By Jorge Morales-Burnett


Half of American college graduates say they are “uncertain whether their degrees were worth the money,” according to a Public Agenda poll conducted last year.

Yet some colleges defy this trend. Take Texas State Technical College (TSTC), where students are offered affordable, vocational, workplace-related education that is crafted, in part, based on the experience its previous graduates have had in the marketplace. Taking effect in the 2014-2015 academic year, the Texas Legislature implemented a novel funding model for TSTC—the Returned-Value Funding model—“built on the concept of aligning the state’s investment in TSTC with the estimated total economic benefit that comes back to the state in increased tax revenue produced by former students.”

Per the Texas Higher Education Coordinating Board, the methodology is based on the use of the “Total Incremental Average Annual Inflation-Adjusted Wage,” which is an adjusted measure derived from the difference between the five-year mean wage of graduates from a particular TSTC campus and an annual base wage based on the minimum wage. This measure attempts to determine the average student’s incremental wage after a TSTC education, assuming every student is fit for a minimum wage job. A standard tax rate is applied to this difference to calculate the value-added tax revenue.

After defining the proportional share of each TSTC campus in the total TSTC system value-added, funding is allocated accordingly—that is, proportionally to TSTC institutions and distributed between academic and technical strategies.

Since the program took effect, financial incentives have shifted program enrollment according to market forces. Advisors can now counsel students not only based on individual skills, but also on increased sector job demand. “Under the new formula the focus is all about student success in the workplace,” stated Gary Hendricks, Vice Chancellor for Financial and Adminstrative Services at TSTC. This in turn has led to stronger ties between TSTC and the business community, with the school’s success contingent on understanding the needs of its students’ future employers. Writing for the Lumina Foundation, Jeffrey J. Selingo and Martin Van Der Werf explain that “the outcome of higher education that most interests lawmakers, students and families is whether college graduates have a job and how much they are earning.”

No doubt news of this new, market-oriented funding model will excite many readers of this blog. It should be noted, though, that TSTC graduates were already seeing extraordinary results in the job market prior to the introduction of the Returned-Value Funding model.

According to data from TSTC Waco, in 2014 a three-semester Electrical Lineworker Certificate—with a total cost of only $5,796—yielded a fourth quarter median wage of $14,194 with a 90% employment rate. An associate’s degree in Robotics Technology—$9,330 for five semesters—achieved a fourth quarter median wage of $13,662 and 100% employment rate. More incredible results came out from graduates with an associate’s degree in Instrumentation Technology, who gained a fourth quarter median wage of $17,240 and 89% employment rate after graduating a five-semester program costing $10,320.

While TSTC’s Returned-Value Funding model is unique, it shares with other technical colleges a willingness to innovate that four-year institutions all too often lack. Also shared with other technical colleges is a curriculum that trains students for the fasted growing occupations in the contemporary American economy. Consider this U.S. Bureau of Labor Statistics list of the fastest growing occupations from 2014 to 2024:

6-22-17 chart 1In an increasingly complex economy, higher education must respond to the growing demands of the business community to adequately prepare graduates for their position in the workforce. As a nation, it is crucial that we regain trust in the effectiveness of technical institutions, and abandon the harmful myth that graduating from a four-year program is the best guarantee of landing a job after college. Our higher education system needs reform; the success of TSTC and TSTC graduates reminds those of us who follow higher education that market-based reforms can be introduced, and succeed, anywhere, not just at for-profit institutions.