Monday, November 24th, 2014

The Obameter

Reduce federal aid to colleges that don't keep costs down

"I've told Congress, let's steer federal aid to schools that are doing a good job keeping tuition affordable and provide good value and serve their students well. If you're getting federal student loans -- colleges and universities -- you shouldn't just be loading up a whole bunch of debt on your students. You've got to figure out how are you working to make sure that they can afford their education."


Updates

Step #1: Build a yardstick to measure performance

When it comes to financing higher education, Washington swings a big bat. In loans and grants, it provides 70 percent of all the financial aid that helps students pay for college. So if the federal government wanted to nudge colleges and universities in a particular direction, it has some leverage.

In 2012, President Barack Obama told an audience in Las Vegas that federal aid should go to schools that keep tuition affordable and deliver the results that lead students to invest in higher education in the first place. Making that happen was his promise during the campaign and now we"re checking to see where that promise stands.

Obama pressed the proposal again in his 2013 State of the Union address, calling on Congress to put the concept into law. It was prominent again, in a recent speech he gave at the State University of New York Buffalo.

Obama"s plan would reward some schools at the expense of others. To do this, he needs to change the law. The administration plans to fold this approach into the reauthorization of the Higher Education Act, which expires at the end of 2013. The Senate and House have held initial hearings, but the last reauthorization took place five years after the law ran out.

In the meanwhile, Obama has told the U.S. Education Department to create a new college rating system that would be available for students and families before the 2015 college year.

Details of that system, reported in the New York Times, include comparing similar institutions along a number of dimensions including tuition, graduation rates, debt and earnings of graduates, and the percentage of lower-income students.

The goal is to refine those ratings so that by 2018, students attending higher-ranked schools would get larger grants and loans on more favorable terms than those available at schools lower down on the scale.

While colleges and universities increasingly track this sort of data for their own purposes, as a group they have been resistant to outsiders measuring their performance. Given the complexities of the Higher Education Act and the number of stakeholders who have a vested interest in its details, getting pay for performance into law must be seen as an uphill battle. And this is before considering partisan politics.

Still, if Washington is ever going to tie federal aid to how well colleges and universities deliver education and at what cost, the information Obama wants to assemble would be essential. The administration is moving forward with what it can do absent congressional approval. We rate this promise In the Works.

Sources:

College Board, Trends in student aid 2012

New York Times, Obama"s plan aims to lower cost of college, Aug. 22, 2013

Inside Higher Education, And so it begins, April 17, 2013

Washington Post, Wonkbook: Can Obama control the cost of college?, Aug. 23, 2013

U.S. Department of Education, FY 2013 budget request - Race to the Top

New York Times, College Costs: Rising, Yet Often Exaggerated, Aug. 22, 2013