Politics & Policy

Obama’s Scattershot Higher-Education Plan

Some decent ideas, some bad ones, and all will be hard to execute properly.

No politician has ever lost points for attacking high tuition. Taking that lesson to heart, President Obama went after excessive college costs last week, and then kept on going. In the end, he sketched a kitchen sink full of ideas intended to “shake up” higher education — some not quite ready for prime time, and some just subprime.

Obama’s big idea is to base colleges’ eligibility for student aid on how well they fare in new federal ratings that will compare institutions against their peers on things like low-income enrollment, tuition prices, debt loads, degree-completion rates, and labor-market outcomes. Students who attend highly rated colleges would be entitled to larger Pell Grants and lower interest rates on their loans.

Conceptually, linking outcomes to eligibility for public funds is an idea worthy of consideration. For half a century, Uncle Sam has offered grants and loans intended to defray steadily increasing tuition bills, while encouraging students to enroll anywhere they want. The expectation was that institutions would compete to provide the best education at the lowest price.

That didn’t work so well. Colleges spent more, relying on generous aid programs to help students afford the tuition. As prices climbed, policymakers expanded student-aid programs. The result: Student-loan debt today exceeds $1 trillion, and about 20 percent of borrowers are not repaying their loans. Every year, tens of thousands of students enroll in colleges from which they have a ridiculously small chance of graduating, with more than half of them doing so on the taxpayer’s dime.

The president got a second big thing right, too. Students have a responsibility in all this, one that pandering pols have too rarely addressed. Obama called for requiring aid recipients to complete a set percentage of their classes in order to be eligible for continued aid. That’s hardly a sufficient call for student responsibility, especially from an administration that has instituted loan forgiveness for graduates who become public employees, but it’s a step in the right direction.

All that said, it’s not clear that the conceptual appeal of the president’s accountability proposal can be translated to practice. Linking eligibility for aid to student outcomes without accounting for the “value added” by individual colleges would create a massively tilted playing field, one that would advantage elite, selective institutions. No one has any idea how to calculate value-added for colleges, and there would be vast opportunities to game the system. Oh, and the federal government is prohibited from collecting key data points under an existing 2008 law.

Some of the president’s other ideas missed the mark. This was especially true in the case of innovation and student-debt relief. Obama called for “challenging” college leaders to adopt “promising practices” like awarding credit for learning rather than time spent in class, redesigning courses using technology, and enhancing student services. That’s all well and good, but colleges have a long record of rolling new bells and whistles into their existing bundle of services, changing little or nothing about their business model, and using any savings to add diversity coordinators and minimize faculty teaching loads. Meanwhile, Obama’s call for regulatory “waivers” to allow for more experimentation might work if the administration avoids its penchant for using waivers to prescribe particular pet reforms and for riding roughshod over statutory constraints.

Even more troubling was Obama’s call for expanding an income-based repayment system that creates perverse incentives for students and institutions and leaves taxpayers footing the bill. Under Obama’s “Pay as You Earn” program, qualifying students pay 10 percent of their income for a specified period. After that, loans are forgiven — even for borrowers with immense graduate-school debts and hefty incomes. Earlier this month Politico reported that Georgetown Law School had figured out how to exploit the public-service loan-forgiveness component of Obama’s “Pay as You Earn” system to ensure that its students don’t have to “pay a single penny on their loans” — while leaving taxpayers with the tab. Expanding this program even further will only add to the college-cost problem.

The president’s tendency to gravitate toward new executive prerogatives makes it harder than it should be to support even his good ideas. After all, this is the same administration that used a single phrase from legislation passed in the 1970s — “gainful employment” — to launch a crusade against for-profit colleges. The push to hold all colleges accountable for what they do with taxpayer funds is long overdue. But the devil is still very much in the details. Given that the good ideas are not well thought out and the bad ones are counterproductive, it’s just as well that this is largely an exercise in political theater.

Andrew P. Kelly is director of the American Enterprise Institute’s Center on Higher Education Reform. Frederick M. Hess is director of education-policy studies at the American Enterprise Institute.


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