The federal student aid system has emerged as the primary source of funding for students pursuing a wide range of subbaccalaureate credentials. But the eligibility rules for federal student aid, offered under Title IV of the Higher Education Act, require a minimum program length of 600 hours for Pell grants, despite little evidence showing that short programs meeting the current benchmark produce better labor-market outcomes than those that do not.
In this report, we review the evidence on the labor market returns on certificate programs and evaluate the justification for the current restrictions on eligibility for federal student aid. We find that some programs that currently qualify for federal aid provide little or no earnings boost for students, while many others, including programs that do not qualify for federal aid, do boost earnings. There is no clear justification for the current line between programs that are Pell eligible and those that do not meet the program length requirements. Better data and more rigorous research will strengthen the evidence base for determining the best policies for improving labor market outcomes.
Key numbers on certificate programs:
- A certificate is the highest level of education for about 10 percent of American adults.
- Completion rates in certificate programs range from 50 to 60 percent, considerably higher than in associate degree programs.
- About half of certificate students in for-credit programs receive Pell grants, and about 70 percent of students accumulate debt, with a median total debt of about $10,000 for those who borrow. About 28 percent of certificate students with federal loans default within 12 years of beginning college.
- Nearly two-thirds of certificate programs require less than a full year of study, and nearly half require less than 480 hours.
- Average annual earnings of certificate holders are 10 percent higher than the average earnings of otherwise similar high school graduates, but there is wide variation across programs and by gender.
Reducing the financial barriers to accessing postsecondary certificate programs is critical to improving financial security for vulnerable segments of the population. Because available evidence does not support the current threshold of 600 hours for Pell eligibility, there is a strong case for extending Pell grant eligibility to students in short-term, for-credit certificate programs that require at least 150 hours. Regardless of whether Congress expands Pell eligibility, more effective regulation and accountability requirements for occupational preparation programs eligible for federal student aid are critical for protecting students and taxpayer investments. In addition, policymakers could consider providing alternative funding streams for students outside of Title IV, as part of the Higher Education Act, through the US Department of Labor, or through other avenues.
This report was corrected on January 14, 2021. In a previous version, the ATES was incorrectly called the American Training and Education Survey below several figures and tables, on page 43, and in endnote 10. These have been corrected to say the Adult Training and Education Survey.