Obama's Very Smart and Utterly Hopeless Plan to Make College Cheaper

Speaking this morning before the University at Buffalo, President Obama rolled out a thoughtful plan to tame the rising cost of college that, should it ever reach Congress, will likely end up deader than the dead white men on a freshman English syllabus.

And that's a pity.

For decades now, Washington has tried to improve access to higher education by acting as a fount of no-strings-attached cash for college students, freely handing out cheap loans and grants to help them cover the rising price of a degree. The results have been, well, less than stellar. Tuition has kept marching up. Americans are now shouldering more than $1 trillion in student debt. Millions have defaulted on their education loans. And the free-flow of government money has helped give birth to an essentially predatory for-profit college industry, along with some less than savory nonprofit institutions.

Today, the president said: No more. True to form, the White House's plan is sort of a grab-bag of wonky policy initiatives. But the heart of it is a simple, powerful, and long overdue idea that the Obama first began arguing for last summer: that Washington should fund the colleges that get the best results while keeping tuition reasonable. By 2015, the Department of Education would begin grading institutions based on factors like average price, student debt loads, graduation rates, employment, and the number of low-income students enrolled. Then, starting in 2018, the government would start directing federal aid to schools with the highest grades compared to their peer institutions. As colleges try to shape up to meet Washington's standards and attract students, tuition prices should theoretically drop, or at least level off.  

The White House calls this "pay for performance." And, to be sure, some of the details are still vague. It's unclear whether troubled colleges would actually lose aid as a punishment for a bad score, or if high-performing schools would simply be rewarded with more funds. The White House summary states only that that students "attending high-performing colleges could receive larger Pell Grants," which generally go to low-income and working class students, "and more affordable student loans." But on a broad philosophical level, the proposal would fundamentally rewire the relationship between the federal government and the world of higher education, by introducing at least somewhat meaningful accountability measures for the first time across all sectors of the industry, from the Ivy League, to the University of Phoenix.

The key to the whole plan, though, really lies in government's power to dole out aid dollars based on results. Without that, you just have a government-sponsored college guide that the least sophisticated, most at-risk students probably won't bother to use. And sadly, accountability is the one thing the White House needs Congress for. The Department of Education is free to start grading colleges as it sees fit. But it can't use its rankings to decide aid eligibility without legislation. And so far, the signals from Capitol Hill aren't good. As The New York Times writes:

Representative John Kline, Republican of Minnesota and the chairman of the House Committee on Education and the Workforce, said in a statement that he was skeptical of Mr. Obama's proposed rating system.

"I remain concerned that imposing an arbitrary college ranking system could curtail the very innovation we hope to encourage -- and even lead to federal price controls," Mr. Kline said. "As always, the devil is in the details."

Senator Marco Rubio, Republican of Florida, said: "I'm strongly opposed to his plan to impose new federal standards on higher education institutions. This is a slippery slope, and one that ends with the private sector inevitably giving up more of its freedom to innovate and take risks. The U.S. did not create the best higher education system in the world by using standards set by Washington bureaucrats."

Recent history also doesn't offer a great deal of hope. Liberals have traditionally treated the higher education establishment with kid gloves. But Republicans, as well as a few Democrats, have recently fashioned themselves as defenders of the for-profit college industry, in particular. In 2011, 58 Democrats joined with all but four House Republicans to pass an amendment that would have prevented the Department of Education from using federal funding to enforce its "gainful employment rule," which cuts off federal aid to for-profit colleges whose students can't repay their education debts. Maybe the GOP's visceral animosity towards the ivory tower will convince them to abandon their for-profit friends. But given that the for-profits would almost certainly be one of the biggest losers under Obama's plan -- we're talking about schools that educate about 11 percent of students, but generate almost half of all student loan defaults -- it seems unlikely.

There are some who don't see this as a longterm problem. At Wonkblog, Ezra Klein writes:

So what Obama is really promising to get done in his second term is to create the infrastructure necessary for a pay-for-performance system: the definition of performance and the routine collection of the underlying data. He doesn't need Congress for that. When that's are done, Obama can try to get legislation passed through Congress to tie them to financial aid by 2018. But even if he fails, he will have set the next president up to finish the job, as the technically hardest and most time-consuming task will be complete.

That strikes me as a bit overoptimistic. First, any grading system that's developed will inevitably face a court challenge if it's ever used to determine federal aid eligibility, just like the court decision that ultimately scuttled the gainful employment rule. So there's a possibility that the Department of Education will come up with a rubric only to be forced back to the drawing board. Beyond that, it essentially assumes the Republican party will either undergo a sudden conversion on college accountability or lose control of the House within four years, while the Democrats hold onto the Senate. And lastly, it presumes the Democrats will sign on to Obama's agenda, which some of them, as demonstrated by the gainful employment vote, will clearly resist.*

Today's proposal was an important first step towards putting college accountability on Washington's policy agenda. But it's not clear when, or if, it will lead anywhere.

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*Update Friday, August 23: I've added that last sentence because, as noted earlier in the story, there's clearly a bipartisan aversion to college accountability, and it's important (and only fair) to note that.