurance entities and gatekeepers of federal financial aid. One option is to allow states to accredit institutions directly. Since colleges must already seek state authorization — typically a rigorous process itself — this will reduce the number of hoops new schools must jump through before opening their doors.

Another option is to allow new entities to serve as accreditors if they demonstrate a robust process for evaluating student outcomes. If an alternative entity certifies that a school’s outcomes are up to standard, then that school may bypass the traditional accreditation system. Senators Michael Bennet (D-CO) and Marco Rubio (R-FL) have proposed such a framework, which would also give the alternative entities “skin in the game” by requiring them to reimburse taxpayers for a portion of defaulted student loans.

However, ED need not wait for Congress to get started. It can use the Experimental Sites Initiative, which permits the Secretary of Education to waive certain laws and regulations to conduct pilot programs and to allow alternative quality assurance entities to gatekeep access to federal funding.

The Obama administration used the initiative to establish the EQUIP program, which allowed nontraditional educational providers partnered with a traditional college to receive Title IV dollars. However, the program required the traditional-college partners to secure approval from their own accreditors to offer the nontraditional programs. Practically, this meant the initiative did not test the viability of a true alternative to accreditation. ED should conduct another pilot program allowing new educational providers to bypass incumbent accreditors entirely.

The natural objection is that allowing more competition among accreditors will result in a “race to the bottom,” whereby schools seek recognition from the accreditor with the weakest standards. While this danger should not be dismissed, accreditors already fail to protect students from low-quality institutions, and most are not focused on student outcomes.

Moreover, if policymakers are concerned about lowering standards, Congress can simply set its own outcomes benchmarks that federally funded institutions must meet regardless of their accreditation status. FREOPP has proposed an outcomes-based accountability system that would require institutions to maintain a satisfactory student loan repayment rate or face financial penalties.

Congress could also consider the nuclear option: decouple accreditation from access to federal financial aid entirely. Institutional eligibility for federal funding would be determined solely by student outcomes — if a college gets results, it can access aid regardless of whether it meets an accreditor’s standards. Accreditors themselves would return to the purely private role they held prior to federal involvement in higher education.

Colleges could receive provisional approval to access federal student aid while they demonstrate outcomes, allowing new schools to start operating far faster. To protect taxpayers from unscrupulous providers, a portion of federal funding could be deferred until schools post satisfactory outcomes, as Beth Akers has proposed. Decoupling accreditation and aid entirely would be a radical step. But it is the only way to fully reorient federal funding around the most important question of all: how well are colleges serving students?

Conclusion

Accreditation is no guarantee of financial value in higher education. Every accreditor oversees many institutions offering programs that do not leave students economically better off. Moreover, accreditors rarely take adverse action against colleges for reasons related to student outcomes, and most institutions with a low return on investment escape sanction altogether.

Policymakers should look elsewhere to ensure quality at federally funded institutions of higher education. First, Congress can set its own minimum acceptable outcomes standards. Meanwhile, other entities such as states should be allowed to gatekeep access to federal student aid funding, exposing incumbent accreditors to competition. This will ensure that new and innovative education providers offering economic mobility to students can operate on a level playing field with the rest of higher education.