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Obama Proposes Tying Aid to New College Ranking to Rein In Costs

August 22, 2013

Obama Proposes Tying Aid to New College Ranking to Rein In Costs

President Barack Obama speaks on education at University of Buffalo, the State University of New York, on August 22, 2013 in New York. Photographer: Jewel Samad /AFP via Getty Images

President Barack Obama called for tying federal financial aid to a new U.S. government rating of college costs and performance, saying spiraling tuition bills are pricing many U.S. families out of higher education.

The plan would rank similar colleges against their peers, and students who go to highly rated schools would get more aid than those lower in the pecking order. The criteria would include tuition, student debt, graduation rates and earnings of students once they leave school.

College costs have become “a barrier and a burden for too many American families,” Obama told students and faculty at the University of Buffalo today. “Colleges are not going to be able to just keep on increasing tuition year after year, and then passing it on to students and families and taxpayers.”

The school was the first stop on a two-day bus trip through upstate New York and northeastern Pennsylvania that Obama is also is using to pitch his economic policies before re-engaging in a fight with congressional Republicans next month over economic policy and the budget.

“This is all about the upcoming battle that’s going to be fought between him and Congress over raising the debt limit and sequester and all the other issues,” said Eddie Mahe, a Republican consultant based in Albuquerque, New Mexico.

Obama has vowed to rein in the cost of higher education at a time when more than half of U.S. undergraduates rely on federal aid and student debt is climbing. Average tuition and fees at public four-year colleges have more than tripled in the past three decades, far exceeding gains in family income, according to the White House.

Rating System

Obama said he’s directed the Education Department to develop a rating system to be in place before the 2015 school year. He said he’ll ask Congress for legislation that would dole out financial aid based on those ratings by 2018.

The federal government provides more than $150 billion a year in federal student aid, awarding it based on the number of students who enroll, rather than the number who earn degrees or what they learn, the White House said.

Obama has already called for giving more federal financial aid to colleges with moderate tuition increases and strong educational outcomes -- such as high graduation rates -- and yanking funding from those with the highest cost. That plan focused on expanding Perkins loans, a program for low-income families, and using the money as a lever to hold down costs.

Cost, Outcomes

The White House said the new ratings would be based on such measures as access, including the percentage of students receiving Pell grants, reserved for those from lower-income families; affordability, including average tuition, scholarships and loan debt; and outcomes, such as graduation and transfer rates, earnings of graduates and graduates’ advanced degrees.

The federal government already gathers reams of information to develop such a ranking, and the administration has produced a College Scorecard with data on cost and student debt.

Colleges have objected to proposals to tie aid to cost and educational outcomes because of concern that certain institutions -- and their students -- would be unfairly penalized.

The government will have no trouble producing a ranking with the data it has available, said Terry Hartle, senior vice president at the Washington-based American Council on Education, which represents 1,800 college presidents.

“But it will be contentious” to figure out how to use it to provide aid to students, Hartle said.

Political Differences

Reaction among lawmakers split along party lines, suggesting the political difficulty of getting legislation through Congress to tie aid to rankings. Iowa Democrat Tom Harkin, who heads the U.S. Senate education committee, said he supported college ratings “to help students and their families make informed decisions.” He didn’t say whether he would back tying aid to such rankings.

Minnesota Republican John Kline, who is chairman of the U.S. House Education & the Workforce Committee, voiced concern “that imposing an arbitrary college-ranking system could curtail the very innovation we hope to encourage -- and even lead to federal price controls.”

The administration already tried to crack down on for-profit colleges by cutting off aid from those whose students take on heavy debts that don’t pay off with higher incomes. The industry lobbied heavily against the plan and successfully fought against the rules in court, saying they were arbitrary and would hurt low-income students. Part of their argument was that the rules targeted for-profit colleges and should apply more broadly, as the new plan would.

Enhancing Prospects

As borrowers buckle under more than $1 trillion in student loans, Obama has repeatedly emphasized that higher education is the pathway to future prosperity for middle- and lower-income Americans.

In addition to linking funding to cost increases and outcomes, Obama has previously pushed for colleges to offer standard financial-aid award letters, so students can easily compare offers. A number of colleges, including the State University of New York system, have voluntarily signed on to that effort.

In its new proposal, the administration reiterated a call for $1 billion “Race to the Top” college grants, modeled after an elementary and high school program that pushed states to agree to the White House’s education agenda. Under the college version, states that promote affordability could win money.

Accountability

Obama would also give a financial incentive to enroll students eligible for Pell Grants. To prevent waste, the money would require colleges with high dropout rates to dole out aid over the course of the semester, rather than a lump sum.

The president would also encourage colleges to award credit based on what is learned, rather than time in classes. He cited such low-cost online programs at Western Governors University, Southern New Hampshire University and the University of Wisconsin system. Massive Open Online Courses, or MOOCs, offered by Harvard, Stanford and the Massachusetts Institute of Technology, could play a key role, the White House said.

On the matter of student debt, Obama proposes to make all students eligible for plans that let them repay loans based on how much they earn -- capped at 10 percent of monthly income. Currently, about 2 million of 37 million student-loan borrowers are benefiting from such income repayment plans.

Student Debt

Under the president’s plan, the Education Department will start a campaign this fall of calling borrowers who have fallen behind on their payments and encouraging them to sign up for affordable repayment options. Next year, the government would help them do so when they file their taxes.

The University of Buffalo and Binghamton University, where Obama speaks tomorrow, are part of the New York university system. Under Chancellor Nancy Zimpher, State University of New York was among the first to sign onto the administration’s “Know Before You Owe” financial-aid initiative.

The SUNY system has among the highest graduation rates and lowest costs in the country, said spokesman David Doyle. For the 2013-14 school year, the in-state cost of attendance, including room and board, is $22,700. The system is also developing an online initiative to grant online bachelor’s degrees in three years and master’s in four, he said.

“We deliver affordable, high-quality education,” Binghamton University President Harvey Stenger said in a phone interview. “We’re doing the things the president wants to talk about.”

To contact the reporters on this story: John Hechinger in Boston at jhechinger@bloomberg.net; Roger Runningen in Buffalo, New York at rrunningen@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net; Lisa Wolfson at lwolfson@bloomberg.net


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