In 2013, President Barack Obama announced a plan to have the federal government rate American colleges and then tie financial aid to those ratings, in an attempt to reduce the cost of quality higher education. With the ratings slated to launch before the 2015-16 academic year, there are expectations that the White House will release more information before year’s end. Obama wants financial aid to begin to be tied to those ratings by 2018. Although the goal of increasing university affordability is worthy, the rating methodology is questionable and it is unclear how the plan would achieve its intended effect—namely, making college more affordable.
The White House has outlined some of the factors that will be used in determining the ratings, but has not released the entire methodology yet. These include measures such as graduation rates, graduate earnings, level of student post-graduation debt, percentage of low-income students enrolled, and tuition. At first, the Obama administration wants the ratings to serve as a guide to high school seniors and their parents who are looking at colleges—not unlike the annual ranking of colleges issued by U.S. News and World Report—but with an explicit focus on fiscal value.
While publishing a system of ratings for colleges is within Obama’s executive authority, tying aid to those ratings will require Congressional legislation. The president is pushing for legislation that will give students at higher rated colleges greater federal aid—in the form of larger grants and better loan terms—to be in effect by the 2018-19 academic year.
With continually rising tuition costs and decreasing state funding of public colleges and universities, college affordability is an issue that needs to be addressed. Between 1978 and 2008, tuition and fees increased approximately threefold, after adjusting for inflation. It is unclear, however, how this plan will actually help make college more affordable. Although a higher rating—accompanied by more federal aid to students—based on a college’s ability to keep costs low could serve as an incentive for institutions to contain costs, it is unclear how much that would change from the current system, in which universities already compete for the best students, with financial aid as one of the tools.
The questionable impact of this plan is not the only troubling aspect of the administration’s plan to tie federal aid to college ratings. The methodology is equally suspect. Using post-graduation income as a measure of success will disproportionately affect schools that specialize in programs for fields that are not necessarily financially lucrative, but may be socially beneficial. Low earning potential should not prevent students from receiving aid to enter professions that society needs.
Another potential problem with this plan is that the schools that reap the most benefit from it are likely to be the schools that need it the least. Wealthy schools are the ones most able to offer financial aid as grants, instead of loans, making their student indebtedness rate better than schools that do not have large endowments. They are also more able to lower the cost of attendance and massage their statistics to look good for ratings. When the stakes are high, as they are when U.S. News and World Report ranks colleges, there is a high incentive for schools to manipulate the data that the ranking bodies consider. A recent study by two Emory University law professors has shown that many law schools have engaged in data manipulation and outright falsification that could be federal felonies. In 2011, Villanova University and the University of Illinois publicly admitted as much. If a government rating system were to determine federal financial aid, that could further incentivize universities to commit fraud.
There is also a serious possibility that this initiative could harm community colleges and other programs that do not fit into the mold of the traditional four-year bachelor’s degree program. Those colleges may have lower graduation rates and could thus receive lower ratings, but still provide an important function by offering training to people for whom a four-year degree is not the right option. High school seniors should not be financially incentivized to attend programs of study that are not right for them because of the possibility of higher federal aid.
Attempting to lower the cost of higher education is a noble pursuit, and it is one in which the administration should persist. Collecting, collating, and presenting important information about universities in the form of a rating system is, in and of itself, not a bad undertaking. In fact, an alternative to U.S. News and World Report and the other major college rankings could very well be useful to many students. Tying those ratings to financial aid distribution is inherently problematic, though, and it is not clear that doing so will address the rising costs of college. The administration should look for other measures that will.
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